Cambridge Analytica Case Analysis

This paper analyzes the Facebook data breach in the context of Cambridge Analytica. It discusses the connection between Facebook and Cambridge Analytica, the breach of trust, and the impacts of the scandal on Facebook and other technology companies. The paper also provides academic and business research on IT and data security.

Running Head: CAMBRIDGE ANALYTICA CASE
0
IT Write Up
Academic & Business Research
(Student details :)
5/25/2019

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Cambridge Analytica Case Analysis
In order to analyze the case of the Facebook data breach in the context of Cambridge
Analytica this paper is going to answer some major questions raised on this issue as follows:
Answer 1
In the context of Facebook-Cambridge Analytica Scandal, a number of concerns are there on
the connection of these two big firms. A company GSR (Global Science Research) made by
Aleksandr Kogan harvested Facebook data through an app thisisdigitallife (CNBC, 2018).
Then the data has been sold to Cambridge Analytica which was working for Brexit and
Trump campaign. In addition, the whole scandal came out with the help of a whistle-blower
Christopher Wylie. The connection between these two firms revealed when Prof Kogan
blamed by Facebook for the act of violating ToS (BBC News, 2019). In this context, the
connection between Facebook and Cambridge was totally illegal and unfair. In August 2016,
when Facebook came to know about the data breach involvement then Facebook lawyers
asked every party to delete the breached data which did not happen. Although everyone
certified deletion yet they did not delete it actually. Therefore, Facebook kept refusing data
breach until March 2018 (ABC News, 2018). The above results in Facebook’s legitimacy was
threatened.
In this case, Facebook, being the social media giant, has launched a new platform known as
Open Graph that enabled third-party developers reaching Facebook users as well as access
their personal info along with their peers, family and friends’ personal data (ABC News,
2018). The main concern about Facebook’s relation with Cambridge Analytica (CA) is that
being a social media platform Facebook should not have allowed the third-party application
developers for reaching Facebook users while accessing their personal data (Winder, 2019).
The above was the main reason that GSR could breach the Facebook user’s data with
thisisdigitallife app. Thus, if Facebook would not have been allowed CA for accessing their
users’ personal data at large level then election campaign could not have been utilized
people’s psychological profiling activities in order to manipulate election results. In this way,
the connection between the two companies CA and Facebook was totally unethical and
illegal because it provided open access to all of the third-party app developers to breach info
of the users and their friends as well. The breached info was utilized for the presidential

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campaigns which are highly unethical, immoral act from the perspective of liberty and
democracy within the country (The Conversation, 2018).
References
ABC News, 2018. Facebook says up to 87m people affected in Cambridge Analytica data-
mining scandal. [Online] Available at: https://www.abc.net.au/news/2018-04-05/facebook-
raises-cambridge-analytica-estimates/9620652.
BBC News, 2019. Facebook-Cambridge Analytica data breach. [Online] Available at:
https://www.bbc.com/news/technology-46822439?intlink_from_url=https://www.bbc.com/
news/topics/c81zyn0888lt/facebook-cambridge-analytica-data-breach&link_location=live-
reporting-story.
CNBC, 2018. Facebook-Cambridge Analytica: A timeline of the data hijacking scandal.
[Online] Available at: https://www.cnbc.com/2018/04/10/facebook-cambridge-analytica-a-
timeline-of-the-data-hijacking-scandal.html.
The Conversation, 2018. Cambridge Analytica scandal: Facebook’s user engagement and
trust decline. [Online] Available at: http://theconversation.com/cambridge-analytica-scandal-
facebooks-user-engagement-and-trust-decline-93814.
Winder, D., 2019. Facebook Privacy Update: Mark Zuckerberg's Response To Cambridge
Analytica Scandal One Year On. [Online] Available at:
https://www.forbes.com/sites/daveywinder/2019/03/17/facebook-privacy-update-mark-
zuckerbergs-response-to-cambridge-analytica-scandal-one-year-on/#220818821980
[Accessed 25 May 2019].
Answer 2
Yes, Facebook clearly breached the trust and faith of their users by getting involved in this
data breach scandal. As per the reliable sources, around 90 million users had been logged out
of their Facebook account either from their mobile phone or laptop post hearing the news on
this scandal (Finance Yahoo, 2018). Besides, Facebook users are now greatly frightened that
they are not even using Facebook Messenger for sharing confidential or private information
with each other. It can be said that an idea of controlling over one’s Facebook data or privacy

