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Why Facebook Is in Trouble

Last Thursday, the New York Times published a damning exposé about how Facebook’s two most senior executives engaged in a concerted and deliberate scheme to shield from the public the extent of the company’s data breaches and then attempted to minimize the deleterious effects the fallout from these revelations would have for the company.

The portrait that emerges of CEO Mark Zuckerberg and COO, Sheryl Sandberg, is not a flattering one. Their attempts at damage control have backfired, prompting calls for substantive regulations that will reign in the company in many areas where they have abused their unchecked and unfettered power.

Despite all the outcry from liberals, the most important aspect of Facebook’s Cambridge Analytica scandal was its impact on demystifying the company and exposing the scope and extent of its surreptitious business practices. The privacy scandal has revealed the enormous gulf between the company’s high-minded persona and the devious business practices in which it engages. It’s allure and image as a “tech” company has been permanently punctured.

When the story broke, the delayed reaction of the company was perplexing — almost bizarre. While Mark Zuckerberg emerged slowly from his cocoon and took most of the incoming fire from the resultant public outcry, his Lieutenant, Sheryl Sandberg, was inexplicably MIA. Instead of “leaning-in,” media darling Sandberg, chose to hide out. Since the revelations resulting from the privacy scandal had the potential to unravel the company’s core business operations with dire consequences for its ability to sustain its growth into the future, the company’s response, while unjustifiable, in hindsight, is understandable.

Here’s the dirty little secret: Facebook’s business model is fundamentally sleazy. It misappropriates customers personal private informant and sells or transfers that data to third parties without its user’s knowledge or consent. There is nothing “high tech” about Facebook. It is nothing more than a giant network that functions as a worldwide advertising platform. That’s it. Zuckerberg’s transparently phony act of appearing at shareholders meetings in a T-shirt to create the image of himself as a Steve Jobs visionary doesn’t change that fact.

The extent to which Facebook tracks individual’s interactions with the internet was previously unknown. We now know that Facebook’s tracking tentacles extend and record even the web browsing history of those who are not on its site. This has now prompted a question that for almost a decade was never asked: what right does Facebook have to collect information on which sites a person visits without their knowledge or approval?

Apple CEO Tim Cook was correct when he said that Facebook’s product is its users. Indeed, the company’s ability to generate revenue is directly related to it unencumbered ability to transfer and sell to third party’s consumers private information.

Throughout its history, Facebook has had the great fortune of being able to operate in an environment of complete laissez-fair, without any burdensome regulations or oversight. In short, it has run its operations with impunity for over a decade. The company has profited enormously through its manipulation and transfer of customers private data. Its data harvesting techniques are responsible for making Facebook one of the largest corporations in the world with a market capitalization of $400 billion.

Shortly after the Cambridge Analytica revelations, Facebook was in the process of responding to the European Union’s General Data Protection Regulations (GDPR). These impending regulations were the first attempts at circumscribing the company’s unfettered ability to collect user data. Because of the latent danger the privacy laws presented to the company’s profitable operating processes, the EU provisions would act as the precipitating cause for the campaign of misinformation, deception and bad faith representations employed by Facebook executives to avoid implementing measures that would impair its lucrative and wildly successful business model.

Zuckerberg’s response to the public furor was instructive. He appeared solicitous and endearing when addressing concerns for user’s privacy, yet in the same breath, failed to detail with specificity what steps his company would implement to insure privacy safeguards are in place.

In meetings with both U.S. Congressional leaders as well as EU officials, Zuckerberg’s responses to queries were evasive and he provided no particular information, save for empty bromides or anomalous answers to specific questions.

Shortly after the privacy abuse revelations, Zuckerberg said on the one hand, that he agreed “in spirit” with the new proposed EU law that requires higher standards for protecting user data, but on the other, he made no commitment to enforcing those standards for the remaining 1.4 billion users outside the jurisdiction of the GDPR.

While Zuckerberg was attempting to hold European regulators at bay by putting a billion Facebook users on a boat to the regulatory-free USA, back in California, sweeping and substantive data privacy laws were in the process of being enacted.

The California data privacy act was a seminal event for the future prospects for Facebook because, unlike the inexperience of European regulators who were charged with implementing the GDPR, the California legislation was drafted by former Silicon Valley tech experts thoroughly conversant in Facebook’s data collection business processes.

All were joined in their common belief and conviction that Facebook had no intention of policing itself to guard against unauthorized disclosure and sale of users’ private information and the company needed to be held accountable. The professional caliber of the working group drafting the proposed regulations, helps explain why Facebook senior executives did everything in their power to kill the legislation, as they recognized it presented a mortal danger to the company’s bottom line.

From the moment the Cambridge Analytica story concerning Facebook’s extensive data privacy breaches broke, the extent of the chicanery employed to contain the damage caused by exposing its unsavory and clandestine business practices was remarkable. Sandberg hired a lobbying firm to help keep regulatory action at bay while simultaneously making public statements that the company was sincerely interested in curing its privacy data abuses. An opposition research firm was also retained to criticize Facebook’s critics such as Apple (AAPL) CEO Tim Cook.

Additionally, despite her pious public pronouncements about her concern and unwavering dedication to safeguarding user’s privacy and limiting the unauthorized sale of private data to third parties, as detailed by the Times report, Sandberg did nothing and had no intention of doing anything to effect meaningful measures to bring about the necessary changes.

Indeed, when Alex Stamos, the company’s Director of Security, disclosed to the Facebook Board that the company still not yet fully addressed the exposure of its network one year after the privacy scandal, Sandberg was livid. She yelled at Stamos, “You threw us under the bus!” This is not the behavior of someone who is committed to safeguarding user’s private data.

The casualty from the concerted attempts to misinform the public and regulators is the credibility of Sandberg and Zuckerberg, which now has been irredeemably tarnished. Who is going to accept at face value statements they make in the future? Given his instrumental role in the debacle, when Zuckerberg claims the company’s platform doesn’t suppress conservative commentary, who can possibly believe him?

The fact that the company has chosen to retain those who are responsible for conducting a deceitful campaign to mislead the public as the face of the company, only serves to exacerbate Facebook’s already diminished credibility.

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