Fb is being hammered by lawmakers, shoppers, and even traders
Facebook Chairman and CEO Mark Zuckerberg testifies at a House Financial Services Committee hearing in Washington on October 23, 2019.
Erin Scott | Reuters
Facebook is in the eye of the storm.
Politicians on both sides of the aisle are furious when a host of internal documents leaked revealed that Facebook has long known from its own research the serious damage its apps can do.
Consumers are insane because they were kicked out of the company’s services for six hours on Monday, the longest outage in 13 years.
And investors, who are usually the last to leave the ship, talk to their wallets and have pushed the stock price 12% in the past three weeks while the Nasdaq has only fallen 4.5% during that time.
It’s an outrage similar to that that hit Facebook in March 2018 when reports surfaced that Cambridge Analytica mistakenly accessed the data of 87 million Facebook members and used it to advertise Donald Trump in the 2016 presidential election.
A sign posted by a protester in the Cambridge Analytica offices in central London, England.
Dominic Lipinski | PA pictures | Getty Images
That scandal marked a huge black eye for Facebook and sparked a review of its lobbying efforts, calling for the company’s liquidation, multiple antitrust investigations, and ultimately a record $ 5 billion fine from the Federal Trade Commission.
But Facebook’s business continued to grow, and the site didn’t change much. Misinformation still flourished before the 2020 presidential election. And in the course of the Covid-19 pandemic, anti-vaxxers and anti-maskers have gone wild, with Facebook’s algorithms often helping to spread the most outlandish conspiracy theories.
The latest crisis stems from the Wall Street Journal reporting, which shows that Facebook clearly understands the addictive nature of its products and uses that knowledge to make even more money with its users. Facebook, in particular, knows that its Instagram service can be harmful to teenage health.
“Facebook is just like Big Tobacco, promoting a product they know is bad for young people’s health and getting it to them early on so that Facebook can make money,” said Senator Ed Markey, D-Mass. , in a hearing last week by the Senate Commerce Subcommittee on Consumer Protection.
Facebook’s witness at the hearing was Antigone Davis, the company’s global security chief. She was asked to address a series of stories from the Journal, entitled “The Facebook Files,” which were based on internal documents from a whistleblower.
On Sunday, the whistleblower revealed herself as Frances Haugen, a former product manager for the company, before an interview on the CBS program “60 Minutes”. Before leaving Facebook in May, Haugen made copies of at least 209 slides of internal company research.
The public outcry sparked by the journal’s series eventually led Facebook to abandon its plans to develop Instagram Kids, a version of the app for children under the age of 12.
However, Facebook has made no commitments to permanently ending its Instagram Kids efforts. In a recent chat with his Instagram followers, Facebook’s Instagram boss Adam Mosseri said he would allow his young children to use Instagram if there was a customized version of the product for this age group.
Another sound on the hill
While Facebook hearings on Capitol Hill have become almost routine, events this week turned out very differently than in the past.
On Tuesday, Haugen testified after her appearance in “60 Minutes” before the same subcommittee that Davis was a guest. Haugen bitterly criticized her former employer, telling lawmakers that the company consistently prioritizes profit over the health and safety of users and directs users to highly interesting posts that are often known to be harmful.
Former Facebook employee and whistleblower Frances Haugen testifies on Capitol Hill before a Senate Committee on Commerce, Science, and Transportation hearing on October 5, 2021 in Washington, DC.
Drew Angerer | AFP | Getty Images
Senators called on Facebook boss Mark Zuckerberg because he had not answered his questions and had done nothing to address the public since the journal’s series of reports began. After the hearing, subcommittee chairman Senator Richard Blumenthal told D-Conn it was premature to summon Zuckerberg, adding that he should volunteer before Congress.
“He has a public responsibility to answer these questions,” said Blumenthal.
Zuckerberg finally addressed the issue in a Facebook post on Tuesday evening, denying the claims made by Haugen and the Journal.
“At the center of these allegations is the idea that we put profit above safety and wellbeing,” wrote Zuckerberg. “That’s just not true.”
He added that it would be illogical to claim that Facebook is deliberately pushing users to content that makes them angry.
“We make money off of ads, and advertisers keep telling us that they don’t want their ads to be placed next to harmful or angry content,” he wrote.
As if Facebook wasn’t stressed enough, the company suffered its worst service outage since 2008 on Monday.
The outage was caused by “configuration changes to the backbone routers” and disabled the company’s numerous services, including Facebook, Instagram and WhatsApp, for six hours.
Facebook’s own work tools were also taken offline, and the company’s employees and contractors could not access the system. A staff member told CNBC that some workers were gathering on an impromptu Discord server to communicate because Facebook’s internal communication tools were offline. An Instagram rep told CNBC that some employees said the outage was karma for the recent whistleblower ordeal.
With advertisers unable to reach consumers for most of the working day, Facebook may have lost between $ 110 million and $ 120 million in advertising revenue, according to Morningstar’s estimate. That would correspond to just over 0.4% of the revenue that Facebook achieved in the fourth quarter a year ago.
Investors pushed the stock down nearly 5% on Monday, which contributed to a recent slump. Even after rebounding 2% on Tuesday, the stock is still 12% below its September 13 level, just before the Journal began publishing its series.
As in the past, Facebook could do very well and continue its upward trend. But every time there is a crisis, investors have one more reason to question the sustainability of the business model.
“We have fought negative headlines before,” CNBC’s Jim Cramer wrote to members of his investment club on Monday afternoon. “This latest story seems different to us, however. The culture on Facebook has to change, and if they can’t fix themselves we’d expect more calls, louder calls for more regulation on the platform, and regulation is never good.” for business.”
A Facebook spokesman did not respond to a request for comment.
SEE: Facebook investors about whistleblower statements