Did Cambridge Analytica Debacle Kill Facebook’s Business Model?

Could It Hurt User Sentiment?

I personally have friends and family members who are addicted to Facebook. They spend more time interacting with people on Facebook than they spend on the telephone or engaging in face-to-face contact. I cannot imagine the most-loyal Facebook fans leaving the site. However, I also believe many Facebook users would be appalled if they knew their private data was being used to help President Trump win the election. I believe millions of Facebook users were naive as to how their data was being used or potentially sold by the company. Now that the information is in the public eye it is up to them to decide whether or not to delete their accounts.

I personally use the site to post news articles and search for some of my friends from high school or college who I have lost touch with. I rarely engage with the site out of fear the company will use my personal information in a way I do not approve of. I believe the most likely scenario is that consumers will maintain their accounts, but engage less and less with the site. How much value advertisers or investors place on Facebook user engagement could drive the narrative going forward.

Will It Hurt Advertiser Sentiment

Facebook has over 2 billion monthly active users (“MAUs”). The chance to reach them with targeted ads is almost too attractive too ignore. Advertisers have to decide whether the upside of reaching billions of people with an ad campaign is worth potentially having their brand tarnished by being associated with Cambridge. Companies could do a risk assessment of Zuckerberg and Facebook. However, it could be difficult to know what third-parties Facebook is selling data to, what they are using it for and who they are sharing it with.

Mozilla recently decided to stop advertising on Facebook’s platform. Mozilla was concerned that Facebook had not taken enough precautions to limit developer access to friends’ data. It intimated it would consider returning once Facebook “strengthened its default settings for third party apps.” I also understand Commerzbank (CRZBF) pulled its advertising from the platform. Who is to say others will not follow suit?