What caused the Facebook outage and how has it impacted the company’s value?
The impact of Facebook's latest network outage
The first week of October marked a record-breaking moment for Facebook, the technology giant led by the divisive Mark Zuckerberg. However, we aren't talking about a bumper earnings report or a major new acquisition. Instead, October 4th marked the longest mass-outage for the company's network of social media platforms since 2008. If, like many of us, you were left twiddling your thumbs for hours that day, unable to share memes on Instagram, ignore relatives on WhatsApp or see who got married on Facebook, then you probably want to know why.
What Caused the Issue?
In a statement issued
following the issue being resolved, Facebook explained that the issue was due
to "configuration changes on the backbone routers". This might not mean much to
most everyday users of the platforms, and if that's you then do not worry, you
are not alone. Essentially, the issue was a mundane maintenance malfunction
gone wrong. Think along the lines of: "This train is delayed due to engineering
problems on the line".
New Issues Presented by COVID
However, the issue
sheds light on some of the new issues major companies are facing as a result of
COVID. While in previous times, such an issue might have been resolved in a far
quicker time, Facebook noted that the decentralisation of employees as a result
of work-from-home measures around the globe meant that it took far longer to
$100 million Lost in Six Hours
In terms of the impact
the situation had on the company, the damage was vast. Facebook reportedly lost
over $100 million in online advertising over the 6-hour outage, fuelling an
unwinding of shares which totalled more than $40 billion in value. In total,
shares have fallen by over 6% following the initial mass outage as reports of
smaller outages have bene flagged since then.
Ongoing Issues for Facebook
This is the latest in a series of issues for Zuckerberg's iconic firm. Over the course of the last US presidential campaign, the firm came under huge scrutiny for its decision not to censor posts in the same way that Twitter had been doing. This was also a major issue over the course of the Black Lives Matter protests last year. In the UK, the firm has come under fire from child protection agencies over warnings that its encrypted message features on Facebook opened the way for greater abuse from predators.
In all, these recent
issues highlight just how massive the Facebook empire has become. Criticisms
that the big-tech has gotten too big take on greater focus in events like this
where such highly depended upon networks are at risk of crashing for several hours
How Much Further Can Shares Fall?
For Facebook, the
lingering concerns in the event of such an outage obviously led to unwinding of
shares. However, typically in these events, reassuring users of upgraded safety
features and security and maintenance reviews tends to offset concerns and lead
to a rebound in share prices. However, with Facebook shares already under
pressure well ahead of this event, the question is how much deeper they can
The reversal from highs around the 380 level has seen price cratering down to lows around 322 as of writing. Price has blown through the rising trend line and several key support levels. With both RSI and MACD in the red here, the focus is on continued downside for now. A break below the 314.62 level will open the way for a test of the 298.96 level next. To the topside, bulls will need to see a break back above the 346.69 level to alleviate near term bearishness.
This article was submitted by Tickmill.
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