Why Facebook’s Business Model Isn’t Its Biggest Problem

About 20 years before Julius Caesar overthrew the Roman Republic and became the first Emperor of the Roman Empire, he was elected to the position Pontifex Maximus.

This made him the head of Roman state religion, and it came with some perks. The main one was a residence – Via Sacra (the main street of ancient Rome – and the ritziest address one could hope to have 2,000 years ago). A lesser honor – his wife, Pompeia, becoming the host of the annual Bona Dea festival – was nearly the end of Caesar’s career in Roman politics.

Because the Bona Dea festival had one rule: no men allowed.

But during Pompeia’s festival, a local nobleman donned some drag and snuck in. He didn’t make it very far before being caught, cast out and tried. But, since Caesar didn’t offer testimony against him, the nobleman walked.

Pompeia, on the other hand, found herself divorced by Caesar, who reportedly said “my wife ought not even to be under suspicion.”

Thus a famous phrase was born – Caesar’s wife must be above suspicion – to serve as an eternal reminder that one is responsible for they company keep, even if that company is misleading about their intentions.

It is a bit of advice Facebook has doubtlessly spent the better part of this week wishing they’d spent more time contemplating, as investors are fleeing, users are staying away and regulators are gathering at their gates wondering if perhaps the world’s most successful social media platform has moved a bit too fast – and broken a few too many things.

Cambridge Analytica

Facebook’s reputation-killer is not a nobleman in drag, but instead a digital strategic communications firm specializing in politics and elections called Cambridge Analytica.

As a firm, Cambridge Analytica makes some pretty big claims in general – namely, that it can take raw personality data from subsets of voters and develop complex models of individuals, which campaigns can then use to target and micro-target voter communities to move elections their way.

The firm’s more specific (and biggest) claim, however, is that it did just this sort of advanced voter modeling for the Trump organization during the 2016 election – and that it is was on the strength of those data models that Trump was able to turn swing states, like Michigan and Wisconsin, from blue to red.

Needless to say, whether Cambridge Analytica actually did this, whether it was marketing puffery and/or whether it was as effective as they are claiming it was, a lot of controversy is swirling around this.

The biggest point of controversy has been about how, exactly, they got all that data to create all of those voter profiles.

And that controversy has dropped directly onto Facebook’s door – since, as it turns out, Facebook users ended up being Cambridge’s main source of data.

Facebook’s First Round Of Trouble

One of Cambridge Analytica’s founding architects, Christopher Wylie, brought this whole story to a head a little under a week ago, when he submitted documents and testimony to The New York Times that had a rather disturbing storyline.

As of 2016, it seems, a Russian-American academic at Cambridge University, Aleksandr Kogan, got permission from Facebook to pull data via a “personality test” app he had created. Facebook admits that Krogan got this permission, but that he claimed at the time that he would use it for academic, not commercial, purposes.

About 270,000 people used that app within Facebook directly, but the app’s makers ended up with a whole lot more data than that, because to access the app, users had to consent to grant access to theirs – and their friends’ – Facebook profiles.

By most estimates, Kogan was able to harvest a total of 50 million Facebook users’ data without their knowledge or permission. Wylie claims that Cambridge was the brains and the financing behind Kogan’s whole operation – and that Facebook was well aware of what they were doing with the data they were gathering. Facebook maintains that it warned Cambridge Analytica when it learned about the misuse of the data, and “received assurances that it had been destroyed,” at which time the suspension was ended.

“Several days ago,” Facebook noted it its blog post on the subject late last week, “we received reports that, contrary to the certifications we were given, not all data was deleted. We are moving aggressively to determine the accuracy of these claims. If true, this is another unacceptable violation of trust and the commitments they made. We are suspending SCL/Cambridge Analytica, Wylie and Kogan from Facebook, pending further information.”

That post, theoretically, was supposed to calm fears that Facebook had been hacked, and to reassure users, investors and regulators that things were fine.

Nothing to see here but a minor misstep brought on by a dishonest agent – a data salesman in drag as an academic trying to sneak into Facebook’s festival.

Unfortunately, as this week bore out, no one was reassured.

The Apology Tour

In the week since the story broke, Facebook has seen its market cap hemorrhage $50 billion (Marc Zuckerberg has lost an estimate 9 billion personally) as investors have gotten wary – and weary – of Facebook’s latest PR kerfuffle.

