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Published 8 months ago with 1 Comments

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  • BlogTrafficGuru
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    Everyone needs to understand the built-in conflict of interest that these social media companies face in the free-market environment.

    Since I worked on Wall Street (on the retail side) I am acutely aware of the need for social media companies to be able to attract financing (initially, mainly equity financing).

    In addition, these companies sometimes use their stock to make strategic acquisitions.

    In order to achieve these two objectives the companies need to show that they are growing. But, what if part of that "growth" is a result of fake bot accounts???

    Another measure that Wall Street uses to evaluate social media companies is the level of "engagement", which is often measured in terms of "active users per month".

    Since bots are automated and have a "high frequency of use" the social media companies hurt themselves when they expose, suspend, or cancel these accounts.

    So, the "growth rate" and "active users per month" metrics are diminished if these companies develop and maintain a strict surveillance and control over these bot accounts.

    Diminished metrics mean lower stock prices. Lower stock prices hurts the ability to make strategic acquisitions with elevated stock values.

    Dealing with bot accounts is not an easy problem to resolve, and the incentive to resolve" is inherently conflicted.

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