Facebook Roundup: The Privacy Issue

The data privacy scandal has hit Facebook (NASDAQ:FB) in a way that it hasn’t any other technology company despite the fact that there have been a considerable number of data breaches in recent times that were far more serious than this one. One reason could be the political leanings of most publishers leading them to react rather strongly to the political mileage that the current President may have gained through the platform.

At the center of the controversy is Global Science Research (GSR) former co-director Aleksandr Kogan, who collected data on people and their friends under the garb of a personality test app and later sold that data to British political consulting firm Cambridge Analytica (which also handled President Trump’s election campaign).

The consulting firm said that it received data on 30 million people according to its agreement with GSR, but Facebook estimated the number of users affected could be closer to 87 million based on the maximum number of friends those people may have had at the time. In any case, the firm said that the data had been deleted on Facebook’s request and hadn’t been used in the 2016 elections.

Also, while Facebook claimed that the data transfer was without its knowledge, Kogan said that the company was well aware of the changes it made to the terms of service to reflect the intention to use the data commercially. Even then, the data was removed when requested.

That’s one part.

A longer standing issue is with respect to the purported Russian meddling in U.S. elections through agencies that posed as different interest groups to create disharmony amongst the voting public. Facebook has said on multiple occasions that actual influence on people was negligible even as it revised its initial estimate of 10 million users that may have seen the offensive ads to 126 million (when organic posts were included).

Mr. Zuckerberg Goes to Washington

Senators figured that all this was enough to warrant a conversation with Zuckerberg, who made a calm and collected impression while sticking to his ground. He accepted responsibility and blame for the mishaps and detailed what the company was doing to change the situation.

On the question of regulation of the social network, Zuckerberg said that Facebook wasn’t opposed to the “right” kind, especially regarding transparency guidelines on data use, rules providing for greater user control over personal data and protections for innovation.

One of the major revelations was that Facebook isn’t ruling out the possibility of a paid version of the app although there would always be a free, ad-supported version to help people connect with each other on an affordable platform.

Facebook Taking Action

1. Starting Apr 9, Facebook has started telling people, in a notice at the top of their news feeds, if their information may have been improperly shared with Cambridge Analytica
2. Facebook is suspending apps and subjecting them to an audit when any improper use of personal information is suspected. Zuckerberg says that if any such activity is discovered, the apps will be banned from Facebook. To this end, it has suspended AggregateIQ, a Canadian advertising tech and audience intelligence company because of its connections with Cambridge Analytica parent SCL while it is investigated. Another app that was recently suspended was data-analytics firm Cubeyou. While Cubeyou’s website says that it has more than 10 million “panelists” contributing consumer opinions, interests and traits throughout the U.S. that is used by more than 1,500 marketers, the company tells Facebook users that their data will be used for academic research.
3. For Facebook users, the company now has a bulk app removal tool for both mobile and desktop users that they can use to select the apps they no longer need or want and remove them. If the apps have made any posts to your profile, these too can be removed.
4. Facebook is now offering users additional information about publications, such as their Wikipedia pages, related articles about the same topic, how many times the article has been shared and where, and a button for following the publisher to help them determine whether they could be a reliable source of information and avoid charges of bias. Of course, an article isn’t untrue just because no one shared it. But more information is always a good thing.
5. Facebook is backing new legislation -- “The Honest Ads Act” -- that basically extends some general advertising rules that already apply to other platforms like TV and radio. This is a change from its earlier stance of self-regulatory measures. The Act requires social media sites to disclose the identities of buyers of online political campaign ads. Digital platforms with at least 50 million monthly views are also required to maintain a public file of all electioneering communications purchased by anyone spending more than $500. All reasonable measures will also have to be taken to see that foreign nationals don’t get to influence American voters. Facebook has added that managers of Facebook pages with large followings will also require verification. Facebook will also require verification for “issue ads”, i.e. those that don’t mention any political leader but spread opinion on a list of key issues developed and updated over time by the company in consultation with third parties.
6. To remove the influence of Russian government agencies through "inauthentic accounts to deceive and manipulate people", Facebook has taken down 70 Facebook accounts, 65 Instagram accounts as well as 138 Facebook Pages run by Russia’s government-controlled Internet Research Agency (IRA). The accounts had spent a combined $167,000 on ads since the beginning of 2015. Facebook has said that 95% of the accounts operated in Russia and other Russian-speaking regions in nearby countries like Azerbaijan, Uzbekistan and Ukraine.

International Reactions

Australia's privacy watchdog (OAIC) has opened a formal investigation into Facebook after the social networking company confirmed that 300K of the people that might have been affected by the Cambridge Analytica data issue were Australian.

The UK's data watchdog, the ICO, has been investigating Facebook on the data analytics issue since May 2017 (1.1 million Britons were affected).

An Indonesian cabinet minister has threatened to shut down the app if a privacy breach is discovered or if there is spread of fake news during the soon-to-be-held elections. Indonesia’s Communications Minister Rudiantara has asked the chief of the National Police, Tito Karnavian, to investigate the matter. Facebook employees in the country could be imprisoned for up to 12 years or fined by as much as 12 billion rupiah ($871,000) if there is any breach of Indonesia’s privacy rules. Indonesia was the third most affected country after the U.S.

Privacy is a matter of considerable concern in Germany where an ARD public television poll found that 61% of Internet users were concerned about the misuse of their data, with 12% saying they had reduced their Facebook usage while another 2% stopped using it altogether. So it isn’t surprising that the German Justice Minister Katarina Barley has expressed a desire to meet with Facebook on the way its algorithms categorized users, because this data misuse was unlikely to be an isolated case.

What Users Say

As Zuckerberg struggles to satisfy legislators and pacify privacy advocates, pollsters have jumped into the scene to gauge user reaction.

The first poll, conducted by IBD/TIPP found that most of the 902 participants nationwide whether young or old, male or female, rich or poor, democratic or republican (or neither), think that Facebook is having a bad effect on society, although the percentages vary slightly between these groups on whether they are likely to use Facebook less as a result. Most people are concerned about the privacy of their data on Facebook.

A Deutsche Bank (DE:DBKGn) survey found that of the 500 people it surveyed, few are actually deleting Facebook although they intend to use it less, with Facebook-owned Instagram likely to be the biggest beneficiary. The survey also found that people trust Google (NASDAQ:GOOGL) slightly more than Facebook, although most aren’t interested in an ad-free paid version that will guarantee privacy.

Yahoo (NASDAQ:AABA) Finance spoke to 4,000 respondents on whether they would pay $5 a month for a Facebook account if it meant nobody could access their data. Only 13% said yes, with 87% saying no.

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