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The cost of years of privacy breaches finally caught up with Facebook this week, dropping its market value of more than $ 100 billion Thursday into the biggest drop in value of a day in the history of Wall Street.
Fears about rising regulatory costs and privacy controversies, as well as declining user and revenue growth, played a key role in Wall Street's mbadive sales. Facebook's stock closed Thursday 19 percent, to its lowest level in nearly three months. The steep downward slope suggests that investors are rebadessing the viability of Facebook's core business by collecting detailed user data to better target them through advertising in a world where public pressure is increasing for more stringent protections. Privacy
is a wake-up call for privacy that markets deliver to Mark Zuckerberg, "said Jeffrey Chester of the Center for Digital Democracy, a privacy advocate.
Long-term Concerns Over the Privacy Harvard dormitory privacy in 2004, have taken the past few months more concrete form than ever.In May, the European Union imposed a new strict regulatory regime.The US authorities have meanwhile begun to scrutinize Facebook in the context of a multi-agency survey on the treatment of the recent data scandal involving the Cambridge Analytica political consulting firm, which inappropriately accessed 87 million people.
[Facebook shares down more than 18 percent following revenue forecast]
Questions about the fate of other major technology companies, such as Twitter and Google, who like Facebook have been grappling with growing privacy concerns and Congress demands to more aggressively fight against the flow misinformation on their platforms
The Washington Post reported three weeks ago that the company was suspending fake accounts and suspicious accounts at a record pace and could see a drop in its monthly users. Analysts have noted that Google's parent company, Alphabet, saw its stock jump on Monday after posting strong earnings despite new European regulations and a recent $ 5.1 billion fine for antitrust violations, suggesting that Investors have specific concerns about Facebook and its recent scandal.
Public opinion about Facebook has also suffered controversies and revelations about the role of the platform in spreading Russian misinformation during the 2016 presidential elections. Calls to #DeleteFacebook have spread on Twitter, and some personalities have announced that they are moving away from their mbadive use of social media.
In terms of the measurable impact on Facebook, the new European rules, called GDPR for the protection of general data The regulation has led to a decline of 3 million users on this continent, revealed on Wednesday responsible for the company at a call for funds. Facebook said the changes would continue to hurt revenues as more people pulled out of ad targeting in the coming months. The company also said it would lose money because its advertising partners had also been affected by GDPR and other upcoming privacy changes.
But Facebook, like other technology companies, has deployed user protections around the world. the consequences for the company are likely to be global. Chief Financial Officer David Wehner said Wednesday in a revenue call that Facebook's expectations regarding declining earnings growth are "a combination of how we approach privacy, GDPR and others."
Problems for the company were confined to privacy issues. Signs of unrest have been growing for nearly two years, following the 2016 presidential election, when chief executive Mark Zuckerberg dismissed the possibility that creepy broadcast of phony reports on the platform affected the vote. He called the concept "a pretty crazy idea", but later apologized for the comment
[Facebook shares tank on slowing growth, wiping out billions in value]
What followed was an important public account, rare for high-flying technology companies. Facebook finally revealed an aggressive Russian manipulation on its platform and had to answer sharp questions about it on the Capitol. Then, reports in March detailed how Cambridge Analytica siphoned Facebook user data for targeting the campaign. This caused another round of questions on Capitol Hill, this time from Zuckerberg himself.
But Facebook has long had a knack for navigating privacy controversies related to its user data collection. The price of his shares withstood these controversies – apart from a drop after the news of Cambridge Analytica – even as Zuckerberg warned that problems such as confidentiality and misinformation on the platform would entail costs for the company. ;business. new content reviewers. This three-year winning streak was sharply reversed after Wednesday's earnings call, which seemed to crystallize several long-standing concerns.
"The impact of data privacy and the GDPR seems to have had more effect on their business said Christopher Rossbach, director of investments at J. Stern & Co. GDPR gave users the more elaborate opinions on how their data were collected and used and required explicit approvals.
Benefits report suggests broader concerns – a frenetic pace for years may finally slow its growth, especially among young users who opt for social media solutions like Snapchat or Instagram.This company, as well as the globally popular WhatsApp messaging service, is owned by Facebook, but none has been as effective as the parent company for generating advertising revenue.
Morningstar released an badysis on Thursday afternoon, noting the slowdown in growth. The report said the drop this week was "Not an opportunity to buy."
Still, it's the privacy issues and the cascade of recent scandals that have dominated Facebook comments, so that investors were trying to understand the fall of Facebook. If Cambridge [Analytica] had never happened, I do not think the concerns would be so pronounced. Cambridge has raised a number of concerns about the trust of users, advertisers and regulators. This creates a darker image, "said Daniel Ives, director of strategy and head of technology research at GBH Insights.
US surveys, first reported by the Washington Post this month, have Two main areas of investigation: The Federal Trade Commission is investigating whether Facebook has breached a 2011 consent decree with the agency that governs its privacy practices when it has shared data with Cambridge Analytica and other companies.And the Department of Justice and the Securities and Exchange Commission are examining whether Facebook's representations of its actions in regard to Cambridge Analytica were timely and accurate.
[Facebook’s disclosures under scrutiny as federal agencies join probe of tech giant’s role in sharing data with Cambridge Analytica]
Facebook stated that he was cooperating with these investigations.He portrayed Cambridge Analytica and people working for the company as acting inappropriately in collecting data.
"It takes time for opinions to begin to settle, and I think the cumulative effect of the months of the end of the scandal has shown that it is not something that's going to happen. they are able to fix significantly. "said Sarah Miller, spokesperson for Freedom From Facebook, a nonprofit coalition of progressive groups calling for the dissolution of Facebook
Analysts began Thursday to debate whether Facebook's fall indicated the likelihood of a long-term break – stagnation or was simply a stumble – and therefore an opportunity to buy a fundamentally strong stock before continuing to rise again.
Richar d BTIG's Greenfield has called down GDPR-related users a "one-off drop, not a headwind" suggesting that Wall Street was exaggerating.
"We were pretty stressed during Facebook's conference call in Q2 2018 and could feel the fear / panic in investors' voices later, "he wrote. "But while we are thinking about why we believe in Facebook, the fundamentals of our investment thesis are unchanged: … Mobile is eating the world and Facebook is an essential part to enjoy. this change."
Remains less clear whether the pressure for stricter regulation of privacy has reached its peak or is still under construction. The fate of Facebook – and many other tech companies – probably depends on the answer to this question.
Hayley Tsukayama and Hamza Shaban this story.
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