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People say they care about Facebook's privacy scandals, but their actions show they don't — here's what that means for other tech giants

Key Points
  • Facebook's announcement that monthly users took off in Europe and Asia in the fourth quarter shows the company may not ultimately pay a substantial business cost commensurate with the public outcry over its privacy practices.
  • The results could have bigger implications for other tech companies, including Amazon and Apple, which both have a stake in quantifying consumer privacy outrage in business terms.
Facebook Chief Operating Officer Sheryl Sandberg speaks during an event on the sidelines of the World Economic Forum in Davos, Switzerland January 23, 2019.
Reuters

This week, Facebook pleased investors by reporting a strong quarter of earnings led by impressive statistics on user activity for the fourth quarter of 2018. 

In light of the social network's recent controversies, there were a few surprises in the figures: The number of monthly Facebook users was steady in the U.S., with spikes in the Asia-Pacific region. Perhaps most surprisingly, they also rose in the European Union — where the company has endured the brunt of criticism over privacy related to the Cambridge Analytica scandal and uncertainty over General Data Protection Regulation, or GDPR.

Facebook's success in courting users so quickly could have far-reaching impact, as other tech companies seek to understand the true consumer appetite for personal privacy.

Merging platforms

For Facebook, it means the wind will be at the company's back as it tries to merge its globally popular WhatsApp messenger service with Instagram and its core Facebook offering. The move, first reported by The New York Times last week and confirmed by CEO Mark Zuckerberg Wednesday, has already drawn the ire of the Irish Data Protection Commission, the agency that administers GDPR.

The company has also recently hired one of its harshest critics to a privacy role at WhatsApp as it seeks to calm privacy concerns over the move.

GDPR has been fueled in large part by public outrage over privacy issues at tech giants. In Facebook's third-quarter earnings call last October, the company blamed a downturn in active monthly users on the legislation. But the resurgence in European users going back to Facebook might show that the public outrage has been tempered by users' desire to return to the product.

Apple's privacy pledges

The data also calls into question whether privacy and security represent a business value proposition that actually interests customers.

Apple has gone to great lengths to position itself as the tech world's privacy leader, while lobbing direct and indirect criticisms at Facebook, Google and Amazon over their own privacy practices. Apple has also weathered a handful of privacy scandals itself this week, including an alarming bug in Facetime and a report that iPhones were hacked for spying in the United Arab Emirates.

Besides setting itself up for harsh criticism if a major privacy violation comes to light, Apple investors may be paying attention to Facebook's renewed success with users despite lots of privacy jabs from consumers and Apple itself. That includes an announcement Wednesday that Apple had disabled Facebook's developer access for internal testing of its app because Facebook was distributing to people outside of the company an app that sucked up incredible amounts of data from iPhones.

While it's highly unlikely Apple would dial back any of its privacy features and pledges, it might scale down the messaging — including its recent spats with Facebook — if it appears consumers aren't responding.

Google has its own privacy scandals

Google's parent company Alphabet has seemingly faced more issues related to internal dissension over privacy matters, including the controversial conversations the company has had with China on possibly building a censored search engine.

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The company also folded its Google+ product around the same time it announced a data leak in the social networking product, and the company is facing similar problems over its use of developer tools in the app store, though not as dire as Facebook. None of these seem to have put a meaningful dent in the popularity of Google products, but we'll know more when the company reports earnings on Monday.

At the same time, Alphabet is also investing in products aimed at privacy-conscious consumers, like email-protecting key fobs and machine-learning features in Gmail that spot nation-state phishing campaigns. Security of personal communications, Google seems to be wagering, is still important even if big-picture privacy outrages don't move the needle much.

Amazon and facial recognition

Amazon, which announces earnings Thursday, has faced similarly harsh criticism to Facebook over its Rekognition facial recognition API and other technologies that some privacy watchdogs have deemed intrusive, including Alexa.

Rekognition has been criticized because law enforcement agencies use it, and because developers can tweak Rekognition for their own purposes, with little centralized control over how its managed by Amazon or anyone else. Several privacy advocacy groups and other organizations, including rival Microsoft, have questioned the safety of the product and how it could be used for damaging purposes in the wrong hands.

It's incredibly difficult for companies to calculate the business cost of "social outcry," but Facebook did it Wednesday. And in its case, that cost may ultimately have been minimal. If Facebook's upward trajectory in terms of users and record profits continues, it will lead investors and companies to assume there's unlikely to be a linear relationship between what people complain about in terms of privacy and security and their likelihood of abandoning the product.

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