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Facebook's Latest Executive Departure Raises Red Flags

By Leo Sun - Jan 8, 2021 at 2:42PM

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The controversial social network just lost its advertising integrity chief.

Facebook ( FB -4.27% ) recently banned President Donald Trump until the end of his term in office on Jan. 20 for using its platform to "condone rather than condemn" his supporters during the deadly riots at the U.S. Capitol. CEO Mark Zuckerberg said the risks of allowing the president to continue using Facebook were "simply too great."

That unprecedented move dominated headlines this week, but it overshadowed another key development at the social network: the departure of Rob Leathern, the company's advertising integrity chief.

Leathern, who joined Facebook as its director of product management in early 2017, oversaw its ad policies regarding politics, fake news stories, and misinformation regarding the pandemic. Leathern announced his departure via Facebook's internal network on Dec. 30, and he left the same day to "work on consumer privacy beyond just ads and social media" without disclosing where he was headed.

Facebook CEO Mark Zuckerberg.

Image source: Facebook.

Facebook hadn't previously announced his departure, which was only revealed via a recent Reuters report and Leathern's social media posts. That silence was unusual since Leathern had arguably been the public face of Facebook's controversial ad policies. That quiet departure raises red flags for the company, for three reasons.

1. Facebook still faces a lot of political pressure

Facebook was pilloried for its failure to stop misinformation campaigns, some of which were funded by foreign governments, throughout the U.S. election in 2016. Those failures, along with Cambridge Analytica's illegal use of Facebook's user data for political ads, highlighted the platform's potential in swaying political elections.

Facebook was grilled by Congress over those failures, which led to Leathern's appointment as its advertising integrity chief. In 2018, Facebook started requiring political advertisers to authorize their accounts with identification and real-world locations, and clearly display "paid by" disclaimers in their ads.

In 2019, Facebook further tightened its grip by requiring political advertisers to provide even "more information about their organization[s]" before their ads could be approved. Last October, Facebook announced it would halt all political ads in the U.S. until after the presidential election on Nov. 3 "to reduce opportunities for confusion or abuse," but allowed new political ad sales in Georgia the following month ahead of the Senate runoffs.

Leathern's team pulled off a delicate balancing act with Facebook's political ads, which allowed it to navigate the tumultuous political headwinds of 2020. But after his exit, Facebook could consider either banning all political ads like Twitter ( TWTR -2.55% ), which could throttle its future growth, or loosening its policies to generate more ad revenue, which could attract more regulatory scrutiny.

2. Leathern couldn't solve Facebook's misinformation issues

Nearly 100 political ads on Facebook during the Georgia Senate runoffs were recently charged with being fake or misleading by the left-leaning global human rights group Avaaz.

A laptop user accesses a social network on a laptop.

Image source: Getty Images.

One ad, funded by the Republican Party, claimed House Speaker Nancy Pelosi was plotting with Vice President-elect Kamala Harris to remove President-elect Joe Biden from office. Another ad from the Senate Leadership Fund falsely claimed Georgia's Democratic Senate candidate Jon Ossoff was "threatening to defund the police."

Accusations of an inadequate response to these allegations indicates Facebook's programmatic ad purchases, its dependence on AI algorithms to filter out offending ads, and its use of poorly paid overseas moderators still aren't stopping the flow of what are widely considered fake news through paid ads.

As a result, Facebook usually only removes offending ads after they've been flagged, instead of proactively stopping them from reaching their targeted users. Facebook's algorithm-powered ad platform -- which targets viewers based on their gender, age, location, likes, and other personal data -- amplifies that effect by showing users the ads they expect to see.

Facebook's core business, which generates nearly all its revenue from ads, benefits from this cycle of confirmation bias. If Leathern, who has worked in the advertising and ad-tech industry for about 15 years, couldn't solve Facebook's misinformation issues, I doubt his successor will fare much better.

3. Facebook could alienate more advertisers

Leathern's department wasn't directly responsible for moderating hate speech or threats of violence from individuals on Facebook, but the company's failures in those areas sparked boycotts of its ads last year. Those boycotts didn't cause any lasting financial damage for Facebook, but they could accelerate in the future if Facebook continues to be associated with hate speech, fake news, and misleading ads.

All those headwinds, along with the looming antitrust lawsuits that threaten to break up the company and Apple's ( AAPL -0.32% ) upcoming opt-in feature for data tracking on iOS devices, could curb Facebook's long-term growth. Those challenges will inevitably make it harder for Leathern's successor, who needs to balance the integrity of Facebook's ads with the desire for revenue growth, to do his or her job.

The bottom line

I recently sold all my shares of Facebook, since I believe its business model is fundamentally flawed and smaller social networks offer better growth with less controversy. Facebook's stock isn't headed off a cliff, but the abrupt departure of its advertising integrity chief raises tough questions about its future.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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