A few weeks ago, we published a blog which highlighted the fact that the Mac Daddy of social networks was in trouble for flaunting privacy rules governed by the General Data Protection Rules (GDPR) Act. Now, it seems as if the social media giant is not only facing more privacy problems but is also facing a mutiny from within.
More security concerns.
Let’s start at the beginning; according to an article on article on wired.com, Zuckerberg and his team just cannot get privacy right.
The article points out that, earlier in March, Facebook has said it is rethinking its business, and a presidential candidate said it should be broken up. On March 13, the company’s services, including Facebook, Instagram, WhatsApp, Messenger, and Oculus, froze for most of a day and a newspaper revealed that a new crop of prosecutors is investigating the company for criminal behavior related to a slew of data partnerships.
For most companies, this would be a catastrophe. For Facebook, it’s just another week and a half.
Hard at work.
The article adds that for the past 15 years, Mark Zuckerberg has pushed Facebook to be the most innovative, influential, fast-growing, and profitable company in the world—to move fast and break things. It worked great, as we all know. It also broke a lot of things Facebook didn’t anticipate. And the cleanup bills are piling up.
The new investigation, by federal prosecutors in the Eastern District of New York, is related to deals with more than 150 partners, including many big tech companies. Those deals allowed the partners to see Facebook user data, sometimes without user consent. The New York Times, which broke the news on Wednesday night, reported on these partnerships in December. While Facebook phased out almost all the deals more than two years ago, it accidentally left some of the data connections open into early 2018, the paper said then.
The article pointed out that the probe adds to an already impressive list of queries and charges from lawmakers, regulators, and prosecutors. The company is under investigation by the Federal Trade Commission for its role in the Cambridge Analytica scandal, which burst into public view a year ago Sunday. Cambridge Analytica also sparked a Securities and Exchange Commission investigation and a criminal investigation by prosecutors from the Northern District of California.
Massive fines expected.
The article added that the FTC is widely expected to levy its largest-ever fine against Facebook in the coming weeks, perhaps in the billions of dollars. Facebook had already told the agency in a 2011 consent decree that it would improve its privacy and data collection practices. That agreement laid out enormous fines for the company for violations. Facebook executives now talk about when, not if, the company will be regulated in some way.
In response to the Times report of the latest criminal probe, a Facebook spokesperson said, “It has already been reported that there are ongoing federal investigations, including by the Department of Justice. As we’ve said before, we are cooperating with investigators and take those probes seriously. We’ve provided public testimony, answered questions, and pledged that we will continue to do so.”
The new investigation reportedly includes grand jury subpoenas for records from at least two smartphone manufacturers. Their partnerships with Facebook allegedly gave them access to the personal information of millions of Facebook users.
The wired.com article pointed out that the smartphone revolution, the app economy, and the explosion in people’s desire to share information have made some data arrangements between companies almost a requirement, and Facebook is not the only company to have them. Some of Facebook’s arrangements, for example, allowed Netflix users to recommend movies and TV shows to Facebook friends via Facebook Messenger. Users agreed to these arrangements.
But the Times also said the data sharing allowed companies like Amazon and Microsoft’s Bing search engine to know the friends of many Facebook users without their consent. In its December story, the Times said that years after a data-sharing arrangement the newspaper had with Facebook expired, the pipes and permissions that allowed that data to flow back and forth remained open. It seemed akin to calling your credit card company, telling them to close your account, only to discover years later that the company had left it active.
Deeper troubles.
The article added that what’s troubling even to Facebook fans is that these deals and the new investigation are yet other indicators of how arrogant, greedy, and sloppy about data collection and user privacy the company was for most of the past 15 years.
Given its history of overpromising and underdelivering on privacy, it should be no surprise that prosecutors are looking to see if criminal acts were also committed.
For more than a year, Facebook has been working hard to convince its users and advertisers that it is a changed company. It’s spent billions of dollars and hired tens of thousands of people to better get the content appearing on its platforms under control. Just last week Zuckerberg said that he was pivoting Facebook toward more private encrypted interactions. “I understand that many people don’t think Facebook can or would even want to build this kind of privacy-focused platform—because frankly, we don’t currently have a strong reputation for building privacy protective services, and we’ve historically focused on tools for more open sharing,” he said in a Facebook post.
But Zuckerberg has made big promises before and not delivered. In fact, he’s built the company that way. “Move fast, break things, apologize, repeat.” That’s taken what sounded like a crazy idea 15 years ago and transformed it into the sixth-most-valuable company in the world. Back then sharing photos or much of anything online using your real name was something few wanted to do. Zuckerberg changed that, believing that people were less worried about privacy than they said they were and wanted to share more online than they knew how to. Mining that gap was a stroke of real genius.
The article pointed out that those days are over. Facebook needs a new guiding star. It will need to find a way to remain just as profitable. But most important, it will need to regain user trust. Financially, Facebook has under promised and over delivered for the past 15 years. Now it will need to do the same to convince users it is protecting them.
