Consequences of #deletefacebook - 14% decrease in shares

Mar 27, 2018 12:45 PM|

After receiving information about the colossal leak of personal data from Facebook accounts, big companies and well-known personalities have deleted their Facebook profiles. As a result the platform's share value dropped by 50 billion USD. Why? “User trust and reputation are the most valuable things a social network can have and can lose," comments Marcin Lipka, Conotoxia Senior Analyst.

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Cambridge Analytica, a British consulting company, intended to collect private data from more than 50 million Facebook users. "We used Facebook to obtain millions of profiles. We formed the base on which the entire company was built," said Chris Wylie, former Cambridge Analytica employee (Head of Research), to New York Times.

Mark Zuckerberg (Facebook CEO) stayed silent for several days after the outbreak of the scandal. After a while, he said that he was working on understanding what exactly had happened and how a similar situation could be prevented in the future. He assured that preventative measures were taken years ago. “But we also made mistakes, there's more to do, and we need to step up and do it,” he added. “I want to thank all of you who continue to believe in our mission and work to build this community together. I know it takes longer to fix all these issues than we'd like, but I promise you we'll work through this and build a better service over the long term,” he said.

Both the market and users reacted in a very negative way. Since the information was leaked, Facebook shares have fallen by 14% and have lost about 50 billion USD. Brian Acton, co-founder of WhatsApp, after deleting his Facebook profile, promoted the #deletefacebook action on Twitter. Elon Musk, a businessman and philanthropist, decided to remove the profiles of his two main companies SpaceX and Tesla. The English music band Massive Attack, after the data leak scandal, decided to contact fans through their band website, suspending their Facebook profile.

Cinkciarz and Conotoxia joined the #deletefacebook action. "I decided to remove all of our company accounts on Facebook," informed Marcin Pioro, Cinkciarz CEO, and the founder and owner of the Conotoxia Holding Group.

What can these user decisions from all over the world mean for Facebook?

“Facebook owes its rapid financial development to a huge database of users. If the number of users decreases or investors realize that there is risk of people turning against Facebook, it may result in a lower valuation of shares. In such a scenario, the loss of users may also lead to a lower company valuation. Since the uncertainties related to the privacy of user data occurred, the company has lost almost one-seventh of its market value,” says Bartosz Grejner, Conotoxia Analyst.

Established in 2004, Facebook has nearly 2 billion users all over the world. In 2012, Facebook made its spectacular first appearance on the American market NASDAQ - it was the most valued company at the time of debut.

"It is not only the number of active users that counts but also the company’s reputation. We share sensitive, often very personal data (ours and our relatives) with social media. If there are justified concerns that information about users is being leaked, then our trust in these institutions will decrease, and, therefore, the value of specific companies is also reduced," adds Marcin Lipka, Conotoxia Senior Analyst.

Mar 27, 2018 12:45 PM|

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