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has literally become laughable and useless after CA’s data breach act. Facebook breached the
trust of their users largely because when people put their private photos, data and rest
information onto their Facebook account then they blindly trust on Facebook’s privacy and
security policies (Picanso, 2008). In addition to that, as an impact of IT on business
Facebook’s legitimacy was also threatened.
However, Facebook has broken that trust and faith of the people badly by allowing open
access on the Open Graph platform for third-party apps. On the other hand, for the sake of a
successful presidential campaign Facebook compromised their users’ trust. CNBC found that
hackers were having access to each and everything from personal info like gender, full name,
hometown, and contact to all kind of personal info like users’ private messages. In this way,
revealing the personal data of 87 million Facebook users without permission by Facebook
had clearly breached the trust of those 87 million users worldwide (BBC News, 2019).
References
Picanso, K.E., 2008. Protecting information security under a uniform data breach notification
law. Fordham L., (Rev.), p.355.
Finance Yahoo, 2018. Facebook, Inc. (FB). [Online] Available at:
https://finance.yahoo.com/quote/FB/ [Accessed 25 May 2019].
BBC News, 2019. Facebook-Cambridge Analytica data breach. [Online] Available at:
https://www.bbc.com/news/technology-46822439?intlink_from_url=https://www.bbc.com/
news/topics/c81zyn0888lt/facebook-cambridge-analytica-data-breach&link_location=live-
reporting-story.
Answer 3
In order to find the daily closing share prices of FB from 1st September 2017 to 31st August
2018, the results of the conducted research are as follows:
(i) Graph showing daily closing prices over a 12 month period

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Source: (Finance Yahoo, 2018)
(ii) During 25th July 2018, FB announced their second-quarter earnings and all
investors of the company reacted in a negative way over the next few days which
have been reflected in the Facebook share prices shown in the above figure. In
this context, Facebook shareholders withdrew their investment more than $130
billion which diminished the company’s market value right after the company’s
second-quarter earnings announcement (CNBC, 2018). Moreover, FB shares fell
from 24 percent, collapsing below $170 within extended trading. In addition to
that, the call, as well as subsequent plunge followed loss for the
company, reported lower daily active user counts worldwide (The Conversation,
2018). Investors reacted in the way they reacted over that period because they
were thinking about margin and profits while investing into FB shares which have
been lowered because of its scandal with CA (Finance Yahoo, 2018). In this way,
investors were already unsure about their already done investment into the
company yet they were holding the shares till the second quarter earning
announcement by the company. After knowing the FB’s earnings during July
2018 mass of investors sold their shares and withdrawn the investment mainly
because of distrust as well as weaker margins (The Conversation, 2018).

