What Does Facebook’s Cambridge Analytica Scandal and Valuation Drop Mean for Advertising?

With a 3-step plan, Mark Zuckerberg hopes to address the scandal and rebuild public trust, but the effects on the platform's advertising channels can already be felt.

Facebook Cambridge Analytica

By now, most people are aware of the Cambridge Analytica scandal and the recent historical drop in Facebook’s stock price and valuation. For those who aren’t familiar with the situation, here’s a brief timeline:

March 17, 2018 – The Guardian and The New York Times report that as many as 87 million Facebook profiles were harvested for Cambridge Analytica. Christopher Wylie, co-founder of Cambridge Analytica, claims that the data sold to the company was used to build psychographic profiles of people and then deliver pro-Trump content to them online.

March 21, 2018 – In a Facebook post, Mark Zuckerberg addresses the Cambridge Analytica scandal. Zuckerberg outlines a three-step plan to solve any future misuse of user data:
1. Investigate any third-party apps that had access to large amounts of information before Facebook’s platform change in 2014
2. Restrict developers’ access to user data
3. Provide users with a tool that shows them what apps have access to their data

April 10, 2018 – Zuckerberg testifies before a joint session of the Senate Commerce and Judiciary committees in what turns into a long and awkward conversation between older Senators that seem out of date with modern social media and a very nervous Zuckerberg.

April 25, 2018 – Despite the backlash from the Cambridge Analytica scandal, Facebook reports Q1 earnings well above analysts’ estimates. In a conference call that afternoon, Zuckerberg reflects on the earnings report, “Despite facing important challenges, our community and business are off to a strong start in 2018. Over the next three years we’re going to keep building Facebook to not only be a service that people love to use, but also one that’s good for people and good for society.”

July 26, 2018 – Following the first full quarter after the Cambridge Analytica scandal, Facebook loses about $119 billion of its value as the company’s share price drops by almost 19% marking the biggest single day drop in U.S. market history.

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Written by on August 21st, 2018 in Insight