Bloomberg News
Facebook Inc. CEO Mark Zuckerberg is acting more like a politician.
After days of silence on the scandal involving Cambridge Analytica and its use of user data, Zuckerberg finally spoke out Wednesday, giving a series of interviews in which he made similar statements about Facebook’s FB, -3.34% efforts to limit similar data abuses and the additional steps Facebook would take going forward. It’s likely Zuckerberg spent much of his time out of the spotlight in the last few days rehearsing like a politician before a big debate, familiarizing himself with Facebook’s stance that it’s normal for big tech companies to talk to Congress and better for outside parties to merely give “guidelines” about how tech companies should behave, rather than issue edicts.
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Zuckerberg gave interviews to CNN, Wired, Recode, and the New York Times, and investors don’t appear to be impressed by what they heard. Facebook shares were down 2.4% Thursday morning and on pace to deliver their worst single-week performance since March 2014.
In the interviews, Zuckerberg had several talking points that would specifically be important for investors. Here is what he said.
Looking into the problem will be ‘pretty expensive’
Zuckerberg didn’t get too specific when talking about the costs of conducting forensic audits to see whether Facebook data is being used improperly, but he did say that he expected the audits to be “pretty expensive.” Zuckerberg told Recode that Facebook would spend “many millions of dollars” on the process, which he thinks will “take a number of months and hopefully not longer.” He said that Facebook executives have been wondering whether they can find enough trained auditors to quickly conduct the reviews on behalf of the company.
Facebook had already committed to spending more on safety and security before the Cambridge Analytica scandal unfolded, and it’s unclear whether these new costs will come on top of the previously announced ones. Zuckerberg said on Facebook’s third-quarter conference call in November that the company had roughly 10,000 people working on safety and security at the time, and that Facebook planned to increase that count to 20,000 in a year’s time. He also said that Facebook was building artificial intelligence tools that could help spot bad actors, but the company’s comments then were mostly in the context of weeding out fake content.
Facebook will try to make users feel more secure about their data
As some Facebook users threaten to delete their accounts in response to the scandal, Zuckerberg announced some actions to better guard user data. He told Recode that Facebook took steps years ago to restrict apps from viewing friends data but will work on “closing down a number of other policies.” Facebook will revoke data access to a particular app developer if a user hasn’t used that app in three months.
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“I don’t think we’ve seen a meaningful number of people act on [deleting their accounts],” Zuckerberg told the New York Times. But he said the #DeleteFacebook movement is “a clear signal that this is a major trust issue for people.”
Analysts thought the announced steps could ease user concerns. “We look to these and further forthcoming data safeguards (expected in coming days) to reassure users that FB is acting more proactively and decisively to protect their data,” wrote Morgan Stanley’s Brian Nowak, who rates Facebook stock at overweight with a $230 price target.
Piper Jaffray’s Sam Kemp, though, thinks users might not need much convincing in the first place. “We continue to believe that the U.S. citizen cares much less about their personal (nonfinancial) data being used to target them than politicians and the media,” wrote Kemp, who rates shares a buy with a $210 target price.
Inappropriate content is like dust in chicken
A key investor concern is whether the Cambridge Analytica incident will prompt governments to more seriously consider regulating Facebook and other tech giants, but Zuckerberg thinks that Big Tech isn’t alone in having to consider what level of harmful content is acceptable. In an interview with Wired, he likened Facebook’s situation with hate speech and extremist content to what chicken processors must consider when trying to get food out for a large population.
“My understanding with food safety is there’s a certain amount of dust that can get into the chicken as it’s going through the processing, and it’s not a large amount,” he said. “I think there’s some understanding that you’re not going to be able to fully solve every single issue if you’re trying to feed hundreds of millions of people—or, in our case, build a community of two billion people—but that it should be a very high standard.”
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Zuckerberg used the chicken-and-dust metaphor situation as a way to state that “guidelines” are better than “dictating specific processes” when looking at new regulations. He also said that he is willing to be more transparent about the source of advertisements on the service, and will begin working toward more ad transparency regardless of the fate of legislation seeking to mandate such actions.
Zuckerberg told CNN that he was “happy to” testify before Congress on the Cambridge Analytica issue, “if it’s the right thing to do,” but said others at Facebook may be better suited to speak to a particular issue. Congressional testimony could give investors more insight into some of these issues, so stay tuned.
Facebook shares are up 18% over the past 12 months, while the S&P 500 SPX, -2.10% has gained 14%, but have fallen 8.5% this week through Wednesday’s close.