FTC, Senate Committee join voices asking Facebook for answers

It is tempting to want to blame someone other than voters for populist voting outcomes such as Brexit and the election of Donald Trump as the US President. Opponents of those outcomes want to see a sinister hand at work to explain away the simple fact that the majority of voters want change.

Now, on the back of the revelations that Facebook has had some of its user data compromised there are hysterical calls, mostly from media companies but also from regulators such as the US Federal Trade Commission, calling for heads. Or at least an explanation.

This week Tom Pahl, Acting Director of the Federal Trade Commission’s Bureau of Consumer Protection, issued a statement in which he said, ““The FTC is firmly and fully committed to using all of its tools to protect the privacy of consumers. Foremost among these tools is enforcement action against companies that fail to honor their privacy promises, including to comply with Privacy Shield, or that engage in unfair acts that cause substantial injury to consumers in violation of the FTC Act.”

His reference to the Privacy Shield is the technical requirements which US firms have with the European Union to hold data on EU citizens.

He went on, “Companies who have settled previous FTC actions must also comply with FTC order provisions imposing privacy and data security requirements. Accordingly, the FTC takes very seriously recent press reports raising substantial concerns about the privacy practices of Facebook. Today, the FTC is confirming that it has an open non-public investigation into these practices.”

We cannot expect too strong a hand to be played by the FTC, although the news is certainly inviting some form of financial compensation, an FTC controlled by the current President can hardly say complain that what Facebook did actually worked. It would be tantamount to saying, “Thanks buddy for putting me in the White House.” The most obvious outcome will be that the FTC does not believe that the data leak actually led to anyone changing their vote – Trump was always going to be president – but the data leak of 30 million or more user accounts is a sin in its own right, and there will be a demand for change in business practices at Facebook.

Mark Zuckerberg, Facebook CEO has had around 3 separate invites to attend either a Congressional sub-committee or a Senate Judiciary Committee and has said he will attend at least one of these to discuss the “future of data privacy and social media,” and on the basis that there is no smoke without fire, Google and Twitter have been invited along as well or perhaps on the understanding that they have the same problems keeping data safe as Facebook has. They will be anxious not to be lumped in with Facebook right now especially at Twitter is about to IPO.

More worrying for Zuckerberg right now is the fall of some 17.3% of his stock price in just a few days, a fall that is just shy of $100 billion in value. Perhaps even more worrying are the open statements about not wanting to use Facebook for advertising.

Across the advertising fraternity Google and Facebook at called “the duopoly” and with the rise of more and more video on Facebook, we would have anticipated that video advertising would become more and more centered on these two. There has been a rising tide against Facebook for its accounts being used to promote Fake News, and last year it was accused of advertising “fraud” which it more or less confirmed, saying that its reporting of advertising views were often inflated. This is now a case of three strikes and you’re out, as this week’s story has emerged about Facebook data being extracted by Cambridge Analytica. So now there are multiple reasons for withdrawing advertising from Facebook. The duopoly may have to make room for more traditional video delivery and advertisers to take market share.

But most people are addicted to social media and their habits are ingrained. Ask yourself, have you receive d less Facebook Notification this week? Probably not, and do you know anyone personally who has followed the #deletefacebook instructions to reject the social media? Chances are that’s not happened.

But Zuckerberg’s falling share price is a sign of the monetization procedures of Facebook being fallible and being rejected, not the actual use of the site. We do not expect 200 million Facebook accounts to be deleted, although certainly some will be, but we do expect Facebook revenues to fall by that kind of level, certainly until this fuss dies down and perhaps advertisers will engage in a full rethink.