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Could Facebook's Latest Scandal Cause Its Collapse?

Have you seen your friends or family members start to take action on the #deletefacebook trend?

Have you seen your friends or family members start to take action on the #deletefacebook trend? If not, you may—and soon.

In case you aren’t familiar, Facebook recently became embroiled in a scandal with Cambridge Analytica, a data analytics firm that worked directly on President Trump’s 2016 campaign as well as a bid to influence the Brexit vote. The short version of the story is that the firm was able to get access to users’ private data through Facebook.

So could this scandal have the power to bring Facebook crashing down?

The Details

The story, originally published by Britain’s Channel 4 News as an undercover expose, revealed CEO Alexander Nix and other executives bragging about how they could use bribes, sex workers, and misinformation (better known as “fake news”) to influence votes and political campaigns around the world. This is unsettling, but what does it have to do with Facebook?

More than 50 million Facebook profiles were mined for data by an app called “thisisyourdigitallife” in 2014, run by an academic named Aleksandr Kogan. Kogan then shared the data mined this way to Cambridge Analytica. Facebook users generally trust Facebook to keep their data as private as possible, or use that data ethically, but this latest application seems like a major breach of trust. Facebook, for its part, claimed that Kogan lied to the company and misused the data when transferring to Cambridge Analytica. Back in 2015, Facebook stopped Kogan’s app from collecting any more user data, and ordered any other company or individual with the already-gathered data to destroy it.

After a prolonged silence, CEO Mark Zuckerberg spoke up about the scandal, acknowledging that the event is a massive breach of trust, blaming Facebook’s naivete, and pointing to a sequence of multiple bad actors, working in succession, as the root cause of the problem.

The Impact

This is a big deal because people expect privacy when using social media. They want to use Facebook (and similar platforms) to interact with their friends, family members, and even their favorite brands without worrying how their data is going to be used. The fact that it was used to potentially manipulate the outcome of a Presidential election makes the problem seem even bigger.

But are users really entitled to expect this type of privacy? Consider your work environment. You’re given a computer, an email account, and open access to your company’s internet connection. Do you expect that all of your emails will remain completely private? Or do you know, because it says so in your employee handbook, that your emails might be monitored for corporate use?

Likewise, Facebook has a detailed and proactive privacy policy that dictates how, when, and why it can use your account’s data. You’re allowed to use the platform for free in exchange for giving Facebook access to your data—primarily for advertising purposes. Whether or not the Cambridge Analytica scandal violates this policy remains to be seen, but it’s worth considering that your expectations for privacy on the platform should be limited.

In any case, some users are in an uproar, and have tried to influence a trend of mass profile deletion on the platform.

The Progress

So how much damage has the scandal really done? There are a few ways to measure this. Mark Zuckerberg acknowledged, "I think it's a clear signal that this is a major trust issue for people, and I understand that. And whether people delete their app over it or just don't feel good about using Facebook, that's a big issue that I think we have a responsibility to rectify." However, the company hasn’t noticed a “meaningful number” of users deleting their profiles.

The company, though, has taken a massive hit. Facebook has lost more than $50 billion in market cap, and the loss may be only just beginning. Experts suspect that the news may invite stricter rules and regulations for the entire industry, which could threaten profitability and the growth potential of Facebook and other companies.

What’s Next?

So what’s next for Facebook? New details may emerge to change the situation, but for right now, Facebook is merely going through a tough time. Users aren’t leaving in droves, and while the stock has taken a hit, Facebook itself retains a strong user base and solid fundamentals. On top of that, Facebook played only an indirect role in the Cambridge Analytica scandal—it didn’t work with the company directly, nor did it sell the data that was used.

The biggest threat to Facebook to come of this is the threat of new, stricter regulations. However, if the company learns from this PR disaster, it will likely introduce and enforce new security standards of its own. In any case, we’ll have to wait and see what else develops before we determine exactly how the company could be affected.

More Stories By Larry Alton

Larry Alton is an independent business consultant specializing in social media trends, business, and entrepreneurship. Follow him on Twitter and LinkedIn.