Facebook (FB - Free Report) remains in the center of the white supremacist controversy, lawmakers in the EU, UK, Australia and Britain are cracking down on it, U.S. users are quitting for privacy concerns while advertisers are sticking on even as Morgan Stanley analysts continue to praise its prospects. Here are the details-
Hate Speech and White Nationalism
Representatives from Facebook and Alphabet’s (GOOGL - Free Report) Google appeared before Congress to say once again that they were technology companies distributing media but weren’t in control of creating it, that they didn’t support and were taking down inflammatory comments whenever they could and that they would continue to support government initiatives to control the spread of hate speech.
The latest round of questioning stemmed from the shooting by white supremacists in New Zealand. The congressional proceedings were livestreamed on YouTube but the comments section had to be disabled soon after it started because it was getting filled with hateful and anti-Semitic content.
Experts are divided on whether regulation will improve the situation because first, not all content is created or used in the U.S.; second, because live streams significantly reduce the time for any kind of filtration and this is the way content is increasingly being consumed these days; and third, the sheer volume of content being created every moment makes the job practically impossible.
Some also said that the hearing was designed to help democrats win votes by creating a certain kind of rhetoric.
Pacifying the EU
Facebook has until Jun 2019 to change its terms and conditions of service in the EU, specifying that free use of the service necessarily entails the sharing of a person’s data with Facebook, which will sell that data to third parties to allow them to serve better-targeted advertisements. It will also specify how consumers can close their accounts or the circumstances under which accounts can be suspended.
Facebook said it has been working with the European Consumer Protection Network (CPC) to bring the changes that will be applicable globally.
Other changes the company needs to implement if it wants to avoid sanctions include-
Modification of the clause limiting its liability in case user data is mishandled by third parties.
Modification of rules limiting its power to unilaterally change the terms and conditions such that it can be done only in reasonable circumstances, and then also, only with the user’s personal interests in mind.
Modification of rules retaining content that a user has deleted only in “specific cases” (such as to comply with an enforcement request by an authority) and for a period not exceeding 90 days when it is for technical reasons.
Modification of the language to better clarify a user’s right to appeal when his/her content has been removed.
The language is the key thing here and just how forthcoming Facebook really is on the issue won’t be clear until the changes are implemented.
Britain Sitting Up
Technology companies have avoided regulation for long on the theory that it could stifle innovation. But lawmakers the world over have realized that it’s high time the era of self-regulation came to an end. Not only have the companies abused their privilege but they have exposed millions of users to privacy and security issues.
Now, UK regulators have decided to bring legislation that casts social networks with the duty of tackling harmful content, especially terrorism and child abuse but also covering legal but harmful matters.
It will also create a new industry-funded regulator with the power to heavily fine (or even ban in case of very serious offense) Internet firms, block people's access to websites and also hold executives personally liable for violations.
While the goal is not to limit freedom of expression, critics argue that there’s at least a fair chance that it could happen.
Australia Joins the Party
Facebook is not taking any chances in Australia where the government just passed a strict law requiring fines and/or imprisonment for failing to quickly remove violent and abhorrent content. That law was implemented in response to a New Zealand shooting where a white nationalist Australian let loose on a mosque that Facebook continued to livestream for 17 minutes without interruption.
So as the country moves toward elections in May, Mia Garlick, Facebook's director of policy for Australia and New Zealand, has said that the company would not be selling any ads mentioning political parties, slogans and logos to foreigners.
It is also getting ready to launch a fact-checking service in Australia in partnership with French news agency Agence France-Presse. Other attempts to deal with so-called fake news include the removal of fake news and reducing the prominence of sensational stories in a user’s newsfeed.
U.S. Moving Toward Data Policy
A bipartisan group of senators are working on new privacy legislation dubbed DETOUR, for "Deceptive Experiences to Online Users Reduction" Act.
Last week, Democratic Senator Mark Warner and Republican Senator Deb Fischer introduced the bill that requires websites with more than 100 million monthly active users to stop them from employing “dark patterns” or deceptive practices to "trick consumers into handing over their personal data," often getting them to part with more than they realize. Not only does this allow the data to be used without consent, but it also exposes the user to security risk.
An example of these practices would be prompts to access phone and email contacts in order to keep using the platform. They could also include pre-checked boxes or pop-ups in the middle of an activity prompting them to give up some data. Because the user is in a hurry to get going, they are more likely than not to give up the information without realizing that it wasn’t what they wanted to do.
Another goal of the act is the creation of a regulator within the Federal Trade Commission (FTC) that would enforce best practices as platforms evolve to protect users’ interests.
This is a growing concern given the number of data breaches hitting Facebook in recent times.
Hosting Criminal Flea Markets
Cisco’s (CSCO - Free Report) Talos security unit discovered that 74 groups of criminals selling stolen credit card information, account theft and spamming tools, were operating freely on Facebook. When you happened to join any such group, Facebook’s own algorithms directed you to similar groups, so the criminal groups were easy to locate. What’s more, the groups were operating freely for over eight years without discovery.
Facebook, of course, removed the offenders as soon as the problem was pointed out and agreed that it should have better vigilance. It also said that it was investing heavily in security to try and prevent such things from happening in the future.
Building Population Map of Africa
Facebook is using artificial intelligence to map the population of Africa so aid and other benefits (including Internet service) can reach the people sooner.
The company is still some way off from mapping the world’s population, but Africa is a good start given its size. The A.I. team first got rid of large land masses that didn’t have any living populations and then focused on matching census data and OpenStreetMap data to building structures. Physically verifying some of the information enabled them to pinpoint living quarters to within meters of where people are actually located.
Users Quitting but Advertisers Aren’t
An IBD/TIPP poll that surveyed 902 people aged 18 and older across America indicates that users are quitting Facebook in droves.
According to the latest survey, 11% of users claimed they quit the platform, while another 19% said they have never used it.
Among those that are still using Facebook, 45% said they were "not at all confident" that Facebook adequately protects the privacy of personal data, another 28% said they were "not very confident,” 17% said they were “somewhat confident” and only 2% said they were confident.
Advertisers however find that Facebook gives them the biggest bang for their buck while brands find the platform safer than YouTube where their ads could be placed next to objectionable content. So Facebook is actually seeing increasing advertising revenue despite its disenchanted users. The social media platform is seeing most of its user growth in places like India and Indonesia, so user growth numbers remain positive.
Morgan Stanley (MS - Free Report) analyst Brian Nowak and John Colantuoni raised their price target on Facebook shares from $190 to $195 while also raising their revenue and earnings estimates by 1%. They retained their Overweight rating on the shares.
The analysts believe that Facebook has real opportunity in monetizing Instagram stories because retailers were keen on exploiting the platform for its reach, data and 'browsing/aspirational' behavior to grow their online businesses, particularly after ROI on Facebook stories turned out to be so attractive. The analysts expect this opportunity to add $4 billion to its North America ad revenue by 2021.
At the same time, the analysts believe that Facebook has its work cut out because a good payments processing platform is required for a seamless buying experience and for advertisers to track whether their campaigns lead to purchases. Although the company has been experimenting with payments strategies for a while, none of those have scaled.
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