Facebook Gains as CEO Sees Muted Impact From Data Crisis
(Bloomberg) -- Facebook Inc. spent much of Wednesday outlining ways that the privacy of its 2 billion users might have been compromised for years by the company’s lax data policies.
The shares rallied anyway Thursday after Chief Executive Officer Mark Zuckerberg stoked optimism that the drumbeat of bad news may be coming to an end.
Most reassuringly for investors, he said that he hadn’t observed “any meaningful impact” on the business, despite weeks of revelations, complaints from advertisers and users of the social network, and a #DeleteFacebook campaign to shut Facebook accounts.
Zuckerberg’s comments late Wednesday suggest “the worst is likely behind” the social media company, Deutsche Bank analyst Lloyd Walmsley wrote in a note to clients. Still, “a lot rides on Zuckerberg’s congressional testimony” expected next week, he added.
Facebook shares rose 2.2 percent to $158.49 at 12:35 p.m. in New York. The stock closed down less than 1 percent on Wednesday.
Still, the company faces challenges ahead, particularly as Zuckerberg confronts that questioning from lawmakers in two congressional hearings next week. The Federal Trade Commission also is probing whether Facebook violated a 2011 consent agreement to protect privacy after data from as many as 87 million users, most in the U.S., were shared with political consulting firm Cambridge Analytica.
The most dramatic update was the removal of a feature that let users enter phone numbers or email addresses into Facebook’s search tool to find other people. That was being used by malicious actors to scrape public profile information. “Most people on Facebook could have had their public profile scraped in this way,” the company said.
Soon after that bombshell, Zuckerberg addressed a crisis that’s been building since revelations last month that Cambridge Analytica improperly accessed user data. Legislators and policy makers are now calling for greater regulation of social media, which has helped knock almost $100 billion off the company’s market value in the past three weeks.
“We didn’t take a broad enough view of what our responsibility was and that was a huge mistake. It was my mistake,” Zuckerberg said in a conference call Wednesday with reporters. “We’re broadening our view of our responsibility.”
Facebook won’t find “every single bad use of data, but what we can do is make it a lot harder for folks to do that going forward,” he added. “We will be able to uncover a large amount of bad activity that exists.”
Facebook shares had fallen 16 percent through Wednesday’s close since the Cambridge Analytica privacy issue emerged because investors are concerned the company’s massive data-gathering operation will be limited, either voluntarily or through regulation. That information is used to target ads, making them much more valuable and profitable.
Zuckerberg defended the business model on Wednesday. “People tell us that if they’re going to see ads they want the ads to be good,” he said, noting that requires keeping track of people’s interests.
Zuckerberg also said he should remain at the helm. “As far as I’m aware, the board has not discussed whether I should step down as chairman,” he said. “Life is about learning from mistakes and figuring out what you need to do to move forward.”
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