#SocialStocks: Meta targeted in lawsuit for loose child safety features

Zoom establishes new pricing plans, Threads expansion in Europe slated for December and other notable stories from this week

Welcome to “#SocialStocks,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

GRAVE ACCUSATIONS IN CHILD HARM LAWSUIT: 

New Mexico Attorney General Raul Torrez filed a lawsuit against Meta Platforms (META), CEO Mark Zuckerberg, and the company’s wholly-owned subsidiaries, including Instagram and Facebook Holdings, to protect children from sexual abuse, online solicitation, and human trafficking. “Our investigation into Meta’s social media platforms demonstrates that they are not safe spaces for children but rather prime locations for predators to trade child pornography and solicit minors for sex,” said Attorney General Torrez. “As a career prosecutor who specialized in internet crimes against children, I am committed to using every available tool to put an end to these horrific practices and I will hold companies – and their executives – accountable whenever they put profits ahead of children’s safety.” Over the past few months, the New Mexico Attorney General’s Office carried out an undercover investigation of Meta’s platforms, creating decoy accounts of children 14-years and younger. The Office gathered evidence that those platforms have: Proactively served and directed the underage users a stream of egregious, sexually explicit images – even when the child has expressed no interest in this content; Enabled dozens of adults to find, contact, and press children into providing sexually explicit pictures of themselves or participate in pornographic videos. Recommended that the children join unmoderated Facebook groups devoted to facilitating commercial sex. Allowed Facebook and Instagram users to find, share, and sell an enormous volume of child pornography. Allowed a fictitious mother to offer her 13-year-old daughter for sale to sex traffickers and to create a professional page to allow her daughter to share revenue from advertising. “Mr. Zuckerberg and other Meta executives are aware of the serious harm their products can pose to young users, and yet they have failed to make sufficient changes to their platforms that would prevent the sexual exploitation of children,” AG Torrez added. “Despite repeated assurances to Congress and the public that they can be trusted to police themselves, it is clear that Meta’s executives continue to prioritize engagement and ad revenue over the safety of the most vulnerable members of our society.”

This comes after Meta announced Friday that it has updated its child safety features after a series of Wall Street Journal reports, including expanding its list of terms, phrases, and emojis related to child safety. Meta said: “We take recent allegations about the effectiveness of our work very seriously, and we created a task force to review existing policies; examine technology and enforcement systems we have in place; and make changes that strengthen our protections for young people, ban predators, and remove the networks they use to connect with one another. The task force took immediate steps to strengthen our protections, and our child safety teams continue to work on additional measures.”

PRICING PLANS: 

Zoom Video (ZM) announced enhancements across its AI-powered customer experience suite and new pricing plans that are expected to be available in the coming weeks. To support its growing customer base and its various business needs, Zoom Contact Center will be available in new tiered plans that each include voice, video, chat, and Short Message Service channels, real-time transcription, remote control, Agent Computer-Telephony Integration, surveys, and AI Companion capabilities including summarization. Additional features, including inbound email and social channel support, and outbound dialers are supported in mid-tier plans. Zoom AI Expert Assist and Workforce Engagement Management will be included in top-tier plans, and available as an add-on to any package. These new plans offer exceptional customer value and flexibility to meet the needs of small-to-large contact center departments. New packages provide flexibility and value Zoom’s new packages provide enterprise-grade feature sets designed to serve the needs of its customers, no matter their size. All product offerings are available to mix and match as named or concurrent licenses. Essentials The Essentials package starts at just $69 per month and includes Zoom AI Companion, remote control, privacy and security features, and support for the most critical channels: omnichannel voice, chat, SMS, and video, as well as many other core capabilities. Premium In addition to the features offered in the Essentials package, the Premium package provides support for email, social channels, and outbound dialer, starting at $99 per month. Elite Elite customers have access to all the features from the Premium package, plus Zoom AI Expert Assist, Quality Management, and Workforce Management, starting at $149 per month. Additionally, customers with Essentials and Premium packages have the option to purchase features such as Zoom AI Expert Assist and Workforce Engagement Management as add-ons to their package.

AI ALLIANCE: 

IBM (IBM) and Meta announce the launch of the AI Alliance in collaboration with over 50 founding members and collaborators globally. “The AI Alliance is action oriented and decidedly international, designed to create opportunities everywhere through a diverse range of institutions that can shape the evolution of AI in ways that better reflect the needs and the complexity of our societies. The AI Alliance is focused on fostering an open community and enabling developers and researchers to accelerate responsible innovation in AI while ensuring scientific rigor, trust, safety, security, diversity and economic competitiveness,” the companies said. The AI Alliance will begin its work with the formation of member-driven working groups across all major topical areas. The Alliance will also establish a governing board and technical oversight committee dedicated to advancing the above project areas, as well as establishing overall project standards and guidelines. Arvind Krishna, IBM Chairman and CEO said, “The progress we continue to witness in AI is a testament to open innovation and collaboration across communities of creators, scientists, academics and business leaders. This is a pivotal moment in defining the future of AI. IBM is proud to partner with like-minded organizations through the AI Alliance to ensure this open ecosystem drives an innovative AI agenda underpinned by safety, accountability and scientific rigor.”

THREAD COUNT: 

Instagram’s Threads hit 620,000 daily Android and iOS downloads on November 23, vs. roughly 350,000 in early November, TechCrunch’s Sarah Perez reported, citing data from Apptopia. Threads is now outpacing X, formerly Twitter, in terms of new downloads, according to Apptopia. Since September, X saw 27M new downloads, vs. Threads’ 41M, Perez wrote. This follows reports from Wall Street Journal that Meta plans to launch Threads in Europe in December, Threads’ largest market expansion since its debut in July.

