Facebook isn’t worried about the impact of its privacy scandal on its bottom line
In the immediate aftermath of the Cambridge Analytica controversy, Facebook’s stock price plummeted, dropping as much as 18.3% and losing many tens of billions of dollars in market cap. But maybe all the media coverage and Wall Street reaction and #DeleteFacebook energy isn’t actually impacting the company’s 2 billion-plus users.
Facebook, which also owns Instagram and WhatsApp, has yet to release any user numbers, but at the Wall Street Journal CEO Council in London today, Carolyn Everson, its vice president of global marketing solutions, said few users have changed their privacy settings, and the company isn’t expecting the hoopla over privacy concerns to meaningfully impact its revenues.
“We have not seen wild changes in behavior,” the Wall Street Journal quoted Everson as saying, “with people saying I’m not going to share any data with Facebook anymore.”
Nor is Facebook apparently expecting new legislation that could hurt its bottom line. “We are not anticipating major changes to our overall revenue and business model,” Everson said at the London event. That was likely true in the aftermath of controversies involving Russians exploiting Facebook’s platform to interfere with the 2016 presidential election, and it will be fascinating to see if or how the Cambride Analytica scandal has changed that dynamic.
Everson’s comments came just a day after Facebook CEO Mark Zuckerberg completed two days of testimony on Capitol Hill, and in the last weeks before Europe enacts its sweeping General Data Protection Regulation, or GDPR, a law that has already put costly burdens on data-wielding companies. Goldman Sachs reported this week that Facebook in particular could see a 7% decline in revenue as a result of the news laws.
Facebook does say it expects its expenses to rise as it brings on more employees to deal with security issues and content moderation, and more costs will come with regulation in the U.S., the prospect of which Zuckerberg has welcomed. Meanwhile, amid fierce competition in Silicon Valley, the company is said to be closely monitoring morale at the company, though the Wall Street Journal also reports that many employees appear to be mostly undaunted by the scandal.
Still, more of its users could unfriend the company. A survey this week of 1,000 respondents representative of the U.S. population in gender and age, found that while only 9% of panelists deleted their account altogether. “There are less drastic steps users are taking that should be worrying as they directly impact Facebook’s business model,” wrote Carolina Milanesi of Creative Strategies, a market intelligence firm based in Silicon Valley that conducted the survey.
“Thirty-five percent said [they were] using it less than they used to and another 31% changed their settings. Twenty-one percent said they are planning to use Facebook much less in the future. Others, in the free format comments, pointed out that they will take a more voyeuristic stance, going on Facebook to look at what people post but not engage. This should be the real concern for Facebook, as unengaged users will prove less valuable to brands [that] are paying for Facebook’s services,” she wrote.
It will be very interesting to see how much impact the recent dramas have on the company’s first-quarter earnings, which will be announced on April 25.