Analysis of Facebook's Cambridge Analytica Data Scandal and Strategies

This report examines Facebook's Cambridge Analytica data scandal, a major strategic issue involving data privacy breaches and the misuse of user information. The report begins with an introduction to Facebook, its market competitors, and its global presence, followed by a detailed analysis of the Cambridge Analytica scandal, which exposed the vulnerability of user data and raised ethical concerns. The strategic significance of the scandal for Facebook and the social media industry is then assessed, highlighting the impact on revenue, share prices, and public trust. The report concludes by evaluating Facebook's responses, including apologies, policy changes, and regulatory compliance efforts, and their effectiveness in addressing the crisis and restoring user confidence. The analysis incorporates various sources, including news articles, academic journals, and industry reports, to provide a comprehensive understanding of the issue and its implications.

FACEBOOK’S CAMBRIDGE ANALYTICA
DATA SCANDAL
STUDENT NAME:
STUDENT ID:
SUBJECT NAME: Strategies for Growth and Excellence
SUBJECT ID:
DATE DUE:
PROFESSOR NAME:
1 | P a g e

1. Introduction
a) Facebook is an online social media networking Service Company, with its headquarters
in California (Carole Cadwalladr, 2018, 17). The founding members of the Company
include Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and
Chris Hughes. The Company was founded by a few Harvard College students and
roommates on 4th February 2004.
b) Facebook is a social networking site which provides various advertisement options and
viewers engagement tactics. Revenue generated from advertisement varies from product
and to product and between time periods.
c) Key market competitors of Facebook include Twitter, Instagram, Snapchat, and LinkedIn
amongst few others (Hilary Tuttle, 2018, 33). While all website companies offer similar
benefits as those provided by Facebook, Facebook is believed to engage its users more
compared to other companies.
Figure 1: Market Competitors of Facebook
2 | P a g e

d) Facebook is the largest social media site has varied opportunities for market growth. The
Company is already present all over the world except for in Russia, China and some other
parts of the world. The below figure depicts the presence of Facebook all over the world.
Facebook can start off with other services keeping in line with its popularity and brand
name. This can allow an avenue for revenue earning for the Company.
Figure 2: Facebook's Presence across the World in Blue
e) The key market weakness of Facebook includes rising Advertisement prices. Facebook
mobile poses another prominent challenge in the market. Facebook is a strategic leader in
the social media market. Though there are present a large number of social media
websites, Facebook is a well-known favorite amongst youngsters today compared to all
other companies (Vicki Arbes, 2017, 26).
3 | P a g e

2. Key Strategic Issue
Facebook was involved in Cambridge Analytica data scandal, which had become a major
corporate issue. The Company was blamed for collecting personally identifiable information for
over and above 87 million users The Company was accused of using the data in order to
influence voter’s opinion, who had hired them. The raw data of millions of Facebook users had
been exposed to Cambridge Analytica for the purpose of generating opinions on Trumph
campaign. While examining the potential fallouts and controversy's to evaluate the way in which
data was extracted, it was analyzed that majority of data of users was extracted by Cam bridge
from Facebook. They made use of WikiLeaks as well. Kogan, who was heading the campaign
build up a quiz. When makers of the quiz expressed their opinions, it led to the leaking of crucial
information along with their personal details. The quiz potentially exposed loophole present in
Facebook API. Though Facebook stopped selling of data, which had been collected through this
method. This was a major corporate issue which tarnished Facebook’s brand image and brand
value. This was a key strategic issue as it created a doubt in everyone's mind regarding the
ethicality of Facebook (Cambridge Analytica, 31).
3. Strategic significance for Facebook and its industry
The issue created an immense impact on Facebook as well as on the entire social media industry
regarding the validity of data. Facebook's revenue fell for various quarters post-discovery of the
scam. The Guardian, Channel 4 News, The New York Times and other news channels reported
the incidence, which led to a drop in share price of the Company, as depicted in the figure below.
4 | P a g e

Figure 3: Impact of Cambridge Analytica on Facebook's Share Price
The incident related to Facebook created mistrust amongst social media websites and companies
(Tom Walker, 2018, 29). Corporates and individual became apprehensive regarding using social
networking companies due to leakage of information and easy availability of information to
others. It created an ethical challenge along threat and panic amongst all individuals online in
varied social media sites. There has been mass account closures post this incidence taking place.
Many companies such as Amazon suspended Cambridge Analytica from their Amazon Web
Services. UniCredit, an Italian banking Company stopped advertisement in Facebook
(ANDLEEB ABBAS, 2018, 18).
4. Evaluating Facebook’s actions or responses to the issue
Facebook’s director Mark Zuckerberg apologized for the situation faced at Cambridge Analytica
on CNN. The director himself called the incidence as a mistake and a breach of trust. Post this
5 | P a g e

incidence there has been changes and reforms to Facebook’s policy for the purpose of prevention
of breaches. Moreover, there has been publishing in various newspapers apologizing for the
incidence taking place (Carol Cadwalladr & E. Graham-Harrison, 2018, 7). The Company went
on to implement EU's General Data Protection Regulation in their every operational area. UK's
Information Commissioner's Office intended on finding Facebook GBP500, 000 over the data
scandal in order to protect their people’s information. Facebook decided to take many actions
and steps to prevent such data scandal from happening in the future. This was aimed at bridging
the gap and mistrust that had been created in the course of Facebook shelling out vital
information regarding individual users (Linda Risso, 2018, 12).
6 | P a g e

BIBLIOGRAPHY
ABBAS, ANDLEEB. "The Facebook ‘leaks’." (2018).
Analytica, Cambridge. "‘Surveillance capitalism’—Facebook just one example of profiteering
off our data."
Arbes, Vicki. "Fair data accreditation:'Antidote in the wake of a scandal'." B&T 2826 (2018): 26.
Cadwalladr, Carole. "The great British Brexit robbery: how our democracy was hijacked." The
Guardian 20 (2017).
Cadwalladr, Carol, and E. Graham-Harrison. "The Cambridge Analytica Files." The Guardian.
Retrieved Mar 17 (2018): 2018.
Risso, Linda. "Harvesting Your Soul? Cambridge Analytica and Brexit." Brexit Means
Brexit? (2018): 75.
Tuttle, Hilary. "Facebook Scandal Raises Data Privacy Concerns." Risk Management 65, no. 5
(2018): 6-9.
Walker, Tom. "Your data for sale... the rise of surveillance capitalism." Green Left Weekly 1182
(2018): 24.
7 | P a g e