It remains to be seen if the #deletefacebook movement will lead to users actually leaving the Facebook (NASDAQ: FB) platform. Even if they do, where will they go to next? Instagram? WhatsApp? What about Snapchat (NYSE: SNAP)?
Chances are good that users will forget about some 50 million user data was used inappropriately by the firm Cambridge Analytica. User trust may be lost but people tend to have a short-term memory. When Equifax (NYSE: EFI) suffered a security breach and 145.5 million user details were taken, the stock collapsed. A few months later, the stock recovered. Wells Fargo (NYSE: WFC) suffered a scandal with its credit card sales tactics but its share bounced back, too. Sales suffered for a quarter and yet the company was able to restore its growth.
The medium term risks for Facebook and the online advertising industry are elevated. Governments will now have a compelling reason to regulate user privacy data more closely. When online profiles are mined to such detail that advertisers may pitch ads to users at at the individual level, that power may be abused. The data from Cambridge Analytica could have been used to sway the voting decision of the individual U.S. citizens.
Alphabet’s Google (NASDAQ: GOOG), Twitter (NYSE: TWTR) and Snapchat also face the same regulations as Facebook. This will threaten advertising effectiveness and ad revenue on these platforms.
