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Can Google Overcome Privacy Concerns Like Facebook?

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On Oct 8, Google-parent Alphabet Inc. (GOOGL - Free Report) announced that it will be shutting down its Google+ social network. The decision comes after The Wall Street Journal on Oct 8 reported that the company did not disclose that private data of hundreds of thousands of users of Google+ was potentially exposed due to a bug from 2015. Although, the company claims that no one exploited this glitch to steal data, Google, reportedly, chose not to go public with the information. 

Google’s data-related glitch, exposing personal information of Google+ users comes seven months after Facebook Inc. (FB - Free Report) found itself in a sticky situation after data misuse that affected millions of its users was revealed. Tech stocks have been driving markets for a while but social media and search engines have had a rollercoaster ride this year.

Google Exposes User Data

Per The Wall Street Journal, Google exposed the private data of up to 500,000 Google+ users due to a bug. The company managed to fix the glitch only in March 2018. The glitch enabled outside developers to access the data. However, the company said that it found no evidence of any developer being aware of the bug or having misused the data.

Reportedly, Google opted not to make the information public because of fears of attracting regulatory scrutiny and affecting its reputation. Google’s vice president Ben Smith blogged that the “consumer version of Google+ has low usage and engagement.” Google+ hasn’t been as successful as Facebook as a social media platform. Following the report, Alphabet announced that it would be closing down the consumer version of Google+.

Social Media Under Scrutiny

Google’s data-related glitch follows Facebook’s data misuse scandal involving Cambridge Analytica. On Mar 19, the social media giant’s shares tanked 6.8%, recording its worst decline in four years, after it was accused of a data misuse scandal that affected the personal information of more than 80 million users.

User data privacy has been an increasing concern for quite some time now. Apple, Inc. (AAPL - Free Report) on the other hand takes a far more conservative approach to user privacy. In fact, in the wake of Facebook’s data misuse scandal, when asked what he would have done had he faced similar problems like Facebook, Apple’s CEO Tim Cook in an interview had said, “I wouldn’t be in this situation.”  Apple has a Zacks Rank #2 (Buy), while Alphabet has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Concerns of a regulatory clampdown on how tech and Internet companies handle user data, has been looming large on a number of companies. A regulatory clampdown means restricted use or ad-free paid service, which will weigh on the companies as they tend to lose users, who can’t afford pair service. Data-related glitch isn’t the only worry for Google.

Summing Up

Tech stocks have been one of the best performers so far this year. However, concerns over data privacy have often affected the broader tech sector, particularly FANG stocks that include Facebook, Amazon.com Inc. (AMZN - Free Report) , Netflix Inc (NFLX - Free Report) and Alphabet. 

So much so, that this resulted in slow user growth for companies like Facebook. In fact, following the data misuse scandal, Facebook missed earnings expectations for the first time in 11 quarters in its last-reported quarterly results. It now needs to be seen how Google emerges out this crisis.

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