Facebook is facing an existential crisis. After the Cambridge Analytica scandal, Facebook sources tell me it will take a Herculean effort to restore public trust in the company's commitment to privacy and data protection. Regulation feels imminent, other Silicon Valley sources say, and yet Mark Zuckerberg appears missing in action.
The real scandal? Data exploitation isn't a bug at Facebook, it's a feature.
Facebook is in the data exploitation business: They make money by harvesting your data and selling it to app developers and advertisers. Indeed, the most alarming aspect of Cambridge Analytica's "breach" of 50 million users' data is that it wasn't a breach at all. It happened almost entirely above board and in line with Facebook policy.
The one rule that Cambridge professor Aleksandr Kogan violated, according to Facebook, was passing user data to third parties, including Cambridge Analytica. But even my Facebook sources acknowledge that it is impossible for the company to completely monitor what developers and advertisers do with the data.
This is why it is so hard to trust Facebook when they say "protecting people's information is at the heart of everything we do." In fact, Facebook's business is providing people's information to outside parties whose ultimate goals are unknowable.
If protecting data was truly at the heart of Facebook's business, Facebook wouldn't be in business.
---
Today's PACIFIC
What everyone is talking about: The next shoe to drop in the Facebook-Cambridge crisis, the vanishing Mark Zuckerberg, and the threat of regulation .... What Silicon Valley is talking about: Google retail, Apple screens, and the coming of Crown Prince Mohammed bin Salman ... What Sacramento is talking about: Kamala Harris in Vogue, Jerry Brown in The New Yorker, and Antonio Villaraigosa in trouble ...
Good morning. Or, for those of our readers who crossed the Pacific for Solina Chau's exclusive tech conference in Tokyo, good night. We hope you enjoyed the view from Prime42. On tomorrow's agenda: Stella McCartney, Will.i.am and Stanford's David Spiegel on the power of hypnosis.
---
The Trust Crisis: Facebook under fire
Sources from Silicon Valley to Capitol Hill say the Cambridge Analytica scandal is likely to accelerate efforts to regulate big tech:
• Democratic Sen. Amy Klobuchar has called on Zuckerberg to appear before the Senate Judiciary Committee, on which she serves, to explain "what Facebook knew about misusing data from 50 million Americans in order to target political advertising and manipulate voters."
• A well-placed Senate source tells me lawmakers feel even more emboldened now than they did in the wake of revelations about Russian meddling in the 2016 election.
• Several tech industry sources said they believe Facebook's missteps could have regulatory ramifications for all major tech companies, especially those like Google and Twitter that rely on the sale of user data.
Where is Zuck?
• The Facebook CEO and his top deputies have been conspicuously absent during this crisis. Public statements are being handled by a company lawyer.
• Zuckerberg's plan to sell off $13 billion worth of shares by mid-2019 to support the Chan Zuckerberg Initiative is drawing new scrutiny from critics who believe it may signal his lack of faith in the company.
• Damian Collins, a British lawmaker, said Monday that Zuckerberg should "stop hiding behind his Facebook page and actually come out and answer questions about his company."
Questions for Facebook
• Why didn't the company disclose this issue to the public when it first learned about it in 2015?
• How closely did it work with the Trump campaign on data analytics?
• How can it be trusted to monitor data it sells to others?
What's next
• Facebook deputy general counsel Paul Grewal says Facebook is "conducting a comprehensive internal and external review and are working to determine the accuracy of the claims that the Facebook data in question still exists."
• My colleague Donie O'Sullivan reports that Facebook is looking into ties between one of its current employees and Cambridge Analytica.
• My colleague Jordan Valinsky emails: "UK's Channel 4 is scheduled to air an undercover exposé tonight in which Cambridge Analytica CEO Alexander Nix talks openly about how the platform operates."
The Big Picture
Facebook is already struggling to retain users in the United States. The number of daily active users in the U.S. -- roughly 184 million -- declined for the first time last quarter. Facebook also lost 2.8 million users under the age of 25 last year, and is set to lose another 2 million this year, according to eMarketer. The scandal only makes things worse.
---
Quote of the year
"When we started the show, tech was strutting around like 'We solved it all. You're welcome' ... and now tech is like, 'we might have broken the world'."