Jumping ship.
Following its extensive problems, two of the social media giants’ big wigs have indicated that they are jumping ship.
The article pointed out that Facebook is losing two of its top execs a week after laying out plans to reposition itself as a “privacy-focused” social network.
Facebook (FB) announced Thursday that Chris Cox, most recently its chief product officer, and Chris Daniels, who was in charge of WhatsApp, are both leaving the company.
The article added that shares of Facebook dipped as much as 2% in after-hours trading Thursday following the news.
“While it is sad to lose such great people, this also creates opportunities for more great leaders who are energized about the path ahead to take on new and bigger roles,” Mark Zuckerberg, Facebook’s co-founder and CEO, wrote in a note announcing the departures.
Cox, in particular, has been a longtime fixture at the company and Zuckerberg’s right-hand man. He joined Facebook in 2005, shortly after it launched, and helped build the News Feed. As part of a broader reorganization last year, he was put in charge of Facebook’s “family of apps,” including Instagram, WhatsApp, and Messenger.
Drawing a line in the sand.
The article pointed out that, in an internal post on Thursday announcing his departure, Cox alluded to Facebook’s recently announced plans to put privacy first by emphasizing private, encrypted and ephemeral conversations across its products.
“As Mark has outlined, we are turning a new page in our product direction,” he wrote in a post shared on his personal Facebook page. “This will be a big project and we will need leaders who are excited to see the new direction through.”
In a filing with the Securities and Exchange Commission Thursday, Facebook said Cox intends to leave after a brief transition period.
The article added that for years, Facebook was known for having a remarkably stable executive bench. But in recent months, the company has lost its chief security officer, its top policy and communications exec, both founders of Instagram and the CEO of WhatsApp.
Daniels, who previously ran Facebook’s affordable internet initiative, only took over WhatsApp less than a year ago, after WhatsApp co-founder Jan Koum stepped down as CEO amid a reported clash over Facebook’s approach to personal data and encryption.
The steady drip of executive departures come amid a bruising two year period in which Facebook has faced criticism for its data privacy practices as well as stories about fake news, election meddling, and filter bubbles.
I smell a mutiny.
Let’s move onto the mutiny. One of the ways that Facebook grew its user base so rapidly is because it used its vast cash reserves to buy other social networks who already had significant user bases of their own. The most high profile of these being Instagram and WhatsApp.
While Facebook successfully bought these companies, as we are about to see, it was a marriage of convenience. And we all know how volatile those can be.
The firstspot.com article pointed out that WhatsApp co-founder Brian Acton does not share a good relationship with Facebook, the firm he sold WhatsApp to for $19 billion in 2014 and he has been quite vocal about it in the past.
Acton asked people to delete Facebook after the Cambridge Analytica Scandal back in 2018 and has now again asked students to join him and delete Facebook from their phones. As per a report by Business Insider, Acton who was invited as a guest speaker at his alma mater, Stanford, criticized Facebook for making money by trading user privacy for revenue.
“We give them the power. That’s the bad part. We buy their products. We sign up for these websites. Delete Facebook, right?” Acton told firstsopt.com.
Both Acton and fellow WhatsApp co-founder, Jan Koum, had hoped they could create another way to monetize their app. Originally, WhatsApp would charge users $1 a year that would support a model of privacy and security. They thought, with enough users, it would be profitable.
“It (WhatsApp) was not extraordinarily money-making, and if you have a billion users … you’re going to have $1 billion in revenue per year,” Acton said. “That’s not what Google and Facebook want. They want multibillions of dollars.”
“Not my decision”
The article added that the WhatsApp co-founder who eventually walked away from Facebook with $850 million in stock grants said that the decision to sell WhatsApp wasn’t really up to him.
“You go back to this Silicon Valley culture and people say, ‘Well, could you have not sold?’ and the answer is no,” he said, as quoted by Buzzfeed, adding that it was a “rational choice” to take “a boatload of money.”
“I had 50 employees, and I had to think about them and the money they would make from this sale. I had to think about our investors and I had to think about my minority stake. I didn’t have the full clout to say no if I wanted to,” he told firstspot.com.
The article pointed out that the WhatsApp co-founder earlier stated in a report that he was under pressure from CEO Mark Zuckerberg and COO Sheryl Sandberg to monetize WhatsApp. As a result, Facebook wanted to weaken the encryption to lay the groundwork to show targeted ads to help with commercial messaging on WhatsApp. Acton’s decision to leave Facebook, when he did, also made him give up $850mn in stock value.
“Besides arrogance, Facebooks problems come down to one thing. The importance of privacy and putting users before money. Yes, companies do want to be profitable, but it should never be at the expense of clients,” said GTconsult Co-Founder and CEO Bradley Geldenhuys.