The hashtag DeleteFacebook has been making the rounds on Twitter, and though it is unclear how many people have actually deleted their Facebook app, the controversy has been enough to scare off advertisers: Mozilla and Commerzbank have both suspended their ads on Facebook indefinitely.

And the talk on Facebook has turned particularly brutal.

One of the more notable members of the #DeleteFacebook movement? Brian Acton. If that name doesn’t ring a bell, he was one of the founders of WhatsApp, which sold to Facebook for around $19 billion in 2014. He says “It’s time.”

Ouch.

The Times’ Zeynep Tufekci argues that the recent troubles don’t represent a bug in Facebook’s business model, but actually makes clear the central feature of it. Facebook, Tufekci argues, makes money “by profiling us and then selling our attention to advertisers, political actors and others.”

Which, we should point out, is what online ad platforms do – that is their business and why advertisers pay them.

Facebook has made a particularly fine business out of it, too – along with Google, the site has wrapped up more than 85 percent of the market for mobile search.

And Facebook’s targeting, we feel compelled to point out, has helped launch many a business – Airbnb, for one example – and drives a lot of traffic to websites where people buy stuff. Facebook also became an important platform during the Obama election, and was used by his campaign to get out the vote.

So, let’s be careful not to throw the baby out with the bathwater, because it’s not the business model that is the villain here.

It is the relative blind eye that Facebook – and, we have to assume, the very highest levels of the organization – has taken to how its platform was being used and who was using it. Remember, before this, there was the fake news propagated by Russian trolls who set up fake accounts. And before that, there were the heinous live videos of people killing other people, and even themselves. There has been, over the years, a lot of bad stuff happening on Facebook that hasn’t generated much of a response other than “we need to do better.”

Problem is, things never quite seem to get better enough.

And now doing better, it seems, may not be something that is going to be up to Facebook anymore – and the mood on Capitol Hill is all about throwing babies and bathwater out in one fell swoop.

Staring with Facebook’s.

Immediately Ahead

In the last 48 hours or so and five days after the story broke, there was the perfunctory public apology by Facebook CEO Mark Zuckerberg.

And the perfunctory promise to do better.

He offered up promises to restrict developers’ access to user information as part of a plan to improve privacy protection. He also floated that he thinks it might be time to offer more regulation for tech firms like Facebook – and that it is incumbent on tech firms and Washington to come up with regulations that “make the most sense.”

What exactly those regulations might be he didn’t sketch out, though he did note that he is more than willing to appear in front of lawmakers to discuss it with them, providing “he is the right person to send” – noting that other executives might be better qualified to field questions from those lawmakers.

We think that lawmakers, for their part, are pretty sure that Mark Zuckerberg is exactly who they want to talk to.

“My message to Mark Zuckerberg is, you are the right person. There’s no question you are the right person,” Senator Richard Blumenthal, a Democrat from Connecticut, told reporters after Facebook executives briefed Senate staff on Thursday.

That apologetic theme continued into Thursday, when Campbell Brown, head of news partnerships at Facebook, noted at the Financial Times’ Future of News Conference in New York:

“It was a mistake.”

Of that there is no doubt.

For Facebook, the question now is whether all of this is too little, too late.

And if you just got some déjà vu reading that line, it’s because it is stolen from Karen Webster, who asked the same question in October of last year when Facebook was once again in the hot seat – back then, it was over being America’s main source of fake news.

And while Mark Zuckerberg managed to escape standing tall before the wagon on Capitol Hill back then, it seems highly unlikely he will be get a second pass, as lawmakers are really beginning to wonder if Facebook is providing a product that is actively harmful to its users and – now – to democracy in general.

Way back in October, Webster warned that Facebook’s most important upcoming challenge was going to be answering critical questions about “the inevitable tensions between how platforms make money, the expectations of their investors, the interests of their stakeholders and, ultimately, the trust placed in the platform by those stakeholders – before the government tells you how they see it all working out.”

Those tensions aren’t resolved – and, as the latest scandal indicates, they are pretty far from being worked out.

Looks like the government might just get their opportunity to tell Facebook how they see it all working out after all.

And that makes for one very convincing – and largely self-inflicted – wound of the week for Facebook.

And quite possibly many others who get caught up as collateral damage.