Will US politics kill Facebook?


If you’re one of Facebook‘s (Nasdaq: FB) 955 million active users, don’t be surprised if you see a spike in politically charged status updates this week.

Sure, everyone has a handful of friends who enjoy brandishing their partisan ways, but it’s going to get ugly in the coming weeks. Between this week’s Republican National Convention in Tampa, Fla., and next week’s Democratic National Convention in Charlotte, N.C., expect the party rhetoric and flame wars to erupt in your news feeds.

How will this all play out? No one knows for sure. There were just 100 million Facebook users four years ago during the last presidential election. Facebook’s population has increased nearly tenfold since then.

X marks the spot
It’s safe to say that by the time the polls close in November, a lot of people will unfriend some of their Facebook connections. This is something Facebook investors need to keep an eye on.

Things are looking pretty good right now. The world’s leading social-networking website operator is growing nicely. Revenue climbed 28% in its latest quarter, fueled primarily by an 18% increase in ads and sponsors paying 9% more for each ad.

Expect Facebook to serve up more ad-bearing pages between now and early November as friendly and not-so-friendly partisan bickering takes place. Political candidates will also make sure they’re investing in online ads. The campaigns for both Barack Obama and Mitt Romney are part of the Sponsored Stories ads that bubble up in news feeds. Facebook claims that Sponsored Stories is a goldmine, generating a daily run rate of US$1 million.

This is all fine for the near term, but what will happen to Facebook as partisan status updates escalate to the point where folks begin unfriending others or, at the very least, elect to hide status updates from those with differing views? It may not seem like much of a problem now, but Facebook’s about to get inundated with folks jockeying for position in what is currently shaping up to be a tight presidential race.

More than just right clicks versus left clicks
Online flame wars aren’t new, and Facebook obviously won’t be the only battleground.

However, you’re not going to see this dynamic breaking out in the other publicly traded social networks. LinkedIn (Nasdaq: LNKD) isn’t likely to be overrun with partisan postings. The corporate-minded networking website is brimming with folks trying to make themselves appealing for potential hiring opportunities in the future. The last thing LinkedIn users want to do is alienate roughly half of the bosses out there.

Taking a political stand on LinkedIn is the equivalent of uploading an embarrassing photo to Facebook that your Aunt Daisy will see.

Google‘s (Nasdaq: GOOG) Google+ is more susceptible to extreme partisan posts than LinkedIn, but it’s still too new to be a feeding ground for verbal fisticuffs. The early adopters are more enchanted by tech than by preaching party platforms.

Renren (Nasdaq: RENN)? Really? China’s leading social-networking website is in a restrictive enough country, where real name requirements and active policing dissuade political musings.

This doesn’t have to end badly
If Facebook bulls are lucky, this will simply be a defining moment for the platform. The discussions and article sharing will remain largely civil. You didn’t want all of your friends to be exactly the same. Right?

Facebook may even come out of this in better shape, cementing its role as the ultimate social influencer.

However, Facebook itself doesn’t have a lot of wiggle room here. Despite the belly-flop of an IPO that has seen the stock shed nearly half of its value in a little more than three months, Facebook shares aren’t exactly cheap at nearly 40 times this year’s projected profitability.

It needs to make sure that regardless of who winds up winning the presidential election in November that it’s still the world’s social hub of choice. How easy that task is to accomplish will depend on how uneasy the Facebook experience becomes between now and then.

If you’re in the market for some high yielding ASX shares, look no further than our “Secure Your Future with 3 Rock-Solid Dividend Stocks” report. In this free report, we’ve put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

 More reading

The Motley Fools purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

A version of this article, written by Rick Aristotle Munarriz, originally appeared on fool.com

OUR #1 DIVIDEND PICK FOR 2016...

Forget BHP and Woolworths. This "dirt cheap" company is growing like gangbusters, and trading on a 5.6% dividend yield, FULLY FRANKED (8% gross). With interest rates set to stay at these low levels for years to come, for hungry investors, including SMSFs, this ASX company could be the "holy grail" of dividend plays for 2016.

Enter your email below to discover the name, code and a full investment analysis in our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2016.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.