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(iii) There are some traits and features of an efficient capital market which are utilizing
to find the U.S. capital market’s efficiency. In this context, any market into which
securities are traded and new info is incorporated into prices so quickly is termed
as efficient capital markets. Besides, the EMT (Efficient Markets Theory) of
financial economics suggests that the value of an asset reflects entire relevant info
which is available over the intrinsic worth of the asset. To find U.S. capital market
efficiency, this paper has analyzed that EMT applies to all kinds of financial
discussion and securities of the country (The Guardian, 2018). Apart from this,
investors typically cannot earn irregularly high risk-adjusted returns on their
investments within an efficient market while stock prices reflect intrinsic values.
Therefore, U.S. capital market has been observed efficient. In U.S., the
informational efficiency of share prices considered in two main ways. In other
words, it can be said that U.S. market reflects all the info made available to
capital market partakers all the time which ultimately makes any capital market
secure as well as efficient. In this context, various methods for analysing and
valuing stocks of U.S. cause few problems for the validity of the EMH.
Apart from this, Eugene Fama suggested that capital market efficiency is a
continuum (Picanso, 2008). It means that the lesser the transaction costs will be in
a market, containing the values of obtaining trading and info, the more efficient
will be the market. In the case of the United States, all common elements of SFM
(referred to as strategic financial management) are present largely in the country.
These elements which make the U.S. an efficient capital market are:
 Effective planning
 Appropriate Budgeting
 Effective management and assessment of risks
 Establishing on-going processes
In this way, in U.S. reliable info about companies is comparatively cheat for
obtaining relevant data on stocks as well as trading securities are cheap thus U.S.
capital market is considered efficient (The AME group, 2018). Therefore, for all
the above reasons U.S. security markets are taken to be relatively efficient over
other global markets (Picanso, 2008).
References

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Finance Yahoo, 2018. Facebook, Inc. (FB). [Online] Available at:
https://finance.yahoo.com/quote/FB/ [Accessed 25 May 2019].
Picanso, K.E., 2008. Protecting information security under a uniform data breach notification
law. Fordham L., (Rev.), p.355.
The AME group, 2018. Data Security Breach: 5 Consequences for Your Business. [Online]
Available at: https://www.theamegroup.com/security-breach/ [Accessed 16 October 2018].
The Conversation, 2018. Cambridge Analytica scandal: Facebook’s user engagement and
trust decline. [Online] Available at: http://theconversation.com/cambridge-analytica-scandal-
facebooks-user-engagement-and-trust-decline-93814.
The Guardian, 2018. Facebook fined for data breaches in Cambridge Analytica scandal.
[Online] Available at: https://www.theguardian.com/technology/2018/jul/11/facebook-fined-
for-data-breaches-in-cambridge-analytica-scandal.
CNBC, 2018. Facebook-Cambridge Analytica: A timeline of the data hijacking scandal.
[Online] Available at: https://www.cnbc.com/2018/04/10/facebook-cambridge-analytica-a-
timeline-of-the-data-hijacking-scandal.html.
Answer 4
The impacts of FB data scandal are huge on FB as well as other technology companies
worldwide. The reason behind is that data security is a fundamental need of the daily
functioning of the global economies. As an impact, this FB scandal brought a wake-up call
for the whole global society for understanding personal data security (Bagshaw, 2019). FB
had been faced the following consequences:
 FB has lost its share value and stock prices in the last 4 years adversely
 FB has lost trust and faith of their users largely
 FB has faced decreased profits and revenues over a span of 2 years at large extent
 Investors showed less interest in holding and buying FB stocks in long-term
 FB has lost millions of loyal users as they do not want to compromise with their data
privacy

