By Kevin Curran
Despite problems in data security and privacy safeguards in recent months, advertisers have decided to keep Facebook (FB) as a friend.
A recent Statista report shows that Facebook now controls 79.2% of the social media advertising market, up from 73.9% just three years ago.
"Advertisers have to go where the eyeballs are," Michael Pachter, Managing Director of Equity Research at Wedbush Securities, told RealMoney. "When advertisers are looking online, they're looking at the two biggest gorillas, and that's Facebook and Google."
He added that he believes in the social media space Facebook has no real peer, labeling both SNAP and TWTR as "vastly inferior options."
"I trust that [Facebook] will manage the company to maximize profit," he concluded stating his buy rating of the stock.
His case is supported by some recent action at Facebook, in announcing the shutdown of the company's "partner program" effective August 15.
The shutdown comes amid pressure from the Cambridge Analytica data privacy scandal, serving as a signal of the company's publicly stated commitment to "enforcing [its] policies to protect people's information."
As of late the stock has been recovering from its record drop, reaching $117.38 at market close, up about $10 a share from the selloff last month.
The shared dropped when investors were surprised by the scale of the growth slowdown.
Facebook derives virtually all of its revenue from advertising, according to company filings.
However, there might yet be challenges to Facebook that could challenge the advertisers' reliance on the platform.
Nicholas Economides, Professor of Economics at New York University and prominent critic of Facebook, believes regulation of Facebook is not only necessary, but imminent.
"The default setting for Facebook data sharing should be to opt out, not in," he said. "Regulation could impose this and Facebook would then have to induce users to opt in to this program to have data shared."
Economides pointed to the California Consumer Privacy Act and European General Data Protection Regulation as precedents for more regulation, threatening the data that is so valuable to advertisers.
"I wouldn't want to say exactly how quickly it will come through, because nothing moves quickly in Washington, but I expect regulation in the coming years," he stated.
