How A Major Outage & Whistleblower Allegation Affect Facebook Stock
Social media platforms Facebook, Instagram, and WhatsApp abruptly cut users off from the online world. Also, issues highlighted by Frances Haugen came to light. What’s going wrong at Facebook?
Originally published on Zinvest: zvstus.com/blog/how-major-outage-whistleblower-affect-facebook-stock
The social media giant Facebook suffered its worst global outage since 2008 with users unable to access Facebook, Instagram, and WhatsApp — disrupting businesses and those trying to stay connected with their loved ones.
In addition to more recent developments, whistleblower allegations accuse Facebook of prioritizing its “own profits over public safety — putting people’s lives at risk.”
Explaining The Nearly Six-Hour Outage
On Monday, social media platform Facebook, along with Instagram and WhatsApp, went dark — cutting users off from accessing their feeds and messages. The massive global outage lasted for more than six hours before coming back online.
This marks it as the worst shutdown since 2008 when a bug disrupted the company’s services for about a day — affecting 80 million users. Currently, there are about 3 billion users.
Facebook & Instagram Down: What Happened?
Santosh Janardhan, Facebook’s VP of Engineering and Infrastructure, released an update apologizing for the widespread outage and states, “Our engineering teams have learned that configuration changes on the backbone routers that coordinate network traffic between our data centers caused issues that interrupted this communication. This disruption to network traffic had a cascading effect on the way our data centers communicate, bringing our services to a halt.”
Fortunately, Facebook did not find any evidence that sensitive user data was exposed during the hours-long outage. The company also had to control how quickly to bring the services back online because a sudden surge in traffic could cause more crashes.
The outage also came as a waking call for many users who realized just how much control social media has on their lives and businesses. Many online businesses, small and large, were affected as their line of communication and source of revenue were cut off.
Meanwhile, social network Twitter exclaimed from its main Twitter account “hello literally everyone”, as memes about the social media shutdown trended.
Facebook Experiences Revenue Loss and Drop-in Shares
While the outage lasted for only six hours, the shutdown in services caused Facebook to lose an average of $163,565 every minute and totaled roughly $60 million by the time it was back online. Founder and Chief Executive Mark Zuckerberg owns a 14% stake in the company and consequently lost approximately $6 billion on Monday.
Shares of Facebook also fell as news reports that the U.S. Federal Trade Commission opened investigations into whether Facebook violated antitrust laws with acquisitions such as WhatsApp and Instagram. The CEO of Facebook Inc., which reported its first quarterly profit this week, owns more than 20 percent of the voting power at both WhatsApp and Instagram, according to regulatory filings reviewed by Reuters.
Both apps have been under scrutiny since their launches because they allow users to communicate without using Facebook itself. But while Facebook may not face any immediate legal action, investors worry that regulators will eventually step up enforcement efforts against the world’s largest social network.
The company was also a part of the $1 trillion clubs along with Apple Inc., Microsoft Corp., Amazon.com Inc., and Alphabet Inc. before dipping down to $919.79 billion. In addition, Facebook shares dropped 5% on Monday morning following an interview of former Facebook product manager Frances Haugen on 60 Minutes.
Facebook Whistleblower Exposes The Social Network on 60 Minutes
Frances Haugen worked with Facebook for almost two years on their civic misinformation team and became concerned that the company was prioritizing engagement over user safety and wellbeing.
Her two main accusations were:
● Facebook is at fault for allowing the spread of misinformation and contributing to the Jan. 6 insurrection at the Capitol.
● The company is aware that Instagram is negatively affecting teenagers’ mental health but has never taken action.
Haugen highlights that Facebook has the ability to make the algorithm safer, citing the time during the 2020 election when they utilized safety systems to reduce misinformation.
However, this was turned off after the election was over and returned to prioritizing growth over safety. Haugen says it felt “like a betrayal of democracy” in her 60 Minutes interview.
She claims Facebook wants to keep users on their apps for longer and does not want to change the algorithm. Otherwise, users will spend less time on their social media and click on fewer ads — meaning less revenue.
“And one of the consequences of how Facebook is picking out that content today is it is -optimizing for content that gets engagement, or reaction. But its own research is showing that content that is hateful, that is divisive, that is polarizing, it’s easier to inspire people to anger than it is to other emotions.”, says Haugen.
