The cost of years of data breaches has finally caught up with Facebook this week, cutting Thursday's stock market value by more than $ 100 billion, the biggest single-day loss in Wall Street history.
Concerns over the rising cost of privacy and controversy, as well as declining user and revenue growth played a key role in a major sell-out on Wall Street, which began Wednesday night following the announcement of Facebook. Facebook's share price dropped 19 percent to its lowest level in nearly three months on Thursday. The steepness of the decline suggests that investors are re-evaluating the viability of Facebook's core business ̵
is a wake-up call for the privacy markets provide to Mark Zuckerberg, "said Jeffrey Chester of the Center for Digital Democracy, a data protection officer.
Long-simmering privacy concerns almost affecting the birth of the company in one Harvard Zimmer in 2004 has taken more concrete form than ever in recent months, with the European Union introducing a stringent new regulatory regime in May, with US officials starting to investigate Facebook in a multi-agency investigation based on the Recent data scandal relates to political advisor Cambridge Analytica, who insufficiently accesses information from 87 million people.
Facebook's bad day on Wall Street questions about the fate of other big technology companies like Twitter and Google, posing as Facebook with rising privacy concerns and demands of the Congress n to aggressively combat the flow of disinformation on their platforms.
Twitter has seen a sharp decline thereafter The Washington Post reported three weeks ago that the company suspended fake and suspicious accounts in record time and may see a decline in monthly users. The company expects to release its second quarter results on Friday.
However, analysts noted that Google's parent Alphabet has risen from strong profits despite new European regulations and a recent $ 5.1 billion fine for antitrust violations. Investors are particularly concerned about Facebook and its recent exposure to scandals ,
The public mood regarding Facebook probably worsened in the run-up to the 2016 presidential election amid controversy over privacy and revelations about the platform's role in spreading Russian disinformation. Calls to #DeleteFacebook have spread on Twitter, and some celebrities have announced that they are turning away from their heavy use of social media.
Regarding measurable impact on Facebook, the new European rules, called DSGVO for general privacy regulation, led to a drop of 3 million users on this continent, corporate executives announced in a profit on Wednesday. Facebook said the changes would continue to drive sales down as more users would stop ad targeting in the coming months. The company also said it would lose money because its affiliates were also affected by the GDPR and other privacy changes.
But Facebook, like some other technology companies, has introduced the protection of users worldwide. The implications for the company are likely to be global. CFO David Wehner said in a winning ad on Wednesday that Facebook's expectation of declining profit growth "is really a combination of the way we approach privacy and the GDPR."
Problems for the company are not limited to privacy issues. For nearly two years, since the presidential elections of 2016, Chief Executive Mark Zuckerberg has intensified the possibility that the rampant spread of fake news on the platform has affected voting for nearly two years. He called the term "a pretty crazy idea," but later apologized for the comment.
What followed was a public bill, rare for high-flying technology companies. Facebook finally revealed aggressive Russian manipulation on its platform and had to answer specific questions on Capitol Hill. The news in March described in detail how Cambridge Analytica diverted data from Facebook campaign targeting users. This led to another poll on Capitol Hill, this time to Zuckerberg himself.
But Facebook has long had a knack for navigating privacy controversy in the context of its collection of user data. The share price proved resilient in these controversies – apart from a downturn following the news from Cambridge Analytica – although Zuckerberg warned that dealing with issues such as privacy and disinformation on the platform would cost the company, such as hiring Tens of thousands of new content checkers. This three-year winning streak reversed after Wednesday's win bid, raising several long-standing concerns.
"The impact of data protection and the GDPR appear to have had more impact on their business than many of them feared." said Christopher Rossbach, chief investment officer at J. Stern & Co. DSGVO gave users more detailed guidance on how their data was collected and used and required explicit approvals.
The earnings report suggests broader concerns that a company has grown At a furious pace, growth could slow down, especially among younger users who have opted for social media alternatives such as Snapchat or Instagram. The company, along with the globally popular WhatsApp messaging service, is part of Facebook but has not been as effective at generating advertising revenues as the parent company.
Morningstar released an analysis Thursday afternoon that noted slower growth and lowered its estimate Facebook share value. The report said the decline this week was "not a buying opportunity".
However, the privacy issues and the cascade of recent scandals dominated Facebook comments on Thursday as investors sought to understand Facebook's case.
If Cambridge [Analytica] had never happened, I think the worries would not be so pronounced. Cambridge has created a whole range of concerns about the trust of users, advertisers and regulators. It creates a darker picture, "said Daniel Ives, Chief Strategy Officer and Head of Technology Research at GBH Insights.
US investigations, reported by the Washington Post for the first time this month, have examined two main areas of investigation Facebook breached an agreement with the Data Protection Authority in 2011 when it shared data with Cambridge Analytica and other companies, and the Department of Justice and the Securities and Exchange Commission are checking that Facebook's account of its actions regarding Cambridge Analytica is timely and accurate.
Facebook has said it is cooperating with these investigations, and it has portrayed Cambridge Analytica and people working for the company as inappropriate to gather data about its users.
The broader political atmosphere surrounding the company , has also darkened in these controversies Both Republicans and Democrats see a possible new regulation of the tech industry and social media in particular.
"It takes a while for opinions to calm down, and I think the cumulative effect of months after the scandal ended has shown that this is not something they can fix in any way, by the way," said Sarah Miller , Spokeswoman for Freedom From Facebook, a non-profit coalition of progressive groups that demanded a split from Facebook.
Analysts began debating on Thursday morning whether Facebook's case signaled the likelihood of a long-term solution stagnating or simply stumbling – and thus an opportunity to buy a fundamentally strong stock before it rises again.
Richar d Greenfield of BTIG called the decline in DSGVO users a "one-time regression, no headwind," suggesting Wall Street overreacted.
"We were quite stressed during the second quarter 2018 conference call, feeling the fear / panic in investors' voices," he wrote. "But when we retired and thought about why we believe in Facebook, the core theses of our investment thesis are unchanged … Mobile eats the world and Facebook is a core holding company to capitalize on this shift."
What? Less clear is whether the need for stricter privacy has reached or is still at its peak The fate of Facebook – and many other tech companies – probably depends on the answer to this question.
Hayley Tsukayama and Hamza Shaban contributed to this story.