Good morning. Berlin-based Fortune writer David Meyer here, filling in for Alan today.
Facebook’s share price is up a few percentage points after CEO Mark Zuckerberg said the recent scandals hadn’t made “any meaningful impact” on the business.
The claim came as Facebook confirmed that it scans the links and images sent in private Messenger conversations. The company yesterday also said the data of 87 million, not 50 million, of its users may have been improperly shared with Cambridge Analytica. Oh, and malicious actors had been using a (now removed) tool for finding friends to record people’s public information. “Most people on Facebook could have had their public profile scraped in this way,” Facebook CTO Mike Schroepfer admitted in a blog post.
Given that Facebook’s privacy scandals keep on coming—and the investigations keep piling up—is it reasonable for investors to be buying into the company rather than walking away from it?
There are indeed causes for optimism. First off, if all this stuff comes out now, there are hopefully fewer potential scandals waiting in Facebook’s closet.
More importantly, though, Facebook’s many admissions come in the context of the company making major changes to its systems, so they are more compliant with the European Union’s incoming General Data Protection Regulation (GDPR). It’s a lot easier to fess up to something when you can promote the cure along with the diagnosis. (Zuckerberg also used a Wednesday conference call with reporters to insist that, contrary to a Reuters report, Facebook will extend GDPR-compliant privacy controls to users around the world, not just in the EU.)
If Facebook didn’t make big changes to get in line with the European privacy law, which comes into effect next month, it would have been risking fines of up to 4% of global annual revenues. It remains to be seen whether EU regulators will be satisfied with the changes Facebook has implemented, but it certainly looks like it’s making a serious effort.
The big question now is how much those changes will affect Facebook’s bottom line. They make it harder for third-party apps to get data on Facebook’s users, potentially making the social network a less attractive platform for some developers. They loosen lucrative ties with data brokers, potentially making for less relevant ads on the platform (something that’s worrying Morgan Stanley’s analysts.) These are reversals of policies that made Facebook what it is today—invasive of privacy, but a big money-spinner.
So when Zuckerberg says there hasn’t been a material impact on Facebook’s business yet, that may not be relevant for long. Yes, most people haven’t jumped on board the #DeleteFacebook bandwagon, but it’s what happens next that counts. Once Facebook has worked to regain people’s trust—if indeed that’s possible—it needs to show that it can still thrive while being respectful of users’ data and privacy.
More news below.
| David Meyer | |
| @superglaze | |
Top News
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Oracle and Trump
Oracle co-CEO Safra Catz, whose company is in bigtime competition with Amazon in the cloud computing space, reportedly told President Donald Trump in a private dinner that bidding for a Pentagon cloud contract was unfairly weighted in Amazon's favor. Trump has it in for Amazon at the moment, but, according to the report, he made no indication to Catz that he would interfere in the bidding process. Bloomberg
YouTube Security
YouTube's offices around the world are to get a security boost following Tuesday's shooting at its San Bruno headquarters. Nasim Aghdam, who shot and wounded three people before killing herself, entered the facility through its parking garage. "We are…revisiting this incident in detail and will be increasing the security we have at all of our offices worldwide to make them more secure not only in the near term, but long-term," the Google-owned operation told its employees. However, it's not so easy to boost security on open-design tech campuses. Recode
Saudi Cinema
Saudi Arabia lifted its 35-year ban on movie theaters at the end of last year, and now the country has issued its first cinema operating license to the U.S.-headquartered (and Chinese-owned) chain AMC. AMC's first Saudi cinema will open in Riyadh in a couple weeks' time. It will likely soon face competition from regional companies such as Vox Cinemas and Novo Cinemas, which are based in the United Arab Emirates. CNN
Around the Water Cooler
Wine Deal
The Carlyle Group is buying Australia's largest winemaker, Accolade Wines, for $769 million. Accolade is the company behind labels such as Hardy's and Kumala, and the fifth-largest company in its field globally. Like other Australian winemakers, Accolade has been enjoying brisk trade with China, where the middle classes are increasingly keen on wine. City A.M.
Nike Diversity
Nike's HR chief has told employees that the company has "failed to get traction" in its efforts to hire more women and minorities. "Our hiring and promotion decisions are not changing senior-level representation as quickly as we have wanted," Monique Matheson said in a memo leaked to The Wall Street Journal. Only 29% of Nike's several hundred vice presidents are women. WSJ
Philippine Diversion
Airlines are cancelling flights to the popular Philippine island of Boracay, after the government ordered its closure to protect it. On Wednesday, President Rodrigo Duterte railed against unlicensed developments on the island and highlighted the outflow of raw sewage to the sea around it. Cebu Pacific, Philippine Airlines and AirAsia Philippines are all scaling back flights to Boracay—Cebu Pacific reckons it will lose as much as $5 million over the next six months due to the cancellations. Reuters
Harassment in Congress
Nevada Senator Catherine Cortez Masto wants Congress to overhaul its sexual harassment policies. In a piece for Fortune, she writes: "Four out of 10 female congressional staffers believe that sexual harassment is a problem on Capitol Hill, according to a 2016 CQ Roll Call survey. One out every six of these women say they themselves are survivors of sexual harassment. These numbers show just how widespread sexual misconduct continues to be in Congress. This culture must change." Fortune
This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.
