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FB, model at risk

model at risk

The way in which Facebook leaves its clients – advertising agencies, consultants … – using the personal information of its users has put into question the business model of the social network.

The company created by Mark Zuckerberg is today the eighth most valuable company in the world with its 2,100 million users. In the last known case, the political consultant Cambridge Analytica (CA), linked to the election campaign of Donald Trump in 2016, was able to access the data of 50 million users of the network to use their profiles -legal, according to all indications – and flood them with more or less explicit electoral propaganda.

When he had to appear before the Senate to give explanations, Billy Long , a Republican senator from Missouri, warned Zuckerberg that Congress is always ready to “react and even overreact.”

A majority of respondents already distrust social networks. Since June 2017, the user base of Facebok in the US does not grow. This year, for the first time, its share of the digital advertising market will fall.

Facebook is worth about 493,000 million dollars, although it only has 14,000 million in physical assets; that is, its value is intangible and, therefore, potentially ephemeral, especially if it becomes a kind of regulated public service. Only between March 6 and 21, their shares fell 8.5%, from 185 to 155 dollars, for fear that Congress will make decisions that are harmful to the company and its business model. Although Facebook has come back – it is now at $ 165 – its shareholders have lost almost $ 70 billion since the CA case was made public. And it will not be the last.

The EU is about to launch a system to safeguard the digital privacy of its citizens (General Data Protection Regulation) that will allow them to prevent tracking their movements on the Internet or that their information is shared with third parties.

The European regulations, which include multi-million-dollar sanctions if the companies do not respect the required procedures, could guide the Capitol. In fact, a congressman has warned: “We can not let Europeans be more protected than us”.

When personal information is used to influence political positions, these tactics can take on a turbid turn. Politicians know that using networks is very profitable in electoral campaigns. Google and Facebook allow you to custom design the themes and choose the samples of recipients. And maybe also other actions less confessable. However, it is no secret to anyone that Facebook sells information that its users voluntarily and gratuitously provide. The information that accumulates about online consumer habits sells it -40,000 million dollars in 2017- to those who can use it in their marketing strategies.

This way of monetizing big data has turned Google and Facebook into a true global oligopoly of Internet advertising by allowing its advertisers to identify and locate the groups that interest them, whether they are retired fishing enthusiasts in Tokyo or fanatics of the Harley-Davidson in California. 
The target can be segmented by age, profession, residence, race or political ideology. Zuckerberg has promised that he will not allow more abuses of that kind. The problem is that if he does, he will cut off the wings of his own invention. Maybe he does not know -or can not- avoid the information accumulated by Facebook being manipulated by his clients.

His powerful lobby in Washington had no difficulty convincing Congress and the Barack Obama administration that curtailing his use of information would endanger one of the greatest business successes in recent US history.

The use of big data is a gigantic business. According to a recent study by the Office of Economic Analysis, digital advertising would have contributed to adding 0.7 percentage points to global GDP between 1995 and 2015.

The most skeptical point out that the restrictions will hardly affect Facebook because if someone does not authorize the use of their data, simply will not be discharged. In the end, if someone does not want their personal information known, the most sensible thing is not to publish it.

 

 

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