Facebook Case Study – April 2018 – Professor Esther Hayman
Read the case description below and then answer the
questions in a separate document and submit on Canvas
In 2014, a personality quiz app created by Aleksander Kogan was downloaded by about 300,000
Facebook users. The users who took the app had their personal profiles, such as their names,
page likes, birthday and current city, shared with (or sold to) a British firm called Cambridge
Analytica in 2015. The app also had the data of people who were friends of the users who took the
app, given Facebook’s “loose restrictions.”
Facebook later calculated that 87 million people had their data used because that was the
maximum number of friends that the users could have had while Kogan’s app was collecting data.
Kogan said that he didn’t know Cambridge Analytica was going to use the data to build profiles of
voters to target political ads, although he knew the data would be used for political consulting.
The “media connected a long series of dots to suggest the possibility that Russian bots
exploited the personal Facebook data” obtained by Cambridge Analytica to put Donald
Trump in the White House. Facebook has been aware of traditional Russian cyber threats
for years.
In 2017, Obama’s Director of National Intelligence thought that Putin and the Russian
Government developed a “clear preference for President-elect Trump.” Russian entities
purchased $100,000 in ads. Supposedly Russian-backed groups used Facebook to sow
divisions before and after the 2016 U.S. presidential election and elsewhere in the world. But
Facebook’s role in distributing misinformation or “fake news” is said to be rampant on both sides of
politics.
This is not the first campaign to supposedly use Facebook data. The Obama campaign used the
method of having users’ friends’ lists to have the data of millions of potential voters. Hillary Clinton
took advantage of a special iPhone and Facebook integration to ask every user to pair their friends
list on Facebook with their phone contacts and give them permission to access that information.
The move to end third-party data targeting has brought to light a little known but common practice
in the digital advertising industry – the collection of huge amounts of data on users. Facebook has
collected vast amounts of data on its users and since 2013 has sold this data to data brokers. Data
brokers have billions of data points on how much people earn, what they buy and other
demographic details of people and their offline behavior that is gathered from public records,
purchases and other sources. Combining the data brokers’ data and Facebook’s has helped
marketers target ads to Facebook users with some precision.
On March 17, the New York Times reported on the Facebook data harvesting situation and that
contractors and employees of Cambridge Analytica in 2014 acquired the psychological profiles of
millions of Facebook users. For five days, Zuckerberg remained silent on this data harvesting
scandal. When people turned to Facebook to search for a response from the leader, they found a
snapshot of the CEO and his wife baking hamantaschen for the Jewish holiday of Purim.
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Zuckerberg before Congress:
News of the data harvesting scandal enraged the public and eventually brought CEO Mark
Zuckerberg to Capitol Hill on April 10 and 11. In an effort to restore public trust in Facebook,
Zuckerberg testified about the controversy before Congress. Parliaments in the UK and the
European Union have also called for him to appear. Zuckerberg had resisted public questioning by
politicians when the Russian disinformation scandal first appeared last year.
Before Zuckerberg went to Congress, he studied up on the private data of congressmen, the Onion
reported. In front of Congress, Zuckerberg said Facebook is investigating all apps to make sure
they aren’t using Facebook user information improperly. If they are found to violate Facebook
rules, those apps will be banned from the social network.
Zuckerberg said they hired 15,000 people dedicated to “community operations and review.” They
will figure out some “acceptable speech in a community that reflects the social norms and values of
people all over the world.”
Before Congress, Zuckerberg admitted that he had not done enough to protect the data of
Facebook’s users and allow them the privacy the site promised. He said, “We didn’t take a broad
enough view of what our responsibility is. That was a huge mistake. It was my mistake.”
He said that Facebook is also investing in artificial intelligence to help uncover advertisers that
have skirted their verification process.
Facebook will apply changes to comply with Europe’s General Data Protection Regulation
worldwide, allowing people to opt out of some data collection.
Facebook will be making changes to its terms and conditions, and making its data policy and
privacy settings clearer and easier to use.
Zuckerberg tried to stress the positives. He said that Facebook is “an idealistic and optimistic
company.” He spoke of its power to reconnect families, help couples meet, and marry and
organize social movements and marches.