ANTITRUST LAWSUIT: 

A group of 83 Spanish media outlets has filed a $600M lawsuit against Meta, citing unfair competition in the ad market due to its “massive” and “systematic” use of data, Reuters’ Inti Landauro reported. The AIM media association claims Meta violated EU data protection rules between 2018 and 2023, as its use of personal data of its Facebook, Instagram and Whatsapp platform users gives it an unfair advantage of designing and offering personalized ads, which they say constitutes unfair competition.

SHARE SALE: 

In regulatory filings, Meta Platforms disclosed that Zuckerberg sold $9.1M in each of two separate transactions as part of an option expiry on November 30th and December 1st.

SUING THE FTC: 

Meta has filed a lawsuit against the FTC, claiming its in-house trials violate the Constitution, and has asked a court to halt the agency’s bid to change a $5B privacy settlement in 2020, according to Bloomberg’s Sabrina Willmer and Leah Nylen. The company alleges in the new lawsuit that the FTC violates due process by acting as both prosecutor and judge in administrative proceedings.

MASS EXODUS: 

X, the social media company formerly known as Twitter (TWTR), may have fewer advertisers after its owner Elon Musk’s insulting and expletive filled rant, in which he told advertisers “not to spend on the platform,” writes Kate Conger and Tiffany Hsu for the New York Times. “At least half a dozen marketing agencies said the brands they represent were standing firm against advertising on X, while others said they had advised advertisers to stop posting anything on the platform,” added the NY Times story.

SHH, ITS A SECRET: 

Meta’s WhatsApp blogged in part, on Thursday: “Earlier this year we rolled out Chat Lock to help people protect their more sensitive conversations. …we’re launching secret code, an additional way to protect those chats and make them harder to find if someone has access to your phone or you share a phone with someone else. With a secret code you’ll now be able to set a unique password different from what you use to unlock your phone to give your locked chats an extra layer of privacy. You’ll have the option to hide the Locked Chats folder from your chatlist so that they can only be discovered by typing your secret code in the search bar. If that doesn’t suit your needs, you can still choose to have them appear in your chatlist. Whenever there’s a new chat which you want to lock, you can now long press to lock it rather than visiting the chat’s settings. We’re so happy our community has been loving Chat Lock, and hope that secret code makes it even more useful to them. Secret code starts rolling out today, and in the coming months will be available globally. We’re excited to keep bringing more functions to Chat Lock to help people protect their privacy, let us know what you think.”

MARKETING MEMBER MILESTONE: 

Sprout Social (SPT) announced that The Arboretum has surpassed 10,000 members. The membership milestone comes less than a year after The Arboretum’s public launch-quickly becoming a hub for industry connection, community and mentorship for social and marketing professionals. “We are thrilled to see how quickly The Arboretum has grown and how rapidly it’s become a go-to space for marketers of all levels to engage with one another on a rich variety of topics, trends and strategies,” said Jamie Gilpin, CMO, Sprout Social. “Reaching this membership milestone is both evidence of our teams’ incredible efforts to make this community meaningful and engaging and of a thriving social industry that is constantly innovating and making increasing business impact.”

LITTLE LAYOFFS: 

After the mass layoffs in late 2022 and early 2023, Amazon (AMZN), Google (GOOGL), Microsoft (MSFT), and Meta continue to make small employee cuts to keep tight control on costs, Katherine Bindley and Preetika Rana of The Journal noted. These cuts suggest a new era for an industry that for years grew with little to no restraint, an era where these companies are now focusing on efficiency and emphasizing shareholder value and healthy margins.

RUN IT BACK: 

Meta Platforms told U.S. officials the rules for political and social issue advertising on Facebook and Instagram will be very similar during the 2024 presidential race as it was for previous election cycles, Anna Edgerton and Alexandra Barinka of Bloomberg reported. The company will block new political ads one week prior to when U.S. voters go to the polls next November, Bloomberg adds, citing a post by the company. The main difference with this election is A.I., which Meta plans to require advertisers to disclose if political or social issue ads have been made or altered by AI.

QUEST PAUSED: 

Meta is pausing shipments of the Quest 3’s Elite Strap with Battery after users reported a charging fault renders the battery useless, Road to VR’s Scott Hayden wrote. A Meta spokesperson has confirmed with Road to VR that it has temporarily paused sales of the device while it manufactures new ones without the fault, which the company says was related to the device’s firmware.

ANALYST COMMENTARY: 

Jefferies upgraded Pinterest (PINS) to Buy from Hold and upgraded Snap to Buy from Hold. The firm upgraded Snap and Pinterest on the view that both have catalysts for revenue growth upside in fiscal 2024. The upgrade of Pinterest is based on increasing conviction in the company’s ability to grow revenue 20%-plus in fiscal 2024, the analyst told investors in a research note. Snap is the more controversial call where Jefferies believes the stock re-rates higher on North America revenue growth reaccelerating into the mid-teens in 2024, The firm says the key risk to both upgrades is a macro slowdown weighing on advertising budgets. Pinterest is a rare story in consumer internet with tailwinds next year for every key revenue growth driver – users, ad load, engagement and price, contends Jefferies.

Barclays raised the firm’s price target on Sprout Social and keeps an Overweight rating on the shares. The firm believes “we are in the middle of a year-end rally in software.” Looking at current valuation levels shows that enterprise value to sales multiples are up by a full turn since early November, but still below the long-term average, which could provide further support, Barclays told investors in a research note. The firm moved price targets to a 2025 base year, which lowers multiples further.

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Originally Posted December 6, 2023 – #SocialStocks: Meta targeted in lawsuit for loose child safety features