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Could Facebook’s Next Move Hurt or Help the Company?

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Clear History tool coming

At an investor meeting hosted by Morgan Stanley in San Francisco, Facebook (FB) CFO David Wehner said the company plans to soon launch its new privacy tool, Clear History. The tool, first announced by Facebook CFO Mark Zuckerberg last May, is set to give Facebook users the ability to wipe out information the social network obtains from their online activities.

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Tool to impact Facebook’s ability to target ads

Facebook’s new privacy tool is viewed as an attempt to regain users’ trust following the company’s string of privacy scandals in the past year. However, the tool is also expected to create headwinds for Facebook’s most important business, advertising. At the San Francisco investor meeting, Wehner said that the Clear History tool would impact Facebook’s ability to target ads. But he was also quick to point out that Facebook has become better at navigating headwinds and believes that it will weather the impact of the Clear History tool.

Advertising is Facebook’s principal business

Targeted advertising is a lucrative business for digital advertising providers such as Facebook and Google. Advertising sales comprised 98% of Facebook’s total revenue in the fourth quarter. The company’s revenue rose 30% YoY (year-over-year) to $16.9 billion that quarter, while Google parent Alphabet’s (GOOGL) and Twitter’s (TWTR) revenue rose 22% and 24% YoY, respectively. Snapchat owner Snap’s (SNAP) and Yelp’s (YELP) revenue rose 36% YoY and 11% YoY.

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