Facebook Stock Outlook After Scandal
Why I remain positive about Facebook, even in spite of recent Cambridge Analytica incident. Fundamentally, nothing has changed, and Facebook remains the leading social media site.
By. Jacob
Edited: 2018-03-22 19:11
Even after recent incident with Cambridge Analytica I am still largely bullish on Facebook. My reason is the fundamentals. As of 2018, Facebook remain the largest social media site with no serious competition. Some people have expressed fear about Facebook loosing its younger users, but I am having a hard time seeing what will replace Facebook in the long run. I simply do not think this is a real concern at this time.
About the recent so-called scandal with Cambridge Analytica. To be fair, most of the responsibility does not lie with Facebook, but rather with those responsible for abusing the platform, and anything can be abused in some way. Even a hammer or a screwdriver. The whole issue has been blown out of proportion. Facebook is caught somewhere in the middle. The fact that data could be harvested so easily is very disappointing. However, actual data collected seem to be of little importance, such as peoples friends lists and what pages people like. Etc. Much of the same data can already be scraped by other means. You do not need access to an API to collect data from Facebook.
The recent criticism of big tech companies, combined with the sensational headlines, is likely the main cause for both stagnation and the drop in stock value. I do not think it reflects the facts. The stock fell around 7% on the news, but is showing signs of recovery already.
Considering that nothing has fundamentally changed, and the media appears to be blowing things out of proportion, now could be a good time to buy Facebook stock. Let us consider the facts:
- There was no leak at Facebook itself (more about this later)
- The data that supposedly was abused is of low-significance, and available through other means as well.
- Facebook remain the number one social media site.
- Facebook has no debt, and maintains a posetive income.
- Potential in video monetization and instant articles - see: Facebook Audience Network
Possible regulation
Currently, there seem to be a negative bias against big technology companies which could ultimately lead to government regulation. This has been called out by Tim Berners Lee (and others), who have expressed support of regulating big technology companies. However, even if Facebook was to face some form of regulation, I do not think it would affect their existing business much. Personally I do not think regulation will prevent leaks, so I am very much against regulation.
Concerning Cambridge Analytica's app, "thisisyourdigitallife", it is rather troubling that an app was allowed to collect data systematically in this manner, and hopefully this sort of data collection will be made harder in the future. I am less worried about how Facebook itself uses my data, with few exceptions. Most available data is of low risk, such as what pages or posts users like, and it will be hard to prevent scraping of such public data. However, clearly when even meaningless data is collected on a vast enough scale, patterns will often begin to emerge, and that may enable someone to use the data, be it for either good or evil purposes. We do not yet know the nature of the ads run by Concerning Cambridge. For instance, did they use fake news to manipulate the election?
The scandal is likely to create a stronger, more secure Facebook. Mark Zuckerberg has admitted mistakes, and expressed his commitment:
Recent pressure in the stock
In my opinion, the recent pressure on the stock is clearly due negative press, and it has little to do with facts. In reality, Facebook is not really responsible for abuse on the platform anymore than Home Depot is responsible for people abusing hand tools to hurt people. Technically, there has been no data breach on Facebook, and even if Facebook restricted their API and access to data, people would still be able to infiltrate the social network in other ways. One way would be to create fake profiles, and have bots automatically scrape the data that would be revealed by connected friends. It would be very hard to prevent abuse completely.
Facebook has the option to regulate and "patrol" their platform with automated algorithms, and at this point, I think any regulation should be left to Facebook themselves – not governments! While I do think these algorithms will eventually work, they are likely still in early development. However, no amount of regulation is going to prevent fake news and data collection entirely. If someone has been fooled by a fake story, they have no one to blame but themselves. Fact checking is increasingly becoming easier. Quite often, all people have to do, to find out if an article or claim is plausible, is to perform a single Google search. Often, they will be able to tell from the URL alone, but often fake news is distributed from alternative websites with low quality design and content.
I think it would be nice if you could actually tell who paid for an ad, and Facebook has already promised to make some improvements in this area.
What do we know?
We know that there technically has not been a data breach at Facebook. This is important, because it may help understand the nature of the data. Apparently, the data was collected through an app called "thisisyourdigitallife", and not obtained through hacking. The data was also of low-risk, such as what pages a user has liked, their friends list, and information about their friends. Likely, this was information which their friends, themselves, made available to friends (friends setting) or the public (public setting on Facebook).
Even if Facebook were to restrict the data available through its APIs, which it appears to have done, it would still be possible to scrape much of the same data using automated scripts. Regulation is therefor very unlikely to prevent such data collection in the future, and I am therefor opposed to the idea. To quote Facebook:
...We remain committed to vigorously enforcing our policies to protect people’s information. We also want to be clear that today when developers create apps that ask for certain information from people, we conduct a robust review to identify potential policy violations and to assess whether the app has a legitimate use for the data. We actually reject a significant number of apps through this process. Kogan’s app would not be permitted access to detailed friends’ data today.
Our Likes and places we have visited, can be controlled with the privacy settings on Facebook. But it is our own responsibility to control what information is made public, and what is only going to be readable by friends. At this point, I do not know if this will prevent Apps from collecting data, but that is irrelevant to my point, which is, anyone who is friends with someone on Facebook will usually be able to view their friends, likes, photos, and places they visited. This is not a problem.
Even if information would be limited to friends-only, and apps would be restricted from collecting data, it would still be possible to scrape much of the same data directly from the site, since users will often accept friend requests by strangers.
If something is to be learned from this scandal, then it is that people should be very careful about granting Apps access to their information, regardless of how sensitive the information is.
Links
- Facebook Audience Network - facebook.com
- Pursuing Forensic Audits to Investigate Cambridge Analytica Claims - facebook.com
Tell us what you think: