Cambridge Analytica Has Declared Bankruptcy

The British firm at the center of Facebook’s recent data privacy controversy is shutting down.

Today, Cambridge Analytica—which was hired by both Donald Trump and Ted Cruz’s campaigns during the 2016 presidential race—announced it will file for bankruptcy in bankruptcy court in the U.S. Southern District of New York. Meanwhile, its parent company, SCL Elections, will file for insolvency in the United Kingdom while ceasing all operations in both countries.

Over the past two months, Facebook has accused the company of wrongfully using user data, which sparked an independent investigation in the UK. The revelations also led to CEO Mark Zuckerberg appearing before Congress to discuss Facebook’s data practices, along with chief technology officer Mike Schroepfer doing the same in British Parliament.

“Over the past several months, Cambridge Analytica has been the subject of numerous unfounded accusations and, despite the company’s efforts to correct the record, has been vilified for activities that are not only legal, but also widely accepted as a standard component of online advertising in both the political and commercial arenas,” the company said today in a statement.

Two years ago, Cambridge Analytica had opened an office in New York to expand beyond political advertising and into the commercial sector. The closure was first reported today by The Wall Street Journal, which cited the company’s “mounting legal fees” and a loss of clients.

5 Things To Learn From Mark Zuckerberg’s Congressional Testimony

Facebook CEO Mark Zuckerberg spent several hours answering questions from dozens of U.S. senators in Washington, D.C. The questions varied from explaining the basics of ad-tech to answering whether Facebook would support bills strengthening privacy laws.

Zuckerberg’s testimony before Congress comes nearly a month after Facebook banned the British data firm Cambridge Analytica after it allegedly improperly accessed the data of as many as 87 million users. Questioning is expected to continue for another couple of hours with another entire day of testimony scheduled for Wednesday before the House of Representatives.

Some lawmakers are considering regulation

Several lawmakers today suggested Facebook might need to be regulated in order to protect consumers’ privacy. While some suggested that Facebook needs to prove it can regulate itself, others tried to get Zuckerberg to commit to supporting future legislation that would let users opt in to providing data rather than its current opt-out model. One example of that is the proposed CONSENT Act, introduced today by U.S. Sen. Ed Murkey. The bill would require opt-in consent from users before a company could use, share or sell personal information. It would also require companies to notify users of all data collected and shared and notify them if there’s ever a breach. Zuckerberg said he agrees in general with some regulation and even offered to provide a list of ways it might make sense.

Lawmakers don’t all understand how Facebook works

A lot of questions today revolved around how data is collected, used or deleted. Several lawmakers suggested Facebook sells user data, but Zuckerberg said the company doesn’t. Zuckerberg and lawmakers were often at odds about the idea of how users are able or not able to consent to how their data is used.

Robert Mueller has questioned Facebook

Zuckerberg was asked if anyone at Facebook had been subpoenaed or interviewed by special counsel Robert Mueller’s team, which is currently investigating Russian interference in the 2016 election. At first, Zuckerberg briefly hesitated before saying yes. He then clarified that he wasn’t sure about the subpoenas but confirmed some employees had been interviewed. (He said he was not among those interviewed.)

Facebook hasn’t thrown out the idea of a paid model

At least two lawmakers followed up on COO Sheryl Sandberg’s comments last week suggesting that Facebook would need a paid model if users want to opt out of ads. Zuckerberg did not directly answer whether it’s currently exploring a paid model. However, he didn’t totally shut down the idea, saying there will “always be a version” of the platform that’s free to use.

Wall Street was happy with Zuckerberg’s performance
While some wondered how the interview-averse Zuckerberg might perform in front of a few dozen lawmakers, Facebook’s stock price jumped during the hearing, increasing 4.5 percent to close at $164.98 per share.

read more here: adweek.com

More Than $1B in Fines Loom in Facebook Scandal

As Mark Zuckerberg prepared for his Tuesday Senate testimony and Wednesday House hearing, The Washington Post reported there’s a call for the Facebook CEO’s ouster and that record fines may loom for the embattled social media giant. (For full coverage of Zuckerberg’s Tuesday appearances before the Senate Commerce and Judiciary Committees, click here and here.)

The Post reports that Scott Stringer, New York City’s comptroller and custodian of the city’s $193 billion pension fund, which holds $895 million in Facebook stock, wrote a letter March 27 pushing Facebook to add three new independent directors and replace Zuckerberg with an independent chairman.

“Part of my fiduciary role is to ask questions of this company as it relates to issues they’re facing,” said Stringer in an interview last week about his letter. Regarding the Cambridge Analytica revelations, he said, “There’s regulatory risk. There’s revenue risk. There’s reputational risk. And there’s also a genuine risk to our democracy.”

The paper also reports that three former Federal Trade Commission (FTC) officials said Facebook’s disclosure that its search tools were used to collect data on most of its 2.2 billion users could potentially trigger record fines and create new legal vulnerability for not having prevented risks to user data.

Those officials, all of whom were at the FTC during the privacy investigation that led to a 2011 consent with Facebook, said the company’s latest mishap may violate the decree’s provisions requiring the implementation of a privacy program.