Meanwhile, Facebook’s Chief Operating Officer, Sheryl Sandberg, was talking to the media. She
said that if users want to opt out of Facebook’s data-driven advertisements, they would have to pay
for it. She admitted that “our service depends on your data.” She also admitted that Facebook
should not have trusted Cambridge Analytica to delete the data just because it said it would. “We
should have checked. We were behind and we didn’t understand that kind of election interference.”
Facebook should have been quicker to understand the threat around elections.
Now Zuckerberg and Sandberg are “desperately trying to project a new image of humility and
transparency.” Sandberg said it was a “mistake” for her and Zuckerberg to not have spoken out
sooner after the Cambridge Analytica revelation last month. “Now we are going to be transparent
and out there talking.”
Facebook Background:
Facebook is the biggest social media network in the world. It has 2.2 billion users and a market
capitalization of more than $400 billion. Mark Zuckerberg is chairman, CEO and controlling
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shareholder of Facebook. A business model built on targeted advertising has generated $16 billion
in 2017 net income for Facebook.
Zuckerberg is 33 and got into computer programming when he was 12. He went to Harvard to
study psychology and computer science but dropped out in his sophomore year. He launched
TheFacebook.com site in 2004 in his college dorm room with friends and since then, has faced
major lawsuits from other Harvard students who claimed he stole their ideas while falsely
promising to help build a separate social network site.
In April 2017, Zuckerberg did one part of a tour around America, fueling rumors of a Zuckerberg
2020 presidential run. There were a variety of photographs showing Zuckerberg looking serious at
a boardroom table with military leaders; at a church at Charleston, and at a NASCAR racetrack,
talking of his ambitions and social values.
Zuckerberg’s face is linked to the company he co-founded. He is often seen in a T-shirt, hoodies
and jeans, which one would consider to be the dress of a teenager, not the CEO of a multi-billion
dollar company. In interviews, some say he presents an oddly blank look. At an estimated net
worth of $66 billion, he is not only one of the richest men in the world, but in the history of the
world. He has tremendous power. But his public reputation may now be somewhat damaged.
This isn’t the first crisis Zuckerberg has faced. In 2010, he was in a legal battle with his old college
friend, Facebook co-founder Eduardo Saverin, after Zuckerberg was accused of cutting his stake
in the company and refusing to acknowledge his contribution. An out-of-court settlement resulted in
Saverin getting 53 million Facebook shares.
Other Issues
A 2016 memo written by a Facebook vice president was leaked recently and it appears to say that
Facebook’s growth is more important than safety concerns. The vice president who wrote it now
said that he doesn’t agree with that memo now nor did he when he wrote it.
Consumer groups filed a complaint with the FTC on April 6, saying that Facebook violates users’
privacy rights through its facial recognition software. It focused on the Facebook feature that helps
users identify people in uploaded photos by suggesting the names of people it recognizes.
Facebook defended its practices, saying users are able to decide for themselves whether to use
the technology.
Reaction from other technology leaders
CEO Tim Cook of Apple has said in an interview that “privacy to us is a human right.” Co-founder
of Apple, Steve Wozniak, has said that Mark Zuckerberg has bought all the houses in Hawaii
around where his house is so he has his privacy but he hasn’t taken the privacy of Facebook users
seriously enough.
Some have pointed out that many Facebook users don’t realize how often they have clicked a
button to grant app developers access to their lives, ages, and likes in exchange for the
convenience of not having to register with their email addresses or other personal information.
They grant sign-on access with one click and in turn, those app developers get their personal data.
1. Identify one relevant theory or concept we covered in class that is related to Mark Zuckerberg as a leader and/or Facebook as an organization. Describe in which way this theory is relevant to the case. Support your answer.
2. Apply one principle or concept from Good to Great that is relevant to what Facebook or Zuckerberg did or should have done. You can use anything in the book, even if we haven’t discussed it yet.
3. Identify a few key stakeholders in this case and illustrate their differing perspectives. (We will cover stakeholder theory on 5/2).
4. Mention something that you feel is important to this case from a leadership or organizational perspective that wasn’t asked about in the above questions.
