Facebook – Broken valley pt. VIII.

The hits keep on coming.

• The UK government has opened up yet another front against Facebook with the publication of a series of e-mails dating back to before 2015 that imply a complete disregard for user privacy and the custodianship of data.
• The UK committee for Digital, Culture, Media and Sport has released a series of emails between Facebook executives dating back to 2012 as part of its investigation into fake news.
• The e-mails come from a court case between a start-up called Six4Three and Facebook which were supposed to remain sealed.
• The UK government managed to compel the founder of Six4Three to disclose this data during a recent business trip to London.
• The emails highlight two dubious activities:
  • First, phone call and text logs: Facebook appears to have been gathering user call and text logs and using that to recommend connections to other users that Facebook’s thinks that they may know.
  • The issue here is consent as it appears that Facebook found a way to upload this data to its servers without having to ask for Android users’ consent.
  • This is the simple trick by which Facebook’s suggested friends function can be very accurate as opposed to a sophisticated AI algorithm.
  • I continue to believe that these are in very short supply at Facebook and see no reason to change that view.
  • Second, selective access: The data suggests that Facebook has been selectively allowing some apps access to its data while denying others.
  • A good example of this is Twitter which attempted to launch a video service called Vine which was shut out from Facebook most likely because it was a competitor for Instagram.
  • Non-threatening apps like Uber and Netflix continued to have access to Facebook data.
  • While this could easily be construed as anti-competitive behaviour, it is not exactly uncommon in digital ecosystems.
  • Google and Amazon have been slugging it out for a while with Amazon refusing to sell Google products on its site and Google pulling support for YouTube from Amazon Echo devices.
  • Apple could also be seen to be guilty of the same practices with its recent banning of a series of apps that help manage screen time the timing of which coincides nicely with the launch of its own tools in iOS12.
• To be completely fair to the company, these are old issues and in at least one case, have long since been fixed.
• However, this represents yet another slug of bad news where some commentators are now calling for Zuckerberg to resign from the company.
• This is unlikely to ever happen unless Zuckerberg himself decides to go because he controls the company despite having far less than 50% of the outstanding shares.
• This means that he experiences less of the negative consequences of his poor decisions than he should.
• Facebook is becoming a classic example of how poor corporate governance ensures that when things go wrong, they go wrong for longer and things get much worse than if shareholders could oust the management.
• I have been expecting this for some time (see here) and I continue to think that there is worse to come.
• Hence shareholders should take the only action they can which is to sell the shares.
• Users who want their privacy back should stop using the service.