But Facebook’s chief operating officer, Sheryl Sandberg, dismissed concerns about the fines in an interview with Bloomberg News, “I think we’re very confident that that was in compliance with the FTC consent decree,” she said.

Still, David Vladeck, who was head of the FTC’s bureau of consumer protection when the decree was drafted and signed by Facebook, told The Washington Post it is possible that this episode is a violation of the consent decree and that Facebook may face fines of $1 billion or more.

“The agency will want to send a signal … that [it] takes its consent decrees seriously,” Vladeck said.

In another blow, Charter Communications Chairman and CEO Tom Rutledge, blogged Monday that he hopes Congress cracks down on Facebook and privacy issues.

“Despite our reliance on websites and social media, the truth is, most people don’t know that when they engage in these activities online, many internet companies are collecting a significant amount of information about them and selling it to others for advertising, research and even voter persuasion purposes,” Rutledge writes. “So we are urging Congress to pass a uniform law that provides greater privacy and data security protections and applies the same standard to everybody in the Internet ecosystem, including us.”

Facebook continues efforts to regain trust. On Monday, it announced a new research initiative with seven nonprofits to study the effect of social media on elections. Under the new initiative, social science researchers will propose research projects for peer review based on a set of general research goals. If a proposal is approved, the researchers will receive the anonymized data from Facebook and accompanying funding from the foundations.

Crucially, Facebook “will not have any right to review or approve their research findings prior to publication,” although it may have influence over which projects are approved.

read more here: responsemagazine.com

The Cambridge Analytica Scandal Won’t Stop Advertisers

Facebook is running out of eyes to blacken in the wake of revelations over the weekend that Trump-affiliated data firm Cambridge Analytica harvested information from 50 million Facebook accounts without permission.

But as long as ads continue to perform on Facebook, the scandals won’t lead advertisers to pull back their spend.

“We may see individuals delete the app, but this won’t change spending patterns,” said Pivotal analyst Brian Wieser.

Advertisers follow the audience, said Melissa Parrish, VP and group director at Forrester, and as long as a channel “works,” they’ll continue to use it.

If advertisers were going to stop spending on Facebook because of bad news, there would have been a meaningful decline last year or even the year before with news of Facebook’s “fairly serious” measurement errors and its fake news problem, Parrish said.

“The only way this scandal affects Facebook advertising is if consumers grow weary and wary of Facebook and start to spend less time on the platform,” she said.

Indeed, Facebook did report a slight dip in North America daily active users during its last earnings call.

But Facebook is still far bigger than any other media platform in the world, other than Google.

“And if not Facebook, where is an advertiser going to go if they need digital media? Verizon?” Wieser said. “Well, that’s the No. 3 platform.”

And while Facebook may be getting a PR beating, advertisers won’t be guilty by association if they continue to advertise through the platform. Brands that advertise on Breitbart, for example, might cause consumers to blacklist a product. Those that advertise on Facebook are just among the more than 5 million brands that do.

Wieser likened the phenomenon to the many controversies that swirl around the NFL. Some viewers take offense at players who take a knee, while others don’t tune in because of the head injury issue. But, at least for now, advertisers aren’t pulling back on spend against the sport. They probably will, though, if viewership tanks.

Even so, the Cambridge Analytica episode is a major headache for Facebook, which has been putting out fires and popping proverbial Tylenol since mid-2016 with the first whisperings that Russian operatives had exploited its ad platform to help sway the US presidential election.

The most recent headlines are just more evidence of systemic problems at Facebook. The platform has been under increasing scrutiny from Washington on both sides of the aisle as it struggles to police its platform.

And Cambridge Analytica’s breach revolves around data that was permissibly collected by an academic researcher named Aleksandr Kogan, through an authorized app he’d created in 2013 – standard operating procedure at Facebook, although the type of data that could be collected through its API was far more expansive back then, including profile data on a user’s network of friends. This type of collection has since been barred by Facebook.

The leak happened sometime between 2013 and 2015 when Kogan shared that data with Cambridge Analytica, which he had no right to do.

Although Facebook knew about it, it didn’t disclose the fact and didn’t make a robust enough effort to ensure that Cambridge Analytica deleted the wrongfully shared data. Cambridge Analytica says it deleted the data, but media reports and former Cambridge Analytica contractors say otherwise.

Facebook suspended the accounts of both Cambridge Analytica and its parent company, SCL Group, just hours before The New York Times and The Observer in the UK published expansive stories on Cambridge Analytica’s shady dealings with Kogan.

It’s a hot mess, but advertisers are far more likely to make media decisions “almost exclusively based upon their own individual tracking and performance” rather than on external factors, one media exec told AdExchanger, nothing that advertisers “would shift dollars only once a negative impact was measured and identified.”

That’s not to say advertisers and agencies aren’t getting more cautious. Another media executive told AdExchanger that internal guidance was issued to team members at the agency this weekend about being more proactive when vetting third parties that share or have access to data on Facebook.

But don’t expect advertisers to cross Facebook off their media plans.

read more here: adexchanger.com