Facebook’s value dropped £41 billion last week
Subash Shangary, Managing Director, Berkeley Private Wealth, 23, Berkeley Square, Mayfair, London, W1J 6HE
Facebook as we all know is one of the most popular social media platforms to date. Connecting families all over the world, from Sri Lanka, India to the UK and US. It brings families closer by sharing photos, comments and messages. Age doesn’t seem to be a restriction with even elderly pensioners such as grandparents in Sri Lanka and Africa having their own Facebook profiles. But lately, Facebook has been in the media for all the wrong reasons.
Facebook was launched on February 5th 2004, founded by Harvard University students Mark Zuckerburg and his roommate Eduardo Saverin. It was initially intended for Harvard University students but was gradually expanded due to the demand from other colleges and universities in the area. In September 2006 it became available to everyone with a valid email address who was over 13 years of age. On the 1st of February 2012, when Facebook filed for an initial public offering (IPO), the underwriters valued the company at £73.5 billion which was the largest valuation for a newly public company in history at the time.
So what caused Facebook to lose £41 billion last week? It was the revelations of Facebook’s failures in protecting it’s users data. It had become apparent that Facebook had a very relaxed approach to its data sharing practices. Recently the Observer newspaper reported that Facebook had harvested the personal data of 50 million Americans and inappropriately shared this data with the political consultancy company Cambridge Analytica. Its founder, Mark Zuckerburg did apologise last week, even though it did take him 5 days to respond to the data breach that affected 50 million of its users. He has been summoned by the UK parliamentary committee to explain how data was taken without users permission. The scandal has prompted wary investors into selling their shares in Facebook.
It is hard to predict just how much damage all this has caused the social media network and only time will tell if they would recover from this episode. As Facebook is in the spotlight, it has also made advertisers wary to associate their company with this platform, causing them to abandon advertising campaigns on Facebook.
There is a well known saying that goes, “If a product is free, it means that you are the product.” This is true not only for Facebook but also other large tech companies such as Google and Amazon who all collect data on their users. Harvesting personal data of users is big business for such companies; more than 98% of Facebook’s revenue comes from advertising. Which is why Facebook collects as much personal data on its users as possible, the company knows it’s users interests, what they buy, where they go and even whom they’re having intimate relationships with. It has been collecting its users call records and SMS data from Android devices for years. They hold on to this information, the recent scandal has spooked many users; which prompted them to download all the data Facebook stores on their account. Users took to Twitter with shocking finds. One user said, “Wow my deleted Facebook zip file contains every single phone call and text I’ve made!” Downloading the data Facebook has on you isn’t very difficult, you can go to settings on your Facebook account and click on the tiny link, “Download a copy of your Facebook data.” This breach has caused a campaign from users to abandon Facebook with the hashtag #DeleteFacebook and #BoycottFacebook.
If the trend to boycott Facebook continues, it would have a lasting and damaging impact on the company. This is because their business model is structured in a way that the more users that Facebook has, the more integral its platform becomes to its users. Unfortunately for Facebook as a company, the same dynamics work in the opposite direction if it loses users.
Technology used in the right way can be empowering, useful, productive and positive; utilised in the wrong way, the very same technology tools can cause problems, cause issues and have a negative impact on individuals. In many ways it is similar to a car, in the wrong hands, it could be deemed as a weapon, but that very same tool if used correctly can also have many benefits. This recent scandal can be used as a “lightbulb” moment by users to be selective in how they use Facebook, as now they would be more aware of the fact that every action they take on their Facebook account is collected as data on them, from clicking ‘like’ to playing games, quizzes and downloading apps.
