Technology

What realistically occurs subsequent to Fb after whistleblower revelations

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Former Facebook employee and whistleblower Frances Haugen testifies during a Senate Commerce, Science, and Transport Committee hearing titled “Protecting Kids Online: A Facebook Whistleblower’s Testimony” on Capitol Hill October 05, 2021 in Washington, DC.

Jabin Botsford | Getty Images

The following is a selection from Big Technology, a newsletter from Alex Kantrowitz. To get it in your inbox every week, you can sign up here.

The question of whether this round of scandal would cause direct harm to Facebook appeared to be settled shortly after the Senate hearing was adjourned on Tuesday. Facebook’s two top stakeholders – investors and advertisers – didn’t run away after whistleblower Frances Haugen testified that it harmed teenage girls’ mental health and profits from the indignation. You already knew the exercise.

“This will effectively be a storm that comes through,” Jeffries analyst Brent Thill told CNBC on Wednesday morning. “And in previous storms this has been a great buying opportunity.”

Facebook scandals tend to get hot and cool quickly. About once a year something terrifying comes to light about the social network: A campaign illegally uses its data to psychologically profile voters; the company lies to advertisers and publishers about key metrics; Her own researchers find that she divides a society that she seeks to bring together. Then, after a round of outrage from US lawmakers, everything largely normalizes. The scandal continues like a passing storm.

Despite all of Facebook’s pitfalls, advertisers – its actual customers – can’t get enough of its targeting and reach. Facebook made $ 29 billion in the second quarter of 2021, up 56 percent year over year, with net income of more than $ 10 billion. The company’s ad system works so well that advertisers didn’t even bother to fake a boycott after dropping the Facebook files. You are addicted. “I was trying to find an advertiser – any advertiser – to let me know they were deducting expenses,” said Jeremy Goldman, director of Insider Intelligence. “I still haven’t found any.”

With such loyal customers, Facebook commanded Wall Street loyalty. Although the company’s stock is down 12% this month (and trading at a discount compared to Google), it outperformed the S&P 500 this year, up 23% versus the S&P’s 19%. The Facebook share pops reliably after every level of difficulty, so Thill and his colleagues instruct their customers to buy. “How do investors make money?” said Thill. “At times like these, usually when the stock is hit, you make a lot of money.”

As the money rushes in, Facebook is inundating Washington with cash to deter lawmakers from taking a tough stance. Dark money flows into “clubs” or third groups, which sometimes disclose – but prefer not to – that Big Tech is funding them.

Senator Richard Blumenthal, who chaired the hearing with Haugen this week, knows that this money is being used to deter him from taking concrete action. “Big money and the Big Tech lobbying army are against us,” he said on Thursday. But it is unclear how he intends to counteract this. Senator Blumenthal’s office declined to make him available for an interview. And so the status quo prevails.

What could change

Even if advertisers, users, Washington and Wall Street don’t take action, this scandal could exacerbate some of Facebook’s existing problems.

For Facebook, the most worrying part of this wave of criticism is that it could potentially get more people to opt out of tracking in iOS. Facebook has already announced that it will suffer a slump in sales this quarter after preventing many people from tracking them on the internet, making life difficult for its advertisers. Facebook earned those “please don’t follow up” labels after years of privacy scandals, and this moment is unlikely to help.

Facebook may continue to struggle to recruit good people after another blow to its brand. In her testimony, Haugen said: “Facebook is stuck in a cycle where there are difficulties in hiring – this leads to projects being understaffed, which leads to scandals, which then makes hiring difficult.” Facebook is still considered a “prestige” brand by many technicians, but it is difficult for recruiters to make calls when the company is in full swing ahead of the convention.

After all, European regulators seem to be pushing for regulation and Haugen is already working with the European Union to get something done. Should the EU enact something, it could have a significant impact on Facebook’s business. But only if the rules do not inadvertently harm Facebook’s competition, which cannot be taken for granted.

From the moment the Wall Street Journal published its first Facebook Files story, the company responded defiantly, some would say recklessly, without a hint of introspection. This could be because they really believe they are right. But it is also likely that Facebook will respond to the incentives. The company has seen few consequences for its actions so far. So it takes on an ascending mantra among those criticized today: Never apologize and move on.

This post was previously published in Alex Kantrowitz’s Big Technology newsletter.

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