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How Cambridge Analytica Scandal Will & Won't Affect Facebook

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Going online and having any contact with mainstream news in the last handful of days made it almost impossible to miss Facebook’s still-unraveling data privacy scandal involving a New York City-based digital insights and political consulting firm Cambridge Analytica. The magnitude of the public outcry and the amount of media attention given to the ordeal has been significant even in the context of the scope of the incident which is said to have seen Cambridge Analytica harvest data of some 50 million Facebook users while informing less than one-percent of them of that activity several years back, then leveraging that information to fight an information war during the 2016 presidential election in the United States, an accusation made by a whistleblower that the firm repeatedly denied. With Facebook co-founder and CEO Mark Zuckerberg finally breaking silence on the matter, what’s essentially the act one of this controversial story is coming to an end, with many questions remaining.

What really happened?

Before delving into the matter, it’s worth pointing out that the story broken by the Observer and The New York Times a week ago was originally reported in late 2015 by The Guardian in largely the same manner, with the original expose lacking some details but still describing the bulk of the issue. In the summer of 2014, Cambridge University researcher Aleksandr Kogan — whom some media is repeatedly labeling as “Soviet-born” despite the fact he’s been living in the U.S. since age seven after emigrating from what’s now Moldova — developed an online personality quiz which users were able to access via their Facebook profiles. Over 270,000 users were paid between $3 and $4 each to participate, Mr. Kogan said in an interview with BBC Radio 4 during which he proclaimed he’s being used as a “scapegoat” for what transpired by both Cambridge Analytica and Facebook.

Users who took the personality test whose results were meant to be used for academic purposes had some of their data harvested by the app but so did all of their Facebook friends, with the extent of the activity reportedly encompassing some 50 million people despite the fact that only a fraction of them technically agreed to it. The data ended up being provided to Cambridge Analytica and Mr. Kogan claims he didn’t profit from the activity. According to the account of one Christopher Wylie, a former employee of Cambridge Analytica, the company used the improperly obtained information to build a software tool for predicting voter behavior and influence the outcome of the 2016 presidential election in the U.S. Mr. Kogan also claims the data itself hasn’t been particularly accurate and any conclusions regarding one’s political preferences drawn from it were as likely to be false as they were to be correct.

Facebook said it asked Cambridge Analytica to delete the data in 2015 after it changed its term of use to prevent third-party apps from harvesting vast amounts of information in such a manner and banned the quiz app but later learned the company hasn’t complied with the request. Facebook also said Mr. Kogan violated its terms of use by sharing collected data with another party, i.e. the analytics firm at the center of the controversy. Cambridge Analytica denied using the data as part of its involvement in the 2016 presidential election and claimed it had deleted it, whereas the Times later reported that isn’t entirely true, citing one insider who suggested significant portions of the controversially obtained information were still on the company’s servers. The matter is presently being investigated by authorities in the U.S. and Europe. Cambridge Analytica also agreed to a forensic computer audit of its servers to confirm it deleted the data, with the probe itself being set to be conducted by an unnamed independent entity hired by Facebook.

How responsible is Facebook?

The manner in which Mr. Kogan’s personality quiz collected the data wasn’t against Facebook’s 2014 terms of use which were revised a year later to specifically prevent such activities, which is also the main reason why the social media giant strongly disagrees with headlines referring to the incident as a data “breach,” having previously noted such wording implies some kind of hacking took place. Mr. Zuckerberg said that he’s responsible for what happens on Facebook “at the end of the day” but noted the firm’s previous efforts effectively prevented such incidents from happening post-2014. Facebook was recently hit with a lawsuit seeking class-action status that alleges the company still failed to protect the privacy of its users and is hence guilty by omission. Some of the company’s comments on the matter suggest it was aware of the data harvesting conducted by Mr. Kogan’s app and Cambridge Analytica’s involvement in the incident even if it may not have had knowledge of how the data ended up being used.

On that note, there’s still a question of whether the harvested data was leveraged to support the Trump campaign’s digital push in late 2016, which the implicated actors and federal filings suggest it didn’t. Instead, the relevant paper trail and various statements indicate Cambridge Analytica only did swing state polling, online fundraising, and TV and Internet ad placement on behalf of the Trump campaign. The “psychographic” personality profiling the political consulting firm was touting as its flagship offering and which is believed to have relied on the improperly harvested data was refused by the campaign, with some insiders recently stating the technology doesn’t even work.

What’s next for Facebook?

In a Facebook post published Wednesday, Mr. Zuckerberg said “the most important steps” to combating such misuse from happening again were already taken with its terms of service revision over three years ago, having also vowed to have the company investigate every app which had access to vast amounts of data prior to the move. Should more similar misuses be identified, the developers responsible for them will be banned from using Facebook and the firm will notify affected users, the CEO promised, adding how that also includes people whose privacy was violated by Mr. Kogan’s app.

