Dive Brief:
- The FTC is looking into whether Facebook violated a 2011 consent decree concerning how it handled the personal data of 50 million users and how that data was transmitted to Cambridge Analytica without those users' knowledge, Bloomberg reported citing sources familiar with the matter. In the 2011 settlement, Facebook agreed to obtain user consent for certain privacy setting changes after a complaint that the company changed user settings without notifying people.
- The news arrives as Facebook is in the midst of a PR crisis regarding its relationship to Cambridge Analytica, a data firm with ties to Donald Trump's presidential campaign. During an internal briefing and question-and-answer session for employees yesterday, March 20, CEO and co-founder Mark Zuckerberg and COO Sheryl Sandberg were notably absent, according to a report in The Daily Beast, raising questions of what the executives are doing to address the scandal.
- Facebook's stock has fallen roughly 10% over the past couple of days amid these developments and increasing scrutiny from government regulators and lawmakers, and analysts acknowledge that the social giant's business could be impacted if users demand better data protection and scale back their engagement. However, some analysts suggest that there won't be an immediate impact on advertiser demand for Facebook, which is the second largest digital advertising platform behind Alphabet's Google, according to Barron's Next.
Dive Insight:
It's been a very rough few days for Facebook and it remains unclear how the company and its most prominent executives, including Zuckerberg and Sandberg, plan to quell rising concerns and potential regulatory threats around how it handles its user data. Rumblings of an FTC probe follow an announcement earlier this week that Massachusetts AG Maura Healy had opened an investigation into Facebook and Cambridge Analytica; AGs from New York and Connecticut have since joined the investigation, per Bloomberg.
The backlash has extended beyond public officials to regular users, who are expressing a growing anti-Facebook sentiment on rival social media platforms like Twitter, where the hashtag #DeleteFacebook is trending. For marketers, it's important to pay attention to these developments but also approach them in a measured manner. According to Barron's reporting, the bad publicity hasn't escalated to the point where it will have a long-term impact on Facebook's advertising revenue or drive brands off the site. However, advertisers are still likely looking for comments from Zuckerberg to put their minds at ease and to get an idea of changes that the platform has planned to address the issue.
Zuckerberg is facing demands from the British Parliament and the U.S. House and Senate Judiciary committees over Facebook's handling of user data. For years, Facebook and other social media platforms, in acting as technology companies, haven't been placed under the scrutiny traditional media outlets deal with. That may change soon as lawmakers, advertisers and the public continue to ramp up the pressure to be more transparent. Facebook could face a more than $40,000 per day fine if the FTC finds that it violated the 2011 consent agreement, according to Bloomberg.
