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Facebook : CEO backed sharing customer data despite second thoughts - documents

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12/06/2018 | 03:10am EST
A person holds a smartphone with the Facebook logo in front of displayed

SAN FRANCISCO (Reuters) - Facebook Chief Executive Mark Zuckerberg questioned the business case for giving millions of outside software developers wide access to customer data before endorsing the practice in 2012, according to internal emails published on Wednesday.

The decision made it possible for a quiz app to gather data on about 87 million Facebook users the following year, and later share the information with the now-defunct British political consulting firm Cambridge Analytica, which worked on Donald Trumps' presidential campaign.

Zuckerberg lamented his choice in a Facebook post on Wednesday, saying that cracking down a year earlier could have helped the company avoid a privacy scandal that has tarred its reputation.

The CEO's 2012 emails, obtained by a British government panel investigating Facebook, provide an unusual window into the internal deliberations over the critical strategic question of how much customer data the social network should share.

Facebook had recently gone public and was counting on third-party apps such as games to help drive growth.

But Zuckerberg questioned whether such apps and the data they sent back to Facebook were producing sufficient increases in usage and revenue.

"In theory, we want information, but are the posts developers are giving us actually valuable?" Zuckerberg wrote in response to a lengthy email from a lieutenant. "They don't seem to be for targeting (content) and I doubt they drive meaningful increases in engagement either."

A proposed alternative was charging apps for access to Facebook user data, though such a move would have likely limited the number of apps that worked with Facebook, Zuckerberg wrote in one message.

Facebook stayed the course, with Zuckerberg rejecting fees in late 2012.

"The purpose of the platform is to tie the universe of all the social apps together so we can enable a lot more sharing and still remain the central hub," he said in an email to several top executives. "This finds the right balance between ubiquity, reciprocity and profit."

By 2014, Facebook had moved to restrict the free promotion and wide data access from which outside developers benefited. Though the tools and data remained free, they became less valuable to many app makers.

Facebook did not immediately respond to a request for comment.

SHIFTING GEARS

The deliberations in the late 2012 emails focussed on profit rather than privacy.

Zuckerberg and senior leaders debated how data-exchange deals with companies like Spotify and Pinterest could generate revenue, believing that Facebook was getting less benefit from the arrangement than its partners.

Zuckerberg loosely proposed the idea of charging apps 10 cents for every user data request, a fee he estimated would cost Spotify and Pinterest about $3 million annually, according to one email.

In another thread, he and Sam Lessin, a director of product management, weighed the consequences.

Facebook had "maximized profit" from games integrating with Facebook by charging them a fee, Zuckerberg said.

But charging had led the best games to abandon Facebook's services, Lessin said, and he was "not proud" of those that remained. Lessin did not respond to a request to comment.

Ultimately, Zuckerberg in the emails stuck with the goal he had set when launching the developer tools years earlier: Get people to share more items on Facebook.

In its IPO filing, the company said working with other apps was "key" to increasing usage of Facebook and had improved its ability to personalize news feeds.

If Facebook made it easy for more apps to integrate social features, Zuckerberg wrote months later, "we should be able to unlock more sharing in the world and on Facebook."

(Reporting by Paresh Dave; Editing by Jonathan Weber and Neil Fullick)

By Paresh Dave

Stocks treated in this article : Facebook, Spotify Technology SA
Stocks mentioned in the article
ChangeLast1st jan.
FACEBOOK -0.88% 162.5 Delayed Quote.25.07%
SPOTIFY TECHNOLOGY SA 1.12% 148.52 Delayed Quote.30.85%
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Financials ($)
Sales 2019 68 929 M
EBIT 2019 25 295 M
Net income 2019 22 174 M
Finance 2019 49 256 M
Yield 2019 -
P/E ratio 2019 21,65
P/E ratio 2020 18,51
EV / Sales 2019 6,01x
EV / Sales 2020 4,84x
Capitalization 464 B
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Income Statement Evolution
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Mean consensus OUTPERFORM
Number of Analysts 47
Average target price 197 $
Spread / Average Target 21%
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Managers
NameTitle
Mark Elliot Zuckerberg Chairman & Chief Executive Officer
Sheryl Kara Sandberg Chief Operating Officer & Director
David M. Wehner Chief Financial Officer
Michael Todd Schroepfer Chief Technology Officer
Atish Banerjea Chief Information Officer
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1st jan.Capitalization (M$)
FACEBOOK25.07%463 773
TWITTER8.66%23 774
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LINE CORP10.26%8 893
SINA CORP13.80%4 317
DENA CO LTD-7.92%2 255