It has been widely reported that Facebook will receive a record fine for privacy violations, but investors seems strangely pleased about it.

Scott Bicheno

July 15, 2019

3 Min Read
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It has been widely reported that Facebook will receive a record fine for privacy violations, but investors seems strangely pleased about it.

All the usual-suspect business papers seem to have received the leak late last week that the US Federal Trade Commission voted narrowly to fine Facebook $5 billion for data privacy violations related to the Cambridge Analytica thing. The FTC, like the FCC, has five commissioners, three of which are affiliated to the Republican party and two the Democrats. As ever they voted on partisan lines, with the Democrats once more opposing the move.

The FTC has yet to make an official announcement, so we don’t know the stated reasons for the Democrat objections. But since that party seems to have decided it would have won the last general election if it wasn’t for those meddling targeted political ads, it’s safe to assume they think the fine is too lenient.

Just because the Democrats have a vested interest, that doesn’t mean they’re wrong, however. Of course Democrat politicians have criticised the decision, but many more independent commentators have noted that the fine amounts to less than a quarter’s profit for the social media giant. Nilay Patel, Editor in Chief of influential tech site The Verge, seems to speak for many in this tweet.

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That Facebook’s share price actually went up after such a big fine initially seems remarkable, but all it really indicates is that Facebook had done a good job of communicating the risk to its investors, so a five bil hit was already priced in. The perfectly legitimate point, however, is that as a punishment one month’s revenue is unlikely to serve as much of a deterrent from future transgressions.

Patel seems very hostile to Facebook, stating in his opinion piece on the matter “Facebook has done nothing but behave badly from inception.” A lot of this bad behaviour consists of exploiting user data, but what is really under attack seems to be Facebook’s core business model and, to some extent, the whole-ad-funded model on which sites like The Verge rely.

Debates need to be had about the way the Internet operates and monetizes itself, but identifying Facebook as a uniquely bad actor when it comes to exploiting user data seems disingenuous. Laws and regulations are struggling to catch up with the business models of internet giants and there are many other questions to be asked about how they operate.

The fact that Facebook’s share price has now largely recovered from the Cambridge Analytica scandal of a year or so ago, as illustrated by the Google Finance screenshot below, indicates that investors consider these issues to be just another business risk, to be weighed up against obscene profits. While we have always considered the scandal to be overblown, it also seems clear that, as a meaningful punishment, even a $5 billion fine is totally inadequate in this case.

Facebook-share-price-July-19.jpg

About the Author(s)

Scott Bicheno

As the Editorial Director of Telecoms.com, Scott oversees all editorial activity on the site and also manages the Telecoms.com Intelligence arm, which focuses on analysis and bespoke content.
Scott has been covering the mobile phone and broader technology industries for over ten years. Prior to Telecoms.com Scott was the primary smartphone specialist at industry analyst Strategy Analytics’. Before that Scott was a technology journalist, covering the PC and telecoms sectors from a business perspective.
Follow him @scottbicheno

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