Facebook Data Scandal – How Could it Affect the Company’s Stock Price?
12 Apr 2018
In mid-March, Facebook faced a major scandal concerning a security breach that allowed data firm Cambridge Analytica to access data from around 50 million of the social network’s users, without their permission. But it was way more than we thought, 87 million according to Facebook.
Facebook Data Scandal
This data was allegedly used to target American voters with political ads to enhance the efficiency of Donald Trump’s presidential election campaign. Psychographic profiles were drawn up thanks to information gleaned by app called “thisisyourdigitallife” created by Aleksandr Kogan, a Russian-American psychology professor at the University of Cambridge.
This personality prediction app helped the company to collect information not only from Facebook users who took the test, but also from their friends. Facebook claims that Kogan told the company he was compiling data merely for academic purposes, while it now seems that Kogan had planned all along to hand his research over to Cambridge Analytica, so that it could be used for political campaigning in the US.
It has also transpired that Facebook knew about this misuse of data 2 years ago, but failed to share this information with the public. The company simply removed the app from its platform and asked Kogan to delete the data he had gathered.
Since then, Facebook stock has been in free fall, losing more than USD 30. But what might affect its share price even more is the European Union’s General Data Protection Regulation (GDPR) law, which should go into effect on May 25th. The GDPR deals with online privacy and plans to force websites to be far more open with their users on how exactly they collect and use their data. This law should provide more protection to users regarding access to their data and the way it is shared. Fines for companies which break this law could be up to 4% of their annual global revenues.
Tech companies have been hit hard recently by dwindling user trust in many of their most popular products, pushing down the markets. The extent to which Facebook is going to be affected by this latest scandal and the GDPR law is unknown, but serious concerns have been raised about the company’s lack of respect for user privacy.
While many investors are currently selling tech holdings, traders who believe that the current controversy is merely a blip are taking the opportunity to buy leading FANG stocks through global stock brokers that provide financial products and trading platforms. Among the most reliable broker you can use is UFX.com, which offers CFDs on most US blue chips, cutting-edge trading tools and a range of advanced charts.
Jason Haze is a freelancer interested in content creation and is passionate about blogging.