Friday 20th July, 2018
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Zuckerberg apologizes for mistakes after scandal, stocks dip

Sheetal Sukhija - Friday 23rd March, 2018

CALIFORNIA, U.S. - As the scandal involving Cambridge Analytica raised questions about Facebook’s user data safety, the company’s CEO, Mark Zuckerberg finally broke his silence and addressed the issue.

Zuckerberg took to the platform to address the scandal a week after it broke and apologized for the mistakes that Facebook made with regard to how data of 50 million people may have been used to tip important election outcomes.

The data in question was used during the pivotal 2016 Brexit vote and the election of U.S. President Donald Trump.

Since the expose that a right-leaning political consultancy Cambridge Analytica, acquired and misused the personal data of tens of millions of Facebook users first came to light last week, Facebook’s stock price is down more than 11 percent.

As the world’s largest social media network continues to face growing government scrutiny in Europe and the U.S., Zuckerberg finally opened up about the company’s stance.

He apologized for mistakes his company made in how it handled the data and vowed tougher steps to restrict developers’ access to data belonging to 50 million of the company’s users.

He said, “This was a major breach of trust. I'm really sorry this happened. We have a basic responsibility to protect people's data.”

In a post on Facebook, Zuckerberg said that the company "made mistakes, there's more to do, and we need to step up and do it."

He said, “We have a responsibility to protect your data and if we can’t, then we don’t deserve to serve you. I’ve been working to understand exactly what happened and how to make sure this doesn’t happen again. The good news is that the most important actions to prevent this from happening again today we have already taken years ago. But we also made mistakes; there’s more to do, and we need to step up and do it.”

He added that the social network planned to conduct an investigation of thousands of apps that have used Facebook's platform, restrict developer access to data, and give members a tool that lets them to disable access to their Facebook data more easily.

While his plans did not represent a big reduction of advertisers' ability to use Facebook data, Zuckerberg said he was open to additional government regulation and is happy to testify before the U.S. Congress if he was the right person.

He added, “I’m not sure we shouldn't be regulated. I actually think the question is more what is the right regulation rather than yes or no, should it be regulated? ... People should know who is buying the ads that they see on Facebook."

Zuckerberg added that Facebook was committed to stopping interference in the U.S. midterm election in November and elections in India and Brazil.

After Zuckerberg’s post, Facebook shares pared gains on Wednesday, closing up 0.7 percent.

Over the past three days, as investors feared that any failure by big tech firms to protect personal data could deter advertisers and users and invite tougher regulation, the company has lost over $50 billion of its stock market value.

In another interview, Zuckerberg told the New York Times that he had not seen a "meaningful number of people" deleting their accounts over the scandal.

On Thursday however, Zuckerberg’s proposals for change drew mixed responses as Wall Street analysts worried about costs and a loss of trust.

Two more major brokerages cut price targets for Facebook stock, adding to the company’s woes, leading its shares to fall as much as 2.5 percent in heavy trading.

Stifel analyst Scott Devitt cut his price target on Facebook by $27 to $168, explaining, “Facebook’s current plight reminds us of eBay in 2004 – an unstructured content business built on trust that lost that trust prior to implementing policies to add structure and process. We would buy all of our Buy-rated stocks and many of our Hold-rated stocks before we would buy Facebook shares.”

Meanwhile, BofA Merrill Lynch slashed its target by $35 to $230. 

The stock fell 2 percent to $166.05.

The company is expected to brief two additional congressional committees on Thursday after executives met with staff for the House Energy and Commerce Committee on Wednesday for nearly two hours to discuss the allegations of improper use of data by political consultancy Cambridge Analytica.

However, at the meeting, Facebook Deputy Chief Privacy Officer Rob Sherman and other executives reportedly did little to satisfy lawmakers in either political party who demanded that Zuckerberg testify before Congress earlier this week.

According to sources, the Facebook executives said they had written down a list of 60 questions they pledged to answer.

While Wall Street analysts were relieved that Zuckerberg’s reaction did not hit at a more fundamental shift in the company’s advertising-driven revenue model, some analysts pointed out that it was clear the company would have to carry extra costs to shore up its reputation in the months ahead.

Meanwhile, some analysts pointed out that Zuckerberg’s promises to investigate thousands of apps, and to give members a tool that lets them turn off access, would not substantially reduce advertisers’ ability to use Facebook data, which is the platform’s lifeblood.

Late on Wednesday, open-source browser and app developer Mozilla said in a blog post that it was suspending advertising on Facebook.

The company wrote, “We found that its current default settings leave access open to a lot of data – particularly with respect to settings for third-party apps.” 

According to a report in The Times, British advertising group ISBA, which represents thousands of well-known brands, too had threatened to withdraw ads if probes show user data was misused.

Meanwhile, the Information Commissioner’s Office in the U.K. has had Facebook’s own auditors step aside to conduct a thorough investigation of Cambridge Analytica’s servers.

Further, the former Cambridge Analytica employee and the whistleblower who launched the scandal, Christopher Wylie said on Twitter that he had accepted invitations to testify before U.S. and U.K. lawmakers.

On Wednesday, the German government issued a statement saying Facebook must explain whether the personal data of the country's 30 million users were protected from unlawful use by third parties.

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