A $5 billion privacy fine is a rounding-up error for Facebook, not a reason to change

Profile picture for user slauchlan By Stuart Lauchlan April 24, 2019
Summary:
Humbled, repentent and only looking at a $5 billion fine, Facebook CEO Mark Zuckerberg should thank his lucky stars.

Mark Zuckerberg

It’s privacy payback time for Facebook at last, as the scandal-ridden social media platform announces it’s putting aside $3 billion to $5 billion to fend off the Federal Trade Commission (FTC) in the US.

Of course, when you’re a company that just reported quarterly revenues of $15.1 billion, that might be considered no more than an operating expense. But it’s a start. And there’s always the chance that the penalty could rise as Facebook has yet to reach an agreement with the FTC over how much it will pay.

Putting $3 billion into the penalty pot did have the effect of cutting Q1 profits by 51% to a mere $2.43 billion. But with revenues up 25% year-on-year and busting expectations, Wall Street didn’t bat an eyelid at the news of the likely fine.

So with the necessary boxes ticked, CEO Mark Zuckerberg was free on the post-results analyst call to pitch ahead with his “privacy-focused vision for the future of social media”.

This is, for those who haven’t had the benefit of the spin to date, built around the idea of public spaces, like town squares, and private spaces, like living rooms. The idea is that to date Facebook’s been a town square, but it’s going to become a living room. Or as Zuckerberg intones the party line:

I expect the digital town squares like Facebook and Instagram will always be important and will only continue to grow in importance. There’s a lot more to build there as well and I’m excited about that. But over time I believe there’s an even bigger opportunity with the digital living room to build a platform focused on privacy. We all need to communicate privately, and this service could be even more important in our lives. So, I think we should focus our efforts on building this privacy-focused platform.

Demonstrating what a lot of new words are to be found in Facebook’s lexicon, the platform will be based on several ‘principles’, he adds:

Private interactions. You should have simple, intimate spaces where you have complete confidence that what you say and do is private. Encryption. Your private communications should be secure, and end-to-end encryption prevents anyone – including even us – from seeing what you share.

Reducing permanence. You shouldn’t have to worry about what you share coming back to hurt you later, so we won’t keep around messages or Stories for longer than necessary.

Safety. You should expect we’ll do everything we can to keep you safe on our services, within the bounds of an encrypted service. So we’re taking the time to get this right upfront before we ship this platform. Interoperability. You should be able to use any of our apps to reach your friends, and you should be able to communicate across our networks easily and securely.

And finally, secure data storage. You should expect that we won’t store sensitive data in countries where it might be improperly accessed because of weak rule of law or governments that can forcibly get access to your data.

Taking the (not very big) hit

Then comes the ‘this could hurt us more than it hurts you’ coda as Zuckerberg tries to convince that this change of strategy is not a reactive on based on scandal and outcry, but for the greater good and a world in which Facebook is ready to take the hit, albeit not in terms that convince that there’s much risk involved really:

Reducing the permanence of data may have some impact, but we’ve generally found that more recent data is more useful for recommendations anyway, so this is another step that should have a much bigger impact on strengthening people’s privacy than it will have on our business. Our stance on data localization is a risk. That is, if we get blocked in a major country, that will hurt our community and our business. But our principles on data localization aren’t new and this has always been a risk.

And to top all this off, there’s a reiteration of the regulate me pleasecry for help that emerged earlier this month as the latest phase of the mea culpa messaging with which everyone should now be familiar:

If the rules for the internet were being written from scratch today, I don’t think people would want private companies to be making so many decisions around speech, elections, and data privacy without a more robust democratic process.

For harmful content, I think there should be a public process for determining what’s allowed and required for keeping harmful content to a minimum. That could be through government or industry, but having common standards is critical since people use so many different services to share content.

For elections, there have long been laws defining what is political advertising, but we need to update those regulations to reflect today’s threats like the ways that foreign nation states try to interfere in elections now. Those threats are often not covered by today’s laws and I think we’d be better off if companies didn’t define those policies themselves.

And just to hammer home the Damascene conversion that’s being sold here, Zuckerberg is now a big fan of GDPR, a far cry from last year when he couldn’t bring himself to guarantee US users would be offered its benefits. Today it’s a very different story:

For privacy, I believe it would be positive if more countries adopted regulation like GDPR as a common framework. At this point, realistically, most countries will adopt privacy regulation, and the most likely alternative to a global framework like GDPR is the fragmentation of the internet and more countries following the approach of authoritarian regimes adopting strict data localization policies, where governments can more easily access people’s data, and I’m highly concerned about that future.

Again, in order to avoid that future, Facebook is ready to take a hit on behalf of us all, he concludes:

I understand that any regulation may hurt our business, but I think it’s necessary. Getting these issues right is more important than our interests. And I believe that regulation will help establish trust when people know that the right systems of governance and accountability are in place. So, over the long-term, I believe that that increase in the trustworthiness of the internet can have a much larger positive impact for our community and our business than any short-term hit that we’re going to take.

My take

I think I have a little speck of piety in my eye!

There’s not much to add here other than that personally I don’t believe a word of this honed and scripted strategic repentance. If you do, good luck to you. You’re a more forgiving person than me.

There’s only one thing that will really lead to changes and that’s some massive financial pain. If Facebook gets away with $5 billion from the FTC - and the idea that the firm is negotiating how much to be fined isn’t a comfortable one - then Zuckerberg and Co will be laughing all the way to the next quarterly earnings call. Not one of the analysts on the results call yesterday had anything to ask about penalties or fines. So long as the revenues keep growing, $5 billion is rounding-up error that can be accounted for.