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Facebook Rocked by New Data Breach Scandal, Business Model Could be at Risk

Calls for investigations came on both sides of the Atlantic after Facebook responded to the explosive reports of misuse of its data by suspending the account of Cambridge Analytica, a British communications firm hired by Trump's 2016 campaign.

AFP

Updated:March 20, 2018, 12:01 AM IST
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Facebook Rocked by New Data Breach Scandal, Business Model Could be at Risk
Mark Zuckerberg. (Image: Reuters)
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Washington: Facebook shares plunged on Monday following revelations that a firm working for Donald Trump's presidential campaign harvested data on 50 million users, as analysts warned the social media giant's business model could be at risk.

Calls for investigations came on both sides of the Atlantic after Facebook responded to the explosive reports of misuse of its data by suspending the account of Cambridge Analytica, a British communications firm hired by Trump's 2016 campaign.

"This is a major breach that must be investigated. It's clear these platforms can't police themselves," Democratic Senator Amy Klobuchar said on Twitter.

Expressing "serious concern regarding recent reports that data from millions of Americans was misused in order to influence voters," Klobuchar and Republican Senator John Kennedy called for Facebook chief Mark Zuckerberg and other top executives to appear before Congress, along with the CEOs of Google and Twitter.

In Europe, officials voiced similar outrage.

Vera Jourova, European Commissioner for Justice, Consumers and Gender Equality, called the revelations "horrifying, if confirmed," and vowed to address her concerns while travelling to the United States this week.

In Britain, parliamentary committee chair Damian Collins said both Cambridge Analytica and Facebook had questions to answer following what appears to be a giant data breach, carried out in an attempt to influence voters' choices at the ballot box.

"We have repeatedly asked Facebook about how companies acquire and hold on to user data from their site, and in particular whether data had been taken from people without their consent," Collins said in a statement.

"Their answers have consistently understated this risk, and have also been misleading to the committee."

On Wall Street, Facebook shares skidded 7.7 per cent in midday trade amid concerns about pressure for new regulations that could hurt its business model.

Brian Wieser at Pivotal Research said the revelations highlight "systemic problems at Facebook," but that they won't immediately impact Facebook revenues.

Still he said "risks are now enhanced" because of the potential for regulations on how Facebook uses data for advertising and monitoring users.

According to a joint investigation by The New York Times and Britain's Observer, Cambridge Analytica was able to create psychological profiles on 50 million Facebook users through the use of a personality prediction app that was downloaded by 270,000 people, but also scooped up data from friends.

Cambridge Analytica said it was in touch with Facebook while denying any misuse of data.

Facebook on Friday suspended the firm, but pushed back against the claim of a major breach, suggesting misused data was limited to a far smaller group of users.

Jennifer Grygiel, a Syracuse University professor who studies social media, said the disclosures will increase pressure to regulate Facebook and other social media firms.

"Self-regulation is not working," Grygiel said.

"I'm wondering how bad this needs to get before our regulators step in and hold these companies accountable."

Grygiel said the breach stems from "thin" regulations that allowed Facebook and its partners to exploit data without oversight.

"They grew because of this," she said. "This was not a mistake."

Daniel Kreiss, a professor of media and communications at the University of North Carolina, said Facebook failed to live up to its responsibilities in handling targeted political ads as it expanded.

"The fact that Facebook seems to make no distinction between selling sneakers and selling a presidential platform is a deep problem," Kreiss said.

Some analysts suggested the breach posed an existential crisis for Facebook because of how it gathers and uses data on its two billion members.

David Carroll, a media professor at the New School's Parsons School of Design, said Facebook and others will soon be forced to live with new privacy rules such as those set to take effect in the European Union.

"Facebook and Google will have to ask users a lot more permission to track them," Carroll said. "Most people are going to say no, so I think it's going to have a huge impact on these companies."

Carroll has filed a legal action in Britain calling on Cambridge Analytica to disclose what data was gathered and used on him.

"If I can get them to disclose my data or my personality score, it indicates every other American has the right to the same thing," he said.
| Edited by: Sanchari Chatterjee
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