After gathering tens of thousands of pages worth of documents, Haugen sent them to The Wall Street Journal, which published the Facebook Files — a series of investigations looking into the company’s controversies and lack of response.
The Securities and Exchange Commission (SEC) also received her documents and her lawyers have filed 8 complaints that allege Facebook misled investors.
Haugen’s Testimony, Facebook’s Response, and Potential Changes in the Future
On Tuesday, Haugen testified before the Senate Commerce Subcommittee on Consumer Protection and provided a detailed and clear look into Facebook’s internal workings. Bringing forth revelations and unearthing the company’s past controversies, Haugen told congress that the tech giant consistently chose to maximize its growth and profit over user safety.
“During my time at Facebook, I came to realize a devastating truth: Almost no one outside of Facebook knows what happens inside Facebook,” Haugen states in her testimony. “The company intentionally hides vital information from the public, from the U.S. government, and from governments around the world.”
While she is not the first former employee to come forward, Haugen may be Facebook’s worst nightmare due to her being an insider critic with overwhelming evidence. She urges that congressional action is needed while believing in the company’s potential for good. On the other hand, Facebook made repeated attempts to discredit Haugen during and after the testimony.
In an attempt to contain the allegations, the company went on the offense and released their own statement denying her accusations. Facebook spokesman Andy Stone tweeted, “Just pointing out the fact that @FrancesHaugen did not work on child safety or Instagram or research these issues and has no direct knowledge of the topic from her work at Facebook.”
Another statement was released with the company further disagreeing with Haugen’s characterization of the topics she brought forward and discrediting her for not working with these topics directly during her two years on the job.
Is Facebook’s Stock Price About To Dip?
In addition to the FTC investigation, the European Union also launched a probe last year into how Facebook uses data. And lawmakers in Congress have called for greater regulation of online platforms like Facebook. While Mr. Zuckerberg remains chairman of Facebook, he no longer controls all major decisions within the company.
He stepped aside as chief executive officer earlier this year when Sheryl Sandberg became acting COO. She now serves as president of Facebook. As part of her new role, Ms. Sandberg oversees product development and strategy. In recent months, she has taken steps to address concerns among consumers and advertisers about privacy issues related to user information.
Sandberg said in April that Facebook does not use facial recognition technology to target ads based on photos posted publicly on the site. However, some analysts say there is still room for improvement. They point out that Facebook can identify individuals even if only partial images appear in public posts.
The company says it doesn’t sell access to friends’ private messages. It also allows third-party developers to create applications that let you send text messages via Facebook Messenger. These include services like Kik Messenger, Viber, Line, WeChat, and Telegram.
But critics argue these features give too many opportunities for misuse. For example, Kik recently came under fire after hackers gained unauthorized access to millions of accounts through a flaw in the messaging service.
Zuckerberg has defended Facebook’s business model, saying it provides value to society by connecting people across the globe. He argues that the company makes money primarily off advertising rather than selling consumer data directly to marketers.
However, some experts question whether Facebook should continue to operate as a free platform where anyone can post content. Instead, they advocate creating paid versions of popular websites that charge fees for premium services.
“I don’t think we need another Google,” said Tim Wu, professor emeritus at Columbia Law School. “We already have enough.”
What’s Next for the Social Media Giant?
After Haugen’s testimony, Zuckerberg broke his own silence in a lengthy Facebook post and says the company’s internal research has been misrepresented.
“The argument that we deliberately push content that makes people angry for profit is deeply illogical. We make money from ads, and advertisers consistently tell us they don’t want their ads next to harmful or angry content.”, he writes.
Both Democratic and Republican senators on the committee agree that Haugen’s testimony solidifies the need for new regulations that will change how Facebook targets users and curates content. With more and more people focusing on the company in light of the hearing and evidence, many believe that this will be the catalyst for change.
Subcommittee Chair Sen. Richard Blumenthal says, “Frances Haugen wants to fix Facebook, not burn it to the ground.” Haugen herself says she would work with Facebook again, if given the chance, and emphasizes that the company should be willing to make collaborative solutions with Congress.
This most likely won’t be Haugen’s last appearance as senators now look towards Zuckerberg to take responsibility and appear before the committee.
