Facebook faces more than privacy concerns

It’s understood that in an environment of #fakenews and alternative facts, gaining consumer trust is paramount for brand success, but how important is it? In February 2018, Mintel found that nearly half of adults agreed they trust well-known companies to keep their personal data secure (47%) while a quarter said they trust lesser-known companies to handle their personal data (26%). One month later, the Cambridge Analytica scandal broke.

When it was revealed that Cambridge Analytica collected private information to understand and influence voter behavior, Facebook came under harsh criticism for how they handled users’ data. Users threatened to leave Facebook with movements such as #LeaveFacebook and #DeleteFacebook trending. Consumer trust in the social media platform plummeted, but the following month the scandal had all but died out.

However, as Facebook released its earnings report for Q2, the impacts of this scandal have come to light. Following strong results in the first quarter, Facebook encountered slowing user growth and revenue generation in the second quarter. Even further, Facebook cautioned that these declines would likely stretch into the back half of the year with the full roll-out of new privacy regulations (GDPR) and investment in products that aren’t fully monetized, such as ‘Stories.’ The news sent the stock into a nosedive, dropping 20% and wiping out $120 billion in company value in a single day.

These results lead us to wonder if eroding trust can have a major, immediate impact.
It seems that privacy is likely only one factor leading to Facebook’s stalled growth. The bigger issue may be relevancy.
In May, immediately following the highly publicized Cambridge Analytica scandal, Mintel once again asked the public, do you trust companies to handle your personal data? Consumers responded exactly the same way they responded in February: 47% said they trust well-known companies to keep their personal data secure and 26% said they trust lesser-known companies to handle their personal data. Cambridge Analytica may have sparked outrage at the time, but didn’t seem to do much to change overall opinions on trust. It seems that privacy is likely only one factor leading to Facebook’s stalled growth. The bigger issue may be relevancy.

Mintel research on social media trends in the US shows that Facebook has the most daily usage among social media sites. A healthy share of younger adults are using multiple social media sites daily, including Snapchat and Instagram which report nearly as much daily usage among 18-24s as there is on Facebook. However, older adults are more likely to make Facebook their only source of social media. With younger adults already seeing Facebook as less essential, user growth may be coming in the form of older adults.

Facebook may be increasingly dependent on serving older adults, an audience traditionally more concerned with online security. Mintel research on attitudes toward technology shows that information security is by far the most pressing worry when considering new technology. It’s an issue for everybody, but 74% of adults aged 55+ rank it among their top three issues with technology, compared to 54% of adults aged 18-34. A personal data violation on the scale of Facebook’s relationship with Cambridge Analytica likely alienated a key audience for Facebook and kept new users away, even if overall attitudes about trust remained stable over this period.

What we think

The public’s trust of their data in the hands of companies seems unshaken, but there is likely looming skepticism. Maintaining a relationship with consumers after their trust is broken can be difficult, and can only be made more difficult when it seems like the company in question isn’t immediately forthcoming about the issue. Companies that are honest about the extent of data breaches will likely be met with more understanding than companies that don’t confront the issue head on.

Dana Macke is Associate Director of Lifestyle and Leisure Reports with an emphasis on family research.

John Poelking is a Leisure Analyst at Mintel. His passion for live entertainment, movies, television, technology and travel informs his sector knowledge.