What will happen to Facebook?

A POPULAR riff doing the rounds in tech circles is that, if data are the new oil, then Facebook’s Cambridge Analytica fiasco is the equivalent of Deepwater Horizon.

The Economist looked at eight of the most notable corporate crises since 2010, including those at Uber and Wells Fargo.[inlinetweet prefix=”” tweeter=”” suffix=””] The evidence shows that these episodes were deeply injurious to the companies’ financial health, with the median firm losing 30% of its value since its crisis, when compared with a basket of its peers.[/inlinetweet]

[inlinetweet prefix=”” tweeter=”” suffix=””]When a scandal first breaks, executives at the top of a firm and securities analysts outside it are often myopic, viewing it as a public-relations blip that will not alter a firm’s operations or its competitive position[/inlinetweet].  In Facebook’s case the absence of established laws and regulations covering social media make it even harder than normal to predict how harsh the backlash will be even as Wall Street bets the backlash could be big.  But others have fared very well during corporate PR problems.

[inlinetweet prefix=”” tweeter=”” suffix=””]A good example is Amazon.com.  Stories about the low pay of warehouse workers and a harsh corporate environment with very high turnover haven’t hurt the retail giant’s sales. [/inlinetweet] They continue to thrive and grow.  But then Amazon didn’t betray their customers’ trust.

[inlinetweet prefix=”” tweeter=”” suffix=””]Facebook is indeed in the middle of a crisis.  What makes it so bad is that Facebook employees are more upset at the leak of an internal memo than of betraying the trust of its users[/inlinetweet].  These are Millennials who are supposed to “give a shit” about the companies they work for.  Evidently, they don’t care that Facebook has violated the trust of millions of people and helped elect the most corrupt administration in our lifetime.

From what I have seen not one media agency or brand is showing any inclination to leave Facebook as marketers are trained to go where the people go.  That’s a shame because Facebook may not learn the lesson that doing, without thinking about the repercussions, is  not the way to do business. [inlinetweet prefix=”” tweeter=”” suffix=””] In the meantime the media will have a field day demonizing Facebook because they are jealous of its power, reach and influence.[/inlinetweet]