Pension Funds and the Use of Derivatives
Pension funds across the world are meant to be low-risk financial instruments. They are allowed to take slightly more risks in some parts of the world as compared to others. However, for the most part, pension fund across the world is advised to stay away from risky instruments such as derivatives. Derivatives have been known […]
Calculating Free Cash Flow to the Firm: Method #2: Cash Flow From Operations
Now, it’s time to move on to the second metric which can be used to derive the free cash flow to the firm (FCFF). This metric is the cash flow from operations. These types of questions involve a complete cash flow statement being provided as the question and expect the student to derive free cash […]
Merger Modelling: The Accretion/Dilution Analysis
Merger modeling requires creating many sub-models which enable decision making. The accretion/dilution analysis is one such sub-model. It is one of the most sought after skills in junior investment bankers who have commonly entrusted the task of creating financial models in major investment banking firms. In this article, we will have a closer look at […]
Contribution Margin
Rearranging the Profit Equation: The contribution margin is created by rearranging the profit equation to provide the requisite details. The profit equation is as follows: Profit = Selling Price (x) – Variable Costs (x) – Total Fixed Costs It can be rearranged as : Profit = (Selling Price – Variable Costs)x – Total Fixed costs. […]
FAQ’s About Behavioral Finance
Behavioral finance is a fairly recent phenomenon. The development of this branch of finance is not more than a few decades old. This is the reason why there is still a lot of ambiguity about behavioral finance. Investors still have a lot of questions about behavioral finance, which they would like to clarify. This is […]
In the previous article, we talked about Facebook’s plan of becoming a social media conglomerate by merging different apps like Facebook, WhatsApp, and Instagram. We also spoke about the enormous economic benefits that Facebook as a corporation will derive from the merger of these diverse apps.
However, for the moment, it does not seem like this is a win-win situation for the users of Facebook. Ever since the news of the merger has been announced, the world has gone into overdrive trying to predict what the adverse effects of such a merger on the users would be.
In this article, we will have a closer look at some of the implications that this mega tech merger will have on the lives of Facebook users.
Privacy: Privacy is always the biggest concern when it comes to Facebook. The company is notorious for having lax data standards. It was also at the centre of a major controversy when data from Facebook users was shared with third party companies in order to influence the outcome of the 2016 Presidential Election.
Given Facebook’s bad reputation, it is only logical that all the privacy authorities in the world are overly concerned about user privacy. The problem with merging Facebook, WhatsApp and Instagram is the fact that only Whatsapp supports end to end encryption. In simpler words, if a person on Whatsapp sends a message to another person, the message can only be read by the other person. It cannot be intercepted by Whatsapp in between. Whatsapp is not aware of the content of the message since it is encrypted. It merely passes the data from one person to another.
This is not the case with Facebook Messenger and Instagram. Facebook messenger allows people to switch on end-to-end encryption if they use the “secret conversations” functionality. On the other hand, Instagram users do not have any such feature.
Now, the problem is that Facebook wants users on one platform to be able to message users on the other platforms. Hence, if a user on Instagram is able to send a message to a Whatsapp user, will that message be encrypted or not be encrypted. If the encryption of the message is compromised, then that will raise security concerns for Whatsapp users.
Many critics believe that Facebook is purposely allowing cross-platform messaging. They are trying to do so in order to circumvent the end-to-end encryption that has been put into place by Whatsapp. The entire business model of Facebook revolves around providing more relevant ads to Facebook users. If they are able to eavesdrop on people’s private conversations, they may be able to provide more relevant ads since they will know the user’s point of view and concerns. Hence, the removal of end-to-end encryption is beneficial for Facebook whereas it isn’t beneficial for the users.
Besides doubting Facebook’s intentions, critics also doubt Facebook’s technical ability to merge these three platforms into one. It will require an extremely comprehensive effort since all the apps will have to be built from the ground up. However, if Facebook decides to undertake this humungous effort, it could provide better security features. Security is always better provided when it is thought of, at the design stage itself.
Hacking: As mentioned above, the end-to-end encryption of the merged entity may be compromised. This means that it will be possible for hackers to intercept some of the messages which are flowing on these applications.
The possibility of hacking is a scary thought. This is because people trust these apps with a lot of intimate data including sensitive personal and financial information. If the security of the aforementioned data is compromised, the utility of this app will be greatly reduced for the average person. After merging the apps, Facebook will have a mammoth task of convincing its users that the applications are still secure in order to avoid any loss of market share.
The social media market has many apps which can compete with Whatsapp. At the moment, people are not switching to other apps because of network externalities. Once a significant number of people decide to leave these apps, it will be easier for the competition to gain a foothold into what seems like Facebook territory.
Antitrust: Lastly, it needs to be understood that Whatsapp, Facebook, and Instagram are all billion dollar enterprise. They are all market leaders in their own right. This is the reason if these firms combine they will have to face antitrust laws. All the firms combined could create a monopoly which could hinder the interests of customers by preventing fair competition. It is for this reason that Facebook founder Mark Zuckerberg will have to be extremely careful about the legal nuances of this merger.
The bottom line is that Facebook merger is likely to run into a lot of regulatory hurdles. The company will also have to convince critics as well as its user base that there is merit in the merger. The question now arises, does Facebook want to undertake such a humungous effort in order to undertake the merger?
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