SAN FRANCISCO - Facebook is taking a good first step on its quest for redemption. Mark Zuckerberg’s $570 billion social network has been unveiling a steady stream of data sins. The belated proactivity is welcome. Being rigorous is costly, but it’s worth it to protect the company’s advertising machine.
Zuckerberg is trying to rehabilitate Facebook out of necessity rather than choice. Many revelations about mishandled data came from whistleblowers and media reports rather than the company. Regulators are starting to force the issue. A $5 billion settlement with the Federal Trade Commission in July requires Facebook to form a new privacy committee.
That has led to other actions. The social network is reviewing data risks and embedding restrictions on the sharing of user data within its programming code. Chief privacy officer Michel Protti told Breakingviews that the ultimate goal is to automate privacy controls as much as possible. Facebook has launched new features so users can see what data other businesses have on them and allow them to delete or disassociate that data, which restricts the ability to target them with ads.
Earlier this month, the company said about 100 app developers may have had access to user information that it thought it had restricted. In September came an announcement that tens of thousands of apps had been suspended for misusing data. Facebook is, at least, the one finding these problems.
Perversely, reduced profitability would be a sign the contrition is for real. It warned last year that heavier spending on security and privacy will bring its operating margin down to the mid-30% range, but that has yet to materialize. Once the $5 billion fine was settled, Facebook was back up to 41% in the third quarter.
And it has plenty of room to invest more. Zuckerberg has said it will take hundreds of engineers and more than 1,000 people across Facebook as part of the FTC settlement. If it hired 1,500 additional compliance and engineering staff, it might cost around $200 million a year – still only 0.2% of the company’s anticipated revenue for 2020, according to Refinitiv estimates.
Investors are in any case swayed in large part by revenue growth, which was almost 30% in the third quarter, year-on-year. It’s there that the dividends from making Facebook more trustworthy will show.
(Editing by John Foley and Amanda Gomez) ((firstname.lastname@example.org; Reuters Messaging: email@example.com))