Facebook is also planning to additionally restrict third-party access to user data and is planning to implement automated mechanisms aimed at combating misuse. As part of that push, apps which users haven’t launched in three months will have their data access rights revoked, whereas no app will be able to harvest anything outside of one’s name, profile photo, and email address via a traditional Facebook Connect login such as the one used by Mr. Kogan’s quiz and numerous other apps like Uber, Disqus, and a wide variety of browser and mobile games. Facebook will also launch a new tool allowing users to quickly inspect which apps have access to their data and revoke it if necessary, having pledged the service will launch next month and be highlighted at the top of the News Feed. The company is presently running full-page newspaper ads apologizing for the ordeal in the U.S. which have been met with a mixed response from the general public.

Facebook is now facing major criticism across the board, with backlash coming from its users, politicians, regulatory agencies, and various other actors. Some industry watchers are predicting the company is under a high risk of being hit with heavy-handed regulations in the near future, with such a turn of events having the potential to impact the rest of the tech industry relying on data harvesting, including giants like Google. Calls for a federal intervention already started; in a statement provided to AndroidHeadlines, the Internet Innovation Alliance repeated its support of the idea of an “Internet Bill of Rights” meant to “promote one standard of privacy and one set of rules that apply to all companies in the internet ecosystem,” thus relating the issue to the still-ongoing debate on net neutrality. “The key need in any [such] legislation is to treat all participants in the internet ecosystem equally” with the goal of protecting consumers on all fronts, privacy included, IIA said.

Jedidiah Yueh, data technologist and founder of secure data management firm Delphix — which also works with Facebook — said Mr. Zuckerberg’s statement about restricting data access to developers is “wrong” and doesn’t accurately reflect Facebook’s approach to development. Combining effective data distribution and protection mechanisms is the only way to move forward and it’s “too late” for restriction-versus-access strategies, Mr. Yueh believes. “Data lockdown stifles innovation” and as Facebook is now struggling to control its own creation, added regulations are “inevitable” as more similar breaches come to light, according to Mr. Yueh. “You don’t become a Facebook by restricting data access to developers,” the industry veteran concluded in a statement provided to AndroidHeadlines, thus emphasizing his point about a strategy focused on both data protection and distribution being the only viable approach to future development.

“Trust is the lifeblood of Facebook’s business; if it loses that, it will lose more than its stock price in the long run,” according to Lynnette Luna, GlobalData Principal Technology Analyst. The Menlo Park, California-based Internet juggernaut appears to agree with that sentiment, with Mr. Zuckerberg’s response to the situation being issued as part of a personal post on Facebook which plays on the human aspect, noting that the company is still just a sum of individuals and concluding that “we also made mistakes.” The move itself is far from unprecedented, with Mr. Zuckerberg often opting for similar damage control methods. The 33-year-old started adopting a more apologetic rhetoric in early 2017 following the initial controversy caused by numerous reports about the role Facebook played in foreign misinformation campaigns aimed at meddling with the last U.S. presidential election and the backlash prompted by his initial response to the allegations, which was to assert that the very notion of Russian or other agents being capable of using Facebook to influence the stateside democratic process is “pretty crazy.”

Facebook is also presently enduring an advertiser boycott including the likes of Mozilla, Sonos, Commerzbank, and even some major marketing agencies such as M&C Saatchi. The majority of the firm’s that pulled ads from Facebook said they’d consider returning if Facebook addresses the issues in an adequate manner, with Mozilla already suggesting it doesn’t believe the changes promised by Mr. Zuckerberg are enough. The scope of the boycott still isn’t believed to be large enough to significantly impact Facebook’s bottom line, especially as its average ad prices spiked following the company’s decision to purge the News Feed from posts created by pages, thus leaving less space for promoted posts to appear on its landing page. As that development was widely interpreted as a sign that not enough advertisers are able to have their paid promotional messages seen which prompted them to increase their bids, the current movement halting some companies’ participation in Facebook’s auction-based ad platform may have little to no impact on the firm’s annual finances.

Overall, while the controversy undoubtedly took a toll on Facebook and erased tens of billions of dollars of its market capitalization over the course of this week, its effects still aren’t significant in the context of the company’s long-term prospects, according to many industry watchers. The firm’s stock that is now widely reported as crumbling is presently trading at Facebook‘s value from last July, with the development hence only being seen as an interim setback for the social media giant. In the end, what will likely happen is some investors confident in Facebook’s sustainability will use the development as an opportunity to buy its shares on the cheap and return the firm on the path of growth as more follow their lead in the coming weeks.

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