Facebook Inc. saw its shares tumble March 19 as a growing chorus of U.S. and EU officials called for investigations into the mishandling of personal user data by a political data analytics firm.
While Facebook stressed that the data was originally volunteered by users to an app and the problem involved improper storing and sharing of the data rather than a breach, the company's stock tumbled on March 19, closing at $172.56, down 6.8% for the day. That marked the stock's largest one-day percentage decline since the year immediately after Facebook's 2012 IPO. Meanwhile, a number of officials took to Twitter to make calls for investigations by the U.S. Congress and the European Parliament.
Facebook on March 16 disclosed that it had suspended the accounts of British company Strategic Communication Laboratories and its political data analytics firm Cambridge Analytica LLC, as well as Christopher Wylie of Eunoia Technologies, for violating the platform's personal data policies. The company said it learned that data voluntarily provided to a personality test app by University of Cambridge Professor Aleksandr Kogan had been improperly passed on to third parties including Cambridge Analytica, a firm that does work for political, government and military clients around the globe.
Facebook on March 19 said it has hired Stroz Friedberg, a digital forensics firm, to conduct an audit of Cambridge Analytica, which has agreed to comply. The company said it also asked Wylie and Kogan to submit an audit, but only Kogan has agreed to do so.
A number of lawmakers in the U.S. and abroad called for investigations into the incident in the days after Facebook announced the account suspensions.
"It's deeply concerning that the privacy of more than 50 million Americans who use Facebook was compromised by Cambridge Analytica, and it appears Facebook failed to take any action against them until these reports surfaced," said Rep. Frank Pallone (D-N.J.), the U.S. Energy and Commerce Committee's ranking member, in a March 19 tweet. He called for a congressional investigation and Committee hearings on the matter.
In a March 19 letter to Facebook CEO Mark Zuckerberg, Rep. Ron Wyden (D-Ore.), the U.S. Senate Finance Committee's ranking member, demanded answers about how many incidents that involved users' data being improperly exposed were known to Facebook and what Facebook knew about how that data was being used. Wyden asked Facebook to respond by April 13. A copy of the letter was posted on Twitter.
Meanwhile, U.S. Sens. Amy Klobuchar (D-Min.) and John Kennedy (R-La.) sent a joint letter to Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) requesting that Grassley call a hearing where senators can question the CEO of Facebook and other technology companies about the companies' voluntary efforts to safeguard data shared on their platforms from misuse.
Massachusetts Attorney General Maura Healey also took to Twitter to announce her office is launching an investigation, saying "Massachusetts residents deserve answers immediately."
The European Parliament will investigate the incident as well, said Antonio Tajani, president of the European Parliament, in a tweet, calling the incident "an unacceptable violation of our citizens' privacy rights."
In a research note published March 18, GBH Insights analyst Daniel Ives said the scandal would reignite fears by some on Wall Street that regulators could clamp down on Facebook in a way that might upset its ad model, though he suggested such fears were overblown, at least in the near-term.
"Ultimately we believe this is more 'headline risk' at this point and does not overly concern us that this would lead to major changes/impact to the company's advertising fortress and key monetization engine for 2018 and beyond," Ives wrote.
Pivotal Research Group analyst Brian Wieser in a March 19 research note echoed Ives' comments regarding the potential for increased regulations, and that third-party ad measurement partners could also face more restrictions as a result of the incident. But, like Ives, Wieser said there shouldn't be any near-term impacts on Facebook's business model.
"We think this episode is another indication of systemic problems at Facebook, although the company's business won't likely be meaningfully impacted for now, because we don't think advertisers will suddenly change the trajectory of their spending growth on the platform," Wieser wrote.