Facebook and Cambridge Analytica: Is the genie out of the bottle?
After two days of hearings on Capitol Hill, the consensus is that marketers will stick with Facebook, CEO Mark Zuckerberg held his own, regulation of some sort is likely and the overall business impact to the social networking giant will be minimal.
Speaking at his second hearing in two days before Congress Wednesday, Zuckerberg emphasized many of the points before a House committee that he made with Senators on Tuesday.
Rep. Frank Pallone (D-NJ) pestered Zuckerberg on creating more default privacy settings from the beginning. "This is a complex issue that deserves more than a one word answer," said Zuckerberg.
Read more: Trump-linked data firm Cambridge Analytica harvested data on 50 million Facebook profiles to help target voters | Data breach exposes Cambridge Analytica's data mining tools | How Cambridge Analytica used your Facebook data to help elect Trump
Pallone, who admitted he had little faith in corporations, continued to hone in on the consumer data privacy by default issue. "People aren't empowered enough," said Pallone.
- Related: At hearing, Facebook's Zuckerberg rejects law to protect privacy of children | How to tell if Cambridge Analytica accessed your Facebook data | Facebook fallout: Big Brands' adversarial ad strategies exposed
The common thread through both hearings could be summed up as data as currency. Consumers don't pay money these days when dealing with Facebook, Google or other Internet players. They pay with their personal data.
Cambridge Analytica and all the Facebook that followed just put the spotlight on the data as currency reality. Legislators talked opt-in vs. opt-out and over two days highlighted how technology clueless they were at points.
What'll change? Probably not much. The bet is Facebook will remain a monetization machine, according to Wall Street analysts. Evercore ISI analyst Anthony DiClemente said in a research note:
Mark Zuckerberg's roughly five hours of testimony yesterday was sometimes tedious, other times repetitive, but mostly -- and this is a good thing -- uneventful. Those who were hoping for verbal sparring matches between hostile, uniformed regulators pitted against an arrogant or somewhat stilted technology CEO likely came away disappointed. Instead, and as we had hoped, Facebook's CEO delivered balanced and reasonable answers to questions, and found much in the way of common ground with lawmakers.
In other words, Zuckerberg would have had to break to really do damage to the company's long-term business prospects. As reported by Stephanie Condon, Facebook may have put itself in a better position to help write any regulation.
In many ways, regulation would likely act to increase Facebook's relative strength over competitors, as it would increase the barriers to entry from upstart rivals by mandating costly investments and reducing the chance that others can amass data at scale.
Analysts are mixed about whether Facebook will see an engagement hit over its privacy issues. Jefferies analyzed Facebook traffic over March and found that its engagement hasn't been impacted by the data policy flap. If user metrics aren't falling significantly marketer dollars are likely to stick around.
Zuckerberg on Wednesday during his House testimony acknowledged that Facebook hasn't seen a mass of people de-activating accounts.
Jefferies analyst Brent Thill said:
Despite the noise of Cambridge Analytica, time spent on core Facebook has not waned in the days following the announcement. Compared to March 2017, time spent is up on average by 15% for the month of March 2018.
Pivotal Brian Wieser said there is a long-term erosion in time spent on Facebook's properties at the expense of Google, but marketing dollars are likely to stick.
One key exchange during Tuesday's hearing revolved around whether Facebook was a monopoly. Zuckerberg said Facebook was not a monopoly, but couldn't name direct alternatives even though there was plenty of competition for certain functions and features.
It's hard to argue Facebook is a monopoly for one simple reason: The company is one half of a duopoly on time spent with Google. Congressional hearings aren't going to change the reality that marketers are going to need Facebook to counter Google for the foreseeable future--at least until something better comes along.
- CNET: See if Cambridge Analytica accessed your Facebook data
- Adjust these privacy settings now
- Now only authorized buyers allowed to run political "issue" ads
- The data game is changing before our eyes
- Rant: Zuckerberg gets privacy and you get nothing
- 5 big questions for businesses and developers (TechRepublic)
- Facebook will pay you to track down apps that misuse your data