Facebook shares are still dropping after its worst one-day decline since 2012 yesterday, as data breaches affecting over 50 million uses makes things political and the social media giant loses some $50 billion.
On Monday, Facebook shares fell almost 7 percent on news that the U.S. Federal Trade Commission (FTC) is investigating it over personal data breaches.
The market-wide sell-off continued on Tuesday, even as the Dow gained points, when more details emerged on the investigation, sparked by a whistleblower who told regulators that more than 50 million Facebook users had their data hijacked by a political consultancy hired by Donald Trump.
In other words, Facebook users helped sway public opinion in the 2016 elections without their consent—and the social media giant is now irrevocably entangled in the ongoing American political chaos.
By early Tuesday morning, the hashtag #DeleteFacebook was trending globally on Twitter, with Quartz even calling it “the perfect opportunity to get happier”. While Facebook users flooded Twitter, threatening to delete their Facebook accounts it remains unclear how many have abandoned ship so far.
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The political consultancy behind the scandal, Cambridge Analytica, is accused of misusing the data of 51.3 million Facebook users, prompting growing questions about exactly what information Facebook is sharing, and with whom--and how management is dealing with the ‘breach’. Related: Who Will Pay For Trump's $60 Billion China Tariffs?
After all, Facebook makes its money from advertising, and advertisers love it for its ability to use personal data of millions of people and turn it into profiles that can target sales.
On Tuesday, media reported that Facebook’s security head, Alex Stamos, would be leaving—but not until August. But Stamos has reportedly been planning his exit for some time over apparent disagreements about the way Facebook has handled personal data.
According to the New York Times, long before the FTC investigation, Stamos was getting resistance for his efforts at transparency over the Russian use of Facebook in the 2016 election.
Stamos’ exit confirms the existence of two camps within Facebook, according to Slate Magazine: “Those who think Facebook should prioritize doing right by its users and those who think its first responsibility is to its profits.”
And these diverging priorities have prompted harsh criticism from users.
Cambridge Analytica was harvesting personal data for its voter-targeting operations for Ted Cruz and Donald Trump in the campaign period. Facebook knew about it. In 2015, Facebook found out that personal user data had been passed on to Cambridge inappropriately and then it demanded that Cambridge delete the data and confirm it had done so. They didn’t, but Facebook didn’t take any further measures until more than two years later. In fact, Facebook didn’t move to suspect the Cambridge accounts until last Friday.
CEO Mark Zuckerberg has been silent, but analysts will be looking for him to own Facebook’s mistakes—and soon.
Zuckerberg is said to have personally lost $6 billion—just yesterday—an amount that could have been a lot more if he hadn’t sold off stock ahead of the Monday decline.
Now, he’s going to have to face his users, and lawmakers in the Senate.
According to Morgan Stanley analyst Brian Nowak, speaking to CNN Money, Facebook—which makes its money on advertising—is facing further risk to its share price due to weaker user or ad growth. “We look for [Facebook] to become more assertive about the mistakes it has made, the unintended actions that have occurred on the platform, and how it intends to fix them,” Nowak said.
By David Craggen for Safehaven.com
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