Rivals and consumers will rein in Facebook, not regulation

Note to government bureaucrats panting to regulate Facebook: Back off! And that’s from someone who is no fan of the social media giant.

As the Cambridge Analytica scandal unfolds, politicians and government officials in the U.S. and England are itching to pounce. Fueled by Facebook’s repeated disregard for customer privacy and its link to the campaign of Donald Trump, legislators are eager to stamp out the company’s ability to harvest user information for profit.

This poses a threat to Facebook and its social media rivals, who depend on that harvesting for their livelihoods.

{mosads}It is also an altogether useless undertaking. Government regulators are not up to the task. After all, Facebook had already entered into a consent decree in 2011 with the Federal Trade Commission guaranteeing user privacy, and in 2015, it amended its policies to prevent just such problems. That didn’t pan out so well.

Government restrictions will not only prove pointless but could well undermine the forces that will ultimately bring Facebook and its rivals to heel: competition. In the last quarter, the number of daily active North American users on Facebook declined for the first time ever.

Why? Maybe it was disgust with the company’s sloppy distribution of fake news or concerns about Facebook’s efforts to censor material.

More likely, it was because people had moved on to Instagram (which Facebook owns), YouTube or another site. If people care about their privacy (and it’s not at all clear that they do), they will gravitate to a service that offers better protections.

That could include a free app like Signal, which permits encrypted texts, phone calls and video chats between users and is ad-free. If such services become more popular, Facebook will have to change its ways.

Rivals will rein in bad behavior from Facebook, not new rules, and it is that potential leash that regulators might destroy.

As happened when new restrictions were put on banks, it will be the biggest competitors, like Facebook, that can easily afford expensive oversight and will take market share and prosper. Smaller firms, up-and-coming innovators in the dotcom revolution, will get strangled by burdensome red tape.

The solution to the problem is not government intervention but increased customer sophistication. Facebook apparently allowed a third party to gather personal data through an app, paying users a modest fee to answer questions.

The respondents were told the survey was for academic purposes. What every user should have known is that personal data is never safe and that online encounters must always be suspect.

Facebook, Gmail, bitcoin, Amazon, JPMorgan, Equifax, Apple’s iPhones: Not one of these are secure. iPhones, it turns out, can be opened. Gmail can be hacked. Bitcoins can be stolen. Online bank accounts can be robbed and credit reports taken. Nothing and nobody is safe.

Moreover, Facebook and others have become so complex and so vast that the information swirling in and out is virtually uncontrollable. Consider: There are 2.13 billion monthly Facebook users around the globe; daily, some 1.4 billion people log onto the site.

According to internet consultancy Brandwatch, Facebook adds 500,000 new users every day and six new profiles every second of every day. Some 250 billion photos have been uploaded onto the site, users record 4 million likes per minute and the company generates 4 petabytes of new data every day. For the uninitiated, a petabyte is 10 to the 15th power.

Does anyone really expect that Facebook, even with all its algorithms and data miners, can possibly keep up with that? No, which is why the Russians were able to infiltrate the site with bogus stories attempting to undermine Hillary Clinton. According to CNN, the site at one time hosted 83 million fake profiles.

The recent furor over the Cambridge Analytica data theft (it is NOT a breach, Facebook assures us) is not because we are shocked that personal data was scooped up and misused; it is because the Trump campaign benefited from the inappropriate access.

Since Hillary Clinton fans have one more reason to call foul, we will now be treated to members of Congress and perhaps of the U.K.’s Parliament huffing and puffing about election sabotage, though they know that such data has been used before to sway votes, by none other than Barack Obama.

Beginning in 2009, data engineer Dan Wagner started work as the DNC’s “targeting director.” He later headed a 54-person team that crafted analytics technologies for Obama’s reelection campaign.

By 2012, he had revolutionized campaigning, according to a lengthy 2012 report by Sasha Issenberg in the MIT Technology Review, by “’targeted sharing’ protocols [which] mined an Obama backer’s Facebook network in search of friends the campaign wanted to register, mobilize, or persuade.” Sound familiar? 

We should not ignore the ways in which social media giants betray our trust. But it is up to customers of these firms to police their activity. If you want your data protected, do not share it on social media, period.

After all, as Facebook proudly states on their website, “Facebook is defined by our hacker culture — an environment that rewards creative problem solving and rapid decision making.” They must have forgotten the part about protecting their customers.

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. For 15 years, she has been a columnist for The Fiscal Times, Fox News, the New York Sun and numerous other organizations.