Analysts Say Advertisers Won’t Flee Facebook, But its Users are Revolting

Facebook’s data leakage scandal with controversial data company Cambridge Analytica looks to have developed into a full blown crisis for the social media company after fresh allegations of Cambridge Analytica engaging in potentially illegal practices. Both Facebook and Cambridge Analytica continue to deny wrongdoing, but are facing a major international backlash nonetheless, with multiple US and EU legislators, including the president of the European Parliament Antonio Tajani, calling for further investigation, and ‘DeleteFacebook’ trending on Twitter.

Cambridge Analytica’s use of Facebook for data mining has been known for a long time, but the story reemerged last weekend as whistleblower Christopher Wylie told the New York Times and the Observer that 50 million Facebook profiles had been harvested. However, it seems the methods used for data mining, whereby permissions were gained via a personality quiz, granting access to data for that individual and their Facebook friends, were legal, albeit seemingly unethical.

However Dr. Aleksandr Kogan, the Cambridge academic who collected the data, did not have permission to sell it on to third parties, but Cambridge Analytica’s Wylie claims to have receipts and emails confirming that that Cambridge Analytica’s parent company SCL bought Facebook data from Kogan.

This data was then allegedly used for Cambridge Analytica’s work on Donald Trump’s campaign for the 2016 US election. The fresh revelations over the extent of the data leak has bought up questions over Facebook’s data handling practices, and led some to call for tighter regulation on the social media giant.

The situation worsened for Facebook on Monday, as Channel 4 released footage of Cambridge Analytica’s chief executive Alexander Nix saying that his company used bribes, fake IDs and sex workers to entrap politicians. These techniques were reportedly used dig up damaging information on political figures, which could then be disseminated over social media. Cambridge Analytica claims the footage was “edited and scripted to grossly misrepresent the nature of those conversations”, and denies Channel 4’s allegations.

Facebook CEO and founder Mark Zuckerberg is yet to respond to the latest developments, but the company has suspended Cambridge Analytica and its parent company SCL Group from the platform. It also announced yesterday that it has hired digital forensics firm Stroz Friedberg to conduct a “comprehensive audit” of Cambridge Analytica. New rules have also been introduced whereby apps must now justify why they need to collect certain data before they’re allowed to request access to it on Facebook’s platform.

However Facebook’s position remains that the incident should not be classed as a “data leak”, since information was given to Kogan with consent.

While Facebook and Cambridge Analytica protest their own innocence, the backlash for both companies has been severe. Facebook shares dropped by up to eight percent on Monday, wiping $36 billion off the company’s value. Several senators in the US have called for Mark Zuckerberg to testify before Congress, something he has so far avoided.

However, analysts say the scandal won’t led to an advertiser stampede to stop advertising on Facebook anytime soon. Debra Aho Williamson, eMarketer’s principal analyst, said in an emailed statement that “for now, we see no signs of advertiser demand diminishing.”

She does however believe this might change if the scandal prompts fresh regulation of the social media site. “If Facebook were forced to change the way it uses data or the way its ad products work, then advertisers may become less enamored with it,” she said. Pivotal’s Brian Wieser agrees, predicting that “regulatory risks will intensify, enhanced use of data in advertising is at greater risk than before, and third party measurement partners may face more restrictions, frustrating advertisers.”

Advertisers might also be deterred if the public backlash is strong enough, as the political dimension of the scandal has heightened feeling about the data breach. The hashtag ‘#DeleteFacebook’ was trending on Twitter yesterday as users took to the platform to announce their breakup with Facebook. Interestingly too, the BBC’s coverage of the story actually advised readers to install an ad blocker in order to limit advertising on the site as a way of protecting their data. Nonetheless this is far from Facebook’s first scandal over data handling, and only time will tell whether this story spurs significant numbers of users to delete their accounts or not.

The news will also likely bring fresh scrutiny of the buying and selling of personal data in digital advertising. Privacy International, while condemning Cambridge Analytica’s practices, point out that it’s not the only company to engage in this type of behaviour. “We will use the rules that exist and seek new protections to prevent this exploitation of our data. We cannot let these powerful companies and governments continue to determine our future,” the company said in a statement.

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