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Wednesday, Dec. 22, 2021
This year was a wild ride for the world’s largest tech companies, from Microsoft (MSFT) and Google (GOOG, GOOGL) reaching a $2 trillion market cap to the chip shortage taking a bite out of Apple’s (AAPL) revenue.
But ex-Facebook (FB) employee Frances Haugen spearheaded the year’s biggest tech story: the leak of thousands of internal documents dubbed The Facebook Papers. The trove laid bare Facebook-parent Meta’s inability to police its platform, risking public safety in the U.S. and abroad. It also showed the negative impacts of Meta-owned Instagram on the mental health of some teen girls.
The leak forced Instagram chief Adam Mosseri to pause plans for a version of Instagram for users under 13, and supercharged talk among U.S. lawmakers to hold Meta accountable for seemingly ignoring content like human trafficking and hate speech.
“I personally consider this one of the most important stories, and it's something that people should be paying attention to,” Georgetown University McDonough School of Business associate teaching professor Christie Nordhielm told Yahoo Finance.
While the Facebook Papers humiliated Meta in 2021, they could prove even more problematic for the company in 2022, as governments around the world begin to crack down on the social media giant. What’s more, the leaks could derail the company’s plans to attract the younger users it so desperately needs to stay relevant and fuel its future growth.
The Facebook leak has fired up regulators around the world
The Wall Street Journal first reported Haugen’s leaks in September in a series of articles called The Facebook Files. The next month, Haugen unmasked herself as the source of the leak in a “60 Minutes” segment that explored Facebook’s impact on society.
Haugen’s subsequent testimony before the Senate Commerce Committee’s Subcommittee on Consumer Protection struck another blow against Meta, as she proved to be both a damning whistleblower and a compelling witness. What’s more, Haugen clearly described technological concepts to senators who are often out of touch with modern tech.
Haugen not only laid out what she says are Meta’s shortcomings when it comes to hate speech, but described how its products spread division and fear across the globe. Haugen specifically pointed to Myanmar and Ethiopia where Facebook has been used to spread disinformation and fuel sectarian violence and ethnic cleansing campaigns.
“My fear is that without action, divisive and extremist behaviors we see [on Facebook] today are only the beginning,” Haugen testified. “What we saw in Myanmar and are seeing in Ethiopia are only the opening chapters of a story so terrifying, no one wants to read the end of it.”
She further pointed out that the social network’s algorithms incentivize divisive content, which pushed some European legislators to post more negative content to drive user engagement.
While many lawmakers might agree with Haugen that Facebook needs government oversight, it’s unlikely that Democrats and Republicans will agree on just how to rein in Big Tech.
According to Nordhielm, laws targeting big tech will likely come from states like California, which have established wide-ranging consumer data protection laws. Internationally, they'll come from governments like the U.K. parliament or the European Union, which currently has one of the strictest data protection laws in the world via its General Data Protection Regulation, or GDPR.
The U.K. is also considering a law that would hold tech executives criminally liable for the spread of hate speech on social media platforms. In the E.U., lawmakers have proposed rules that would require social media to open up the algorithms they use to recommend new content to users and to take down hate speech and similar content.
“It may be that Europe or California set the bar for this,” she said.
Instagram for Kids remains in limbo
Haugen’s leaks didn’t just help reinvigorate calls to regulate social media networks. It also effectively forced the company to hold off on launching Instagram for Kids, a service for children under 13 that promised to limit advertising and user interactions.
But advertising revenue wasn’t the point of the proposed service. Instead, it could have served as a pipeline for younger users who would go from Instagram for Kids to the full Instagram app as they grew older — ensuring Instagram’s growth for years.
Meta needs those users. While it’s the largest social media company in the world, it’s seeing increased competition from the likes of Snap (SNAP) and TikTok. When it comes to advertisers, teens and young adults are the most important target demographic. That's because teens don't yet have brand preferences, and if advertisers can get those users hooked early, they could have new customers for life.
But shortly after the Facebook leaks hit, Instagram put the plan on hold indefinitely. And in an appearance before the Senate Commerce Committee this month, Instagram’s Mosseri confronted senators who questioned the safety of Instagram even for kids over the age of 13.
Senator Marsha Blackburn (R-TN) said her staff created an account for a fictitious 15-year-old that was immediately set to public rather than private as Instagram says should happen. Senator Mike Lee (R-UT), meanwhile, said an account that he set up for a fake 13-year-old girl served ads for plastic surgery, directly contradicting Mosseri’s assertion that such ads don’t appear on the accounts of younger users.
For now, it looks like Instagram for Kids will remain in limbo, at least until the heat dies down — proving the biggest tech story of 2021 will hurt the social network long after the new year.
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