Shares of Facebook were down more than 5% in early morning trading Monday after several media reports exposed an incident that allowed a political consulting firm to access data on up to 50 million Facebook users.
The consultancy in question is Cambridge Analytica, a data analysis communications company with ties to conservative billionaire Robert Mercer and former Trump advisor Steve Bannon. Over the weekend, Facebook said that it suspended Cambridge Analytica from its platforms while it works to determine the accuracy of reports that the U.K.-based company mishandled Facebook user data.
Stories published by The Observer and The New York Times cited Christopher Wylie, a whistleblower that allegedly played a role in the incident. Wylie said that Cambridge academic Aleksander Kogan made an app that prompted users to answer personal questions in order to build a psychological profile. This information was allegedly shared with Cambridge Analytica without Facebook’s consent, violating the social media company’s terms of use.
Facebook knew about the violation and blocked the application in 2015. The internet giant also worked to ensure that all parties involved destroyed the data, although recent reports suggest that not all of it was actually deleted.
“We are moving aggressively to determine the accuracy of these claims. If true, this is another unacceptable violation of trust and the commitments they made,” said Paul Grewal, Facebook’s deputy general counsel, in a blog post Saturday.
Cambridge Analytica also worked on Facebook ads for President Donald Trump during the 2016 election. Facebook has already been under intense scrutiny for the way it handled political advertising during that election cycle, with multiple intelligence agencies suggesting that social media platforms were a key battleground in Russia’s propaganda campaign to influence U.S. voters.
To many investors, the Cambridge Analytica story underscores Facebook’s failure to properly protect its users and their data, which could lead to increased spending and possible regulatory concerns in the very near future.
“We think this episode is another indication of systemic problems at Facebook,” Brian Wieser, analyst at Pivotal Research Group, told Reuters.
Wieser clarified, however, that these reports are unlikely to meaningfully impact Facebook’s business for now because advertisers are unlikely to “suddenly change the trajectory of their spending growth on the platform.”
Still, the head of European Parliament said on Monday that EU regulators will investigate the alleged data misuse, adding to concerns that Facebook could face regulatory pressure. Meanwhile, we already know that Facebook intends to ramp up spending to prevent abuse and improve security this year.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>
Image: Bigstock
Why Is Facebook (FB) Stock Falling Today?
Shares of Facebook were down more than 5% in early morning trading Monday after several media reports exposed an incident that allowed a political consulting firm to access data on up to 50 million Facebook users.
The consultancy in question is Cambridge Analytica, a data analysis communications company with ties to conservative billionaire Robert Mercer and former Trump advisor Steve Bannon. Over the weekend, Facebook said that it suspended Cambridge Analytica from its platforms while it works to determine the accuracy of reports that the U.K.-based company mishandled Facebook user data.
Stories published by The Observer and The New York Times cited Christopher Wylie, a whistleblower that allegedly played a role in the incident. Wylie said that Cambridge academic Aleksander Kogan made an app that prompted users to answer personal questions in order to build a psychological profile. This information was allegedly shared with Cambridge Analytica without Facebook’s consent, violating the social media company’s terms of use.
Facebook knew about the violation and blocked the application in 2015. The internet giant also worked to ensure that all parties involved destroyed the data, although recent reports suggest that not all of it was actually deleted.
“We are moving aggressively to determine the accuracy of these claims. If true, this is another unacceptable violation of trust and the commitments they made,” said Paul Grewal, Facebook’s deputy general counsel, in a blog post Saturday.
Cambridge Analytica also worked on Facebook ads for President Donald Trump during the 2016 election. Facebook has already been under intense scrutiny for the way it handled political advertising during that election cycle, with multiple intelligence agencies suggesting that social media platforms were a key battleground in Russia’s propaganda campaign to influence U.S. voters.
To many investors, the Cambridge Analytica story underscores Facebook’s failure to properly protect its users and their data, which could lead to increased spending and possible regulatory concerns in the very near future.
“We think this episode is another indication of systemic problems at Facebook,” Brian Wieser, analyst at Pivotal Research Group, told Reuters.
Wieser clarified, however, that these reports are unlikely to meaningfully impact Facebook’s business for now because advertisers are unlikely to “suddenly change the trajectory of their spending growth on the platform.”
Still, the head of European Parliament said on Monday that EU regulators will investigate the alleged data misuse, adding to concerns that Facebook could face regulatory pressure. Meanwhile, we already know that Facebook intends to ramp up spending to prevent abuse and improve security this year.
Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>