By Kirsten Grind
Facebook Inc.'s handling of user data has upset lawmakers and
regulators in multiple countries. But the biggest risk to its
business could come from angry users.
Throughout previous controversies in recent years, Facebook's
user population has climbed steadily, providing the critical base
that draws an ever growing gusher of advertising revenue.
Now Facebook is contending with a groundswell of users -- some
of whom are tweeting under the hashtag #DeleteFacebook -- who claim
to be abandoning the social media giant, prompting some analysts to
warn that its growth juggernaut could sputter.
"The biggest issue we see for Facebook is if the DeleteFacebook
leads to user attrition and eventually ad dollars allocated
elsewhere," Barclays analysts said in a research note Tuesday. The
public backlash also could impinge on Facebook's ability to recruit
talented engineers, they said.
The latest crisis began late Friday when Facebook said it was
looking into reports that analytics firm Cambridge Analytica ,
which worked with the Donald Trump campaign in 2016, improperly
accessed data from its platform on tens of millions of users, and
retained the data even after it had agreed to delete it. Cambridge
Analytica said it followed Facebook policies.
The controversy knocked a total of 9% off Facebook's stock price
Monday and Tuesday, erasing $50 billion in market value, before
shares rebounded 0.7% on Wednesday. Facebook is facing legislative
inquiries on two continents and an investigation by the Federal
Trade Commission.
Chief Executive Mark Zuckerberg broke his silence on the issue
Wednesday, admitting mistakes and pledging an investigation and
improvements to user-data policies. "We have a responsibility to
protect your data, and if we can't, then we don't deserve to serve
you," Mr. Zuckerberg wrote in a Facebook post.
It's possible the tensions will ebb. For now, though, those
reassurances weren't enough for some users who already were
frustrated by Facebook's handling of Russian interference on the
platform around the 2016 U.S. election.
Sabine Stanley, a 42-year-old professor at John Hopkins
University, says she had been thinking about deleting her Facebook
account for months as the company battled one crisis after another,
but the revelation about Cambridge Analytica and Facebook's slow
response pushed her over the edge.
"You combine that with the election scandal, and I decided I
couldn't support Facebook anymore," says Ms. Stanley, who also
deleted her account on Facebook's Instagram app.
A Facebook spokeswoman declined to comment. The number of people
worldwide who use Facebook at least once a month has more than
doubled since it went public in 2012, hitting 2.13 billion in the
fourth quarter. Revenue and profit have grown even faster, thanks
to Facebook's use of its wealth of data to help advertisers target
their messages to those users.
Warning signs began appearing last year, as anger rose in the
U.S. over Facebook's lax controls over misinformation and abuse on
its platform. In an earlier Pivotal Research Group analysis of
Nielsen data, Facebook's U.S. users spent 7% less time on the site
in August compared with a year ago and 4.7% less time in
September.
Last month, Facebook said its users collectively spent 5% less
time on the platform a day in the past three months of 2017,
translating to a little more than two minutes per day, per
user.
The company also said it experienced its first-ever
quarter-to-quarter drop in the number of people who log in daily in
its most lucrative market, the U.S. and Canada, where Facebook lost
about 700,000 daily users. Facebook said the decline was a blip and
that the figure was likely to fluctuate given Facebook's broad
reach in the region.
Brian Weiser, an analyst with New York-based Pivotal Research,
says he expects the Cambridge Analytica issue to reduce the amount
of time users spend on Facebook by 10% to 15%.
"The biggest, most concerning thing here is the scale of this
problem," Mr. Weiser says. "All the operational failures indicate a
real management problem."
Gabrielle Estres, a 34-year-old industrial adviser in London,
deleted her Facebook account this week after the recent data issues
at the company, but said even before that she had been using it
less.
"It was this super cool thing and now at this point it's more
the thing that always reminds me of birthdays," she said. "The
threshold of deleting your account is not that high anymore."
So far, there's little indication that advertisers have changed
their plans because of the latest furor -- though some prominent
executives have criticized the firm in recent months. Investors
will get their next glimpse of Facebook's performance with its
first-quarter report more than a month from now.
"If time goes on and it appears they still seem disconnected
from how users feel, then they might have a problem," says Colin
Sebastian, a senior research analyst at Robert W. Baird & Co.
in San Francisco. "We can see now they're in crisis management
mode, which is a good thing."
Write to Kirsten Grind at kirsten.grind@wsj.com
(END) Dow Jones Newswires
March 22, 2018 07:39 ET (11:39 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From Aug 2024 to Sep 2024
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From Sep 2023 to Sep 2024