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Recently, Internet users worldwide reacted strongly against Facebook (FB - Analyst Report), claiming that the social networking platform had manipulated their emotions. Earlier in 2012, Facebook and Cornell University had conducted an experiment on nearly 7,000,000 randomly selected users and that too without their consent for the same.

Per the experiment, Facebook had intentionally posted positive news feeds on the profiles of some of its users while posting negative news on others. This was done to determine whether seeing positive feeds on one’s profile made them happy or sad. Other profiles were exposed to more negative posts to determine their impact on the users.

Furor over the experiment broke out soon after its results were published in the March issue of the Proceedings of the National Academy of Sciences. Per sources, the experiment was driven by an age-old complaint by its users who said that people’s posts on all the wonderful things in their lives made them feel miserable about their own not so-happening lives.

However, the results of the experiment proved otherwise. Per the result, users who were shown negative content were more likely to produce negative posts. On the other hand, users in the positive group were more likely to create more upbeat posts.

Hence, it can be concluded that the experiment worked for Facebook as the social media platform was successfully able to influence people’s emotions. Facebook, however, stated that it was an endeavor by the company to improve its service and it never intended to hurt the sentiments of its users.

We believe that as per the terms of service, Facebook may not face any legal implications on account of the experiment. However, this experiment should not have been conducted without the consent of the affected users. It may adversely impact the popularity and credibility of the social media platform.

Currently, Facebook is the world’s largest social media platform with over 1.0 billion monthly visitors. It aims to take this number to 7.0 billion in the near future. However, to do so, it will have to attract users from all age groups.

We believe that Facebook’s growing mobile user base, Instagram’s increasing popularity, frequent launch of new products and international expansions will boost the company’s top line and profitability. However intensifying competition from Google (GOOGL - Analyst Report), Twitter (TWTR - Analyst Report) and Yahoo (YHOO - Analyst Report) remain a major headwind.

Currently, Facebook has a Zacks Rank # 3 (Hold).
 

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