As Mark Zuckerberg prepares to testify before the US Congress, it may be a good time to consider what we have learnt from the Facebook data-mining scandal.
There was much uproar when Facebook users found out the extent to which companies such as Cambridge Analytica were able to mine their personal data and use it to the advantage of its clients. That this happened in a political context only exacerbated the outcry.
The fallout is bound to be existential for Cambridge Analytica. It has already been costly for Facebook and its boss; $80 billion has been wiped off its market capitalization, and Zuckerberg’s shares alone have lost nearly $7 billion in value.
One could argue that the public was naive. The prime directive of corporations is to make money. If they can do good in the process, that is appreciated, but it is not their raison d’être — no matter how much we may all wish that it were.
Facebook users, therefore, should have looked carefully at the business model. The company does not charge its users, it charges advertisers. There is no such thing as a free lunch. So of course Facebook and its users are interesting to various companies from a data-mining perspective. Posting personal data on the free, unregulated global web comes with risks. Yes, there are data protection laws, but they apply only at national and not supranational level.
The data-mining crisis is an opportunity for both Facebook and Zuckerberg: They can now address the issue of data privacy and take a closer look at the business model (Zuckerberg, by the way, seems genuinely perturbed and contrite).
Cornelia Meyer
Professor Tim Wu argued in The New York Times that one should not fix Facebook, one should replace it. I would argue the opposite. The legendary former chief executive of GE, Jack Welch, never tired of advising corporations not to let a crisis go to waste. In that sense, the data-mining crisis is an opportunity for both Facebook and Zuckerberg: They can now address the issue of data privacy and take a closer look at the business model (Zuckerberg, by the way, seems genuinely perturbed and contrite).
On the macro scale, the Facebook crisis has shown that data protection is an issue, which has to be solved and enforced at a supranational level. This applies not only to Facebook, but also to Google, Twitter and Instagram. At the same time, users have to be made aware of the risks that come with posting their personal data. The onus of issuing this warning is firmly on the shoulders of the social media companies.
Some also make a case that Facebook, which has more than two billion users, is simply too big, and a de facto global monopoly. There may be some validity in that; competition is a good thing and we should welcome a wider field of companies active in that space.
When all is said and done, there is no excuse for breaches of data protection. Nevertheless, social media has irreversibly reshaped the world and made it a more horizontal place. We can all connect across borders and social strata, which in its nature is a democratic thing. It also has applications that are hugely beneficial and which we would not like to lose, such as enabling people to connect at times of crisis or natural disasters.
The flipside of social media’s inherent democracy is the lack of fact checkers to identify fake news. The onus is on the individual to understand which side is up. This is fiendishly difficult, and there is again a case for the social media giants to issue a health warning.
Prof. Wu argues that there could be many other economic models for social media — for instance, on a not-for-profit basis. I would argue that the horse is out of the gate. Facebook and the rest have to address their privacy and ethics codes. It may help them to look at the latest scandals through the prism of security, rather than privacy. Companies have an uncanny ability and willingness to deploy resources to address security issues. Technology is constantly evolving, and may also provide solutions.
Lastly, everyone should understand what they are signing up for when they use a free service. They are dealing with a company whose ultimate goal is economic gain. If it does not get it from them, it will get it from the advertiser or elsewhere.
- Cornelia Meyer is a business consultant, macro-economist and energy expert. Twitter: @MeyerResources