Facebook Inc. has lost more than $50 billion of its market value in two days as questions mount over user data obtained by Cambridge Analytica, a London firm that helped Donald Trump’s presidential campaign with social media promotion.
The Federal Trade Commission, which enforces privacy regulations in the U.S., is sending a letter to the Menlo Park, Calif.-based company inquiring about information acquired by Cambridge Analytica on Facebook users and their connections, or “friends,” within the platform’s network, according to a person familiar with the matter. A digital forensics firm hired by Facebook to review the matter left a London meeting with Cambridge officials on Monday at the request of the British Information Commissioner’s Office, which is pursuing a warrant for its own investigation.
The developments, which raise the possibility of a Congressional hearing, heighten challenges for a social media company already grappling with concerns that phony news articles on its site were used to influence elections around the globe. Privacy has been an issue since at least 2011, when founder Mark Zuckerberg, a Harvard dropout, reached a settlement with the FTC over allegations that the social media platform had repeatedly shared data that it told users would be kept confidential.
“It’s time for Mr. Zuckerberg and the other CEOs to testify before Congress,” Sen. Mark Warner, the highest-ranking Democrat on the chamber’s Intelligence Committee, said in a Twitter post on Tuesday. “The American people deserve answers about social media manipulation in the 2016 election.”
It’s time for Mr. Zuckerberg and the other CEOs to testify before Congress. The American people deserve answers about social media manipulation in the 2016 election.
— Mark Warner (@MarkWarner) March 20, 2018
Facebook, whose digital platform is used by more than 1 billion people a day, dropped 2.6 percent to $168.15 at the close of regular New York trading on Tuesday, leaving the company with a market value of $492.6 billion. The stock, which pared earlier losses of as much as 6.2 percent, had already tumbled 6.8 percent on Monday.
Given election interference concerns and mounting data-privacy worries in Europe, “we look for Facebook to become more assertive about the mistakes it has made, the unintended actions that have occurred on the platform, and how it intends to fix them,” said Brian Nowak, an analyst with investment bank Morgan Stanley.
Facebook said last week that Cambridge Analytica and its parent Strategic Communications Laboratories had been suspended after Facebook learned that the companies may not have deleted data improperly shared by Dr. Aleksandr Kogan, a University of Cambridge psychology professor who obtained it through his app, “thisisyourdigitallife,” which used Facebook Login.
About 270,000 people downloaded the app, advertised as a research tool used by psychologists, giving their consent for Kogan to access information such as their location, content they had liked and limited data on friends whose privacy settings allowed access, Facebook said. Although Kogan obtained the information legitimately, using the same techniques as other app developers on Facebook at the time, he violated the company’s policies by sharing it with SCL, Cambridge Analytica and Christopher Wylie of Eunoia Technologies, Facebook said.
Facebook demanded those parties destroy the data in 2015, when it learned what had happened, and each of the recipients said they had done so. This month, the company said, it learned that some of the data might have been kept.
“We are committed to vigorously enforcing our policies to protect people’s information,” Paul Grewal, Facebook’s deputy general counsel, said in a statement. “We will take whatever steps are required to see that this happens. We will take legal action if necessary.”
Cambridge Analytica, which was paid $5.9 million by the Trump campaign in the 2016 election and nearly that amount by the campaign of his Republican primary rival Ted Cruz, said it complies with all Facebook’s rules and is working with the company to resolve its concerns as quickly as possible. Cambridge blamed the earlier issues on a contractor and promised to cooperate with the Information Commissioner’s investigation.
Commissioner Elizabeth Denham said her office had asked Facebook to abandon its search of Cambridge Analytica premises because it could compromise the agency’s “complex and far-reaching investigation.” That probe, which includes the Facebook data, is evaluating how politicians, analytics companies and social-media platforms use the personal information of United Kingdom residents to target voters.
That’s not the only challenge facing Cambridge. Its CEO, Alexander Nix, was suspended by the company’s board on Tuesday after he was recorded telling an undercover reporter for BBC Channel 4 that the firm had expertise in using tapes of sexual encounters and too-good-to-be-true offers to damage politicians.
“Mr. Nix’s recent comments secretly recorded by Channel 4 and other allegations do not represent the values or operations of the firm, and his suspension reflects the seriousness with which we view this violation,” the board said in a statement.
Nix had said in a statement the previous day that the firm’s staff routinely used interviews with prospective clients to try to discover — and avoid — those who intended to violate the law, but admitted he misjudged the situation with the reporter.
“In playing along with this line of conversation, and partly to spare our ‘client’ from embarrassment, we entertained a series of ludicrous hypothetical scenarios,” Nix said. “I am aware how this looks, but it is simply not the case.”
In the U.S., the Federal Trade Commission said it’s aware of the issues that have been raised regarding Facebook’s data but declined to say whether it’s investigating.
“We take any allegations of violations of our consent decrees very seriously,” a spokesman said.
