The crisis roiling Facebook could deepen further Tuesday with more revelations likely about how its user data came to be harvested for political purposes and investors continuing to take fright at the risk to its business model.
Revelations by the New York Times and UK media claiming that data analysis firm Cambridge Analytica tried to influence how Americans voted using information improperly gleaned from 50 million Facebook users has already seriously hurt its brand.
An undercover TV report Monday suggesting that Cambridge Analytica was prepared to consider using bribes and entrapment to create content it could then post to the internet to sway voters is piling on the pressure.
Cambridge Analytica says it does not engage in bribery or entrapment and says the Channel 4 News report was a misrepresentation of how the company conducts its business.
Facebook says the user data in question was initially properly gathered by a psychology professor, who then passed it to Cambridge Analytica. That breached Facebook’s rules.
Facebook shares, which suffered their biggest one-day fall in four years on Monday wiping $37 billion off the company’s value, are poised to fall again Tuesday. They were down 1% in premarket trading.
“What matters for this stock, at this time, are the headlines,” wrote analysts at Macquarie Capital.
Facebook CEO Mark Zuckerberg hasn’t commented publicly since the scandal broke late on Friday.
But the questions of data privacy thrown up by the scandal strike at the heart of Facebook’s business, which relies on more than 1.4 billion users engaging with the platform each day.
Every time they do, they share a bit of information about themselves: what they like, who their friends are, what they want to watch. That data is the product Facebook sells to advertisers who want to target specific customers.
If the Cambridge Analytica scandal leads to tougher data protection regulations — as some policymakers are demanding — or puts people off sharing as much about themselves online, that could hurt Facebook’s revenue, and that of all social media platforms. (Other tech stocks suffered in Monday’s sell-off too.)
Zuckerberg and other top Facebook executives will be bracing themselves for another rough ride Tuesday. Channel 4 News says it will broadcast a new report at 3:00 p.m. ET on Cambridge Analytica’s work in the United States.
Cambridge Analytica said on Twitter on Tuesday that its data science team did not use Facebook data for the 2016 presidential campaign.
Meanwhile, Zuckerberg is facing calls to testify before lawmakers in the United States and United Kingdom. And the UK data protection officials are seeking a warrant to enter Cambridge Analytica’s offices in London to inspect its servers and systems.