-- Alec Berg, writer/producer/director on HBO's Silicon Valley, at PaleyFest LA
Cashing In: Google goes retail
Google -- another giant in the data harvesting space -- has immense troves of data on what shoppers are searching for online. But those searches often end up directing consumers to other companies like Amazon.
Now Google is trying to change that, per Reuters' Nandita Bose:
• Google "is teaming up with retailers including Target, Walmart, Home Depot, Costco and Ulta Beauty."
• Retailers "can list their products on Google Search, as well as on the Google Express shopping service, and Google Assistant on mobile phones and voice devices."
• "In exchange for Google listings and linking to retailer loyalty programs, the retailers pay Google a piece of each purchase..."
What to watch for: Google is already marketing itself as a friend of retail while implying that Amazon is not:
• Daniel Alegre, Google's president for retail and shopping: "We have taken a fundamentally different approach from the likes of Amazon because we see ourselves as an enabler of retail."
---
The Prince's Diaries: Saudi Prince to Silicon Valley
"Saudi crown prince heads to White House and Silicon Valley" by Tribune's Tracy Wilkinson and Alexandra Zavis:
• "Crown Prince Mohammed bin Salman arrives Monday in Washington on a cross-country trip to court government officials, Silicon Valley technology companies, investors and one of his biggest fans: President Donald Trump."
• "The prince... is expected to travel over the next two weeks to Wall Street, Silicon Valley, Seattle, Boston and Houston, where he will confer with oil and energy executives."
The Big Picture: Mohammed is looking to attract "American investment, business and expertise in an attempt to diversify and modernize a sclerotic economy that historically has relied on oil and foreign guest workers. He is promoting a development plan he calls Saudi Vision 2030."
---
Valleyspeak
• "Apple Is Secretly Developing Its Own Screens for the First Time" (Bloomberg)
• "Qualcomm's Ex-Chairman to Leave Amid Plans to Buy Company" (NYT)
• "Delta adds Silicon Valley route from its New York JFK hub" (USA Today)
• "Snapchat expands into Silicon Valley with lease in Mountain View office" (SVBJ)
• "Trade Associations to Petition Trump Admin. to Halt China-Tariff Plans" (WSJ)
• "Alibaba doubles Lazada investment in aggressive Southeast Asian expansion" (Reuters)
2020 Watch: Kamala Harris goes Vogue
Another sign she's running... "Dreaming Big: After a year in Washington, Kamala Harris has proved she doesn't back down from a fight. How far can the star senator go?" by Vogue's Abby Aguirre:
• "[I]n the seventeen months since Donald Trump was elected president, Harris has been propelled into an altogether different stratum of political celebrity-one that raises certain questions about her future."
• "From the moment President Trump delivered his inaugural address, linking immigration to crime in a macabre vision of 'American carnage,' Harris was—to put it bluntly—uniquely poised to call bullshit."
• On 2020: "'I honestly am focused on 2018,' [Harris says]... about a presidential run. But you haven't ruled it out, I say. 'I'm not focused on it,' she repeats."
---
CA-Gov: Villaraigosa's new headache
The latest dust-up in the California governors' race: Critics of former Los Angeles mayor Antonio Villaraigosa say he has benefited from groups that they believe prey upon the poor and people of color, via LAT's Seema Mehta:
• "Over the course of his political career, Villaraigosa has received hundreds of thousands of dollars in pay and donations from Herbalife, the L.A.-based multilevel-marketing nutritional supplements company, where he once served as a senior advisor. Payday lenders are among his other contributors."
• Villaraigosa spokesperson Luis Vizcaino said his boss "must raise funds to be competitive," and blamed rival Gavin Newsom for "driving this story."
---
California vs. Trump: What Jerry Brown's reading
New at The New Yorker: "Inside California's War on Trump: As the state resists the White House on issues from immigration to climate change, Governor Jerry Brown is determined to avoid a pitched battle," by Connie Bruck:
• "During the past year, Brown has been reading about the Weimar Republic. He noted certain similarities between Germany in the thirties and the United States today—in particular, 'the erosion of familiar cultural foundations. The world is changing quite a lot, and that can undermine people's sense of confidence.'"
Bonus: "The Last Days of Jerry Brown," by California Sunday Magazine's Andy Kroll, with photographs by Carlos Chavarría. "After more than 40 years in public life, 15 as governor of California, he is as combative and contradictory as ever — and still trying to save the world from itself."
---
Have a fantastic day, folks. Stay positive.