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 FB has shaken the faith and confidence of the citizens of any country in democracy as
well as election procedure (Bogle, 2018).
In addition to that, this scandal also affected the business of many technology companies
which were working sincerely and under the code of ethics. In addition, now FB and the other
numerous technology companies which are having thousands of data points require boosting
their R&D as well as the technology around data security (Australian Government, 2018).
References
Bogle, , 2018. Data breaches: If a company has lost your personal info, they now have to tell
you. [Online] Available at: https://www.abc.net.au/news/science/2018-02-22/-companies-
must-inform-consumers-of-data-breaches/9462170 [Accessed 16 October 2018].
CNBC, 2018. Facebook-Cambridge Analytica: A timeline of the data hijacking scandal.
[Online] Available at: https://www.cnbc.com/2018/04/10/facebook-cambridge-analytica-a-
timeline-of-the-data-hijacking-scandal.html.
Bagshaw, E., 2019. Businesses get $60 million budget boost to advertise on Facebook,
Instagram. [Online] Available at: https://www.theage.com.au/politics/federal/businesses-to-
get-60-million-marketing-boost-in-budget-20190328-p518iv.html.
Australian Government, 2018. Notifiable Data Breaches scheme. [Online] Available at:
https://www.oaic.gov.au/privacy-law/privacy-act/notifiable-data-breaches-scheme [Accessed
16 October 2018].
BBC News, 2019. Facebook-Cambridge Analytica data breach. [Online] Available at:
https://www.bbc.com/news/technology-46822439?intlink_from_url=https://www.bbc.com/
news/topics/c81zyn0888lt/facebook-cambridge-analytica-data-breach&link_location=live-
reporting-story.
Answer 5
When FB allows any third party application to access details of the friends of a user on
Facebook then they can easily tie that info to their own user network for promoting products
and things worldwide (Finance Yahoo, 2018). With this research, it has been found that
modern technology enabled the FB–CA scandal, which has ultimately affected FB users’ life

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in terms of election betrayal and data as well as trust breaching. Mark Zuckerberg, President,
and CEO of Facebook, provided that it was a mistake of the company, and he had failed to
protect the data of users responsibly. Many business leaders said that instilling confidence in
customers and users that their private info is secure is the most important thing in the global
business environment (CNBC, 2018). Global leaders also consider that if companies breach
the users’ trust then it causes enormous consequences on the company itself.
After the incident, the corporation sent notifications to its users regarding their privacy
policies to notify them regarding the data collected by the company and how they are
accessing such data (BBC News, 2019). After the FB-CA scandal during 2018 silence broken
and Mark Zuckerberg apologized for FB’s mistakes over CA scandal. Besides, FB changed
how they share data with third-party apps as well as admitted that they made mistakes. CEO
of the FB stated that they are having responsibility of protecting their users’ data and if they
are unable to do it then FB do not deserve to serve us anymore (ABC News, 2018). As per
reliable sources, the company has changed many of the rules which enabled the breach.
Moreover, FB acknowledged a major violation of users’ trust and expressed a deep regret that
they did not do anything enough for dealing with the breach (Winder, 2019). However, CEO
of the FB did not answer why FB enabled this much third-party access to their users’ private
info for this many years. The technology-based companies other than FB need to strengthen
interconnected networks while holding private information and data. Until then, people can
only hope that any worst case like Facebook data breach will not occur, however, all of us
require being more vigilant with online lives containing social media activities and info
sharing (BBC News, 2019).
According to (Winder, 2019), Zuckerberg recently claimed that FB has become an innovator
in the field of privacy. In this context, recent sources are suggesting that FB will now give
people a new private or semi-private world to communicate their things which they would not
have had before in their life.
References

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ABC News, 2018. Facebook says up to 87m people affected in Cambridge Analytica data-
mining scandal. [Online] Available at: https://www.abc.net.au/news/2018-04-05/facebook-
raises-cambridge-analytica-estimates/9620652.
BBC News, 2019. Facebook-Cambridge Analytica data breach. [Online] Available at:
https://www.bbc.com/news/technology-46822439?intlink_from_url=https://www.bbc.com/
news/topics/c81zyn0888lt/facebook-cambridge-analytica-data-breach&link_location=live-
reporting-story.
Finance Yahoo, 2018. Facebook, Inc. (FB). [Online] Available at:
https://finance.yahoo.com/quote/FB/ [Accessed 25 May 2019].
Winder, D., 2019. Facebook Privacy Update: Mark Zuckerberg's Response To Cambridge
Analytica Scandal One Year On. [Online] Available at:
https://www.forbes.com/sites/daveywinder/2019/03/17/facebook-privacy-update-mark-
zuckerbergs-response-to-cambridge-analytica-scandal-one-year-on/#220818821980
[Accessed 25 May 2019].