How Tech Companies Are Failing The Trust Test
The eroding trust in digital platforms will hinder their expansion and limit access to consumer attention
A Growing Backlash Against Tech
One of the biggest headlines in tech news this week is undoubtedly the revelation of how data analytics firm Cambridge Analytica used Facebook to collect personal data on 50 million U.S. users without authorization to build voter profiles, and leveraged the information to influence the 2016 election. The report and ensuing uproar sent Facebook’s stock price plummeting on Monday, further fueling the narrative of Facebook’s ongoing brand crisis following a neverending cascade of bad decisions and controversies in the last few months.
Whether it’s Mark Zuckerberg touring hurricane-struck Puerto Rico in virtual reality or credible studies showing Facebook usage negatively impacts users’ wellbeing, not to mention the role its algorithm plays in spreading “fake news,” the social media giant seems to be stumbling on one PR disaster after another, with many starting to question the company’s ability to properly manage its data security and prevent its platform and targeting tools from abuse. On Tuesday, Facebook’s chief information security officer, Alex Stamos, announced he is leaving the company after internal disagreements over disinformation, further adding to Facebook’s worries.¹
On Wednesday afternoon, CEO Mark Zuckerberg broke his silence on the controversy with an open post in which he acknowledged that Cambridge Analytica breached Facebook’s trust, which caused Facebook to break users’ trust in data protection, and vows to prevent it from happening again. He also went on a live interview with CNN on Wednesday night, saying that he is “really sorry that this has happened” and that he is “happy to” testify before Congress. By Thursday morning, Mozilla announced it is pausing its advertising on Facebook, citing current default privacy settings leave third-party apps with access to a lot of private user data.
Zooming out for a bit, it’s not hard to see that Facebook’s ongoing crisis is part of what The Economist calls “techlash,” an ongoing backlash against omnipotent tech companies, such as Google or Facebook, and the power they wield in changing our daily lives and society at large. Silicon Valley giants, especially those with a business model built on data collection, are now frequently having their authority questioned by the public while lawmakers toy with regulation, trade sanctions, or an outright breakup of a major technology company.
Twitter, for example, has been under fire for failing to deal with the hate speech and abuse rampant on its platform while also failing to deal with its “bot” problem. YouTube was considered by a recent New York Times thinkpiece to be “one of the most powerful radicalizing tools of this century,” given its billion users and algorithms that recommend ever more extreme videos and promote conspiracy theories. Even a social app as innocuous as Snapchat has come under fire repeatedly for perpetuating racist stereotypes and making light of domestic violence.²
For what it’s worth, all the major tech platforms are by now well aware of the “techlash” and are taking measures to fix their problems. Facebook, for example, has pledged to focus on improving quality of time spent on its platform by promising to surface more content from your contacts instead of from brands and publishers. The company is also trying to crowdsource help to identify trusted media outlets in addition to fully cooperating with authorities regarding the disinformation campaigns that exploited its platform.
Other companies are also doing similar damage control. Twitter has tightened its anti-abuse rules and purged thousands of “bot accounts.” Google is adding Wikipedia entries to conspiracy videos on YouTube to provide some background and contexts while also announced that it plans to spend $300 million over the next three years to support journalism and fight disinformation through its new Google News Initiative. Snapchat and Instagram have removed their Giphy GIF sticker features after users saw an extremely racist GIF as an option to add to their images. Despite their efforts, however, some critics are quick to point out that those measures alone are far from enough to address the underlying systemic issues.
The Trust Test
With nearly all major tech companies, even the ones as beloved as Amazon and Apple, facing some backlash against the disinformation and abuses their platforms enable, consumer trust in those platforms quickly erodes as concerns over data privacy and “fake news” mounts. As we pointed out in our 2018 Outlook, as we enter a market society, where every aspect of our lives which can be quantified will be productized, only the most trusted brands will be granted access to our most private spaces. That trust includes confidence in the product or service itself, but also extends to confidence in the ethics and politics of the company behind it. In short, trust has become the key to gain consumer access, and many tech platforms and brands are failing the trust test.
Make no mistake, this will have consequences for the tech giants. While it is true that incumbent social media platforms are hard to topple due to the existing network effect, such erosion in trust will no doubt hinder their growth and access to consumer attention. Facebook already lost 1 million North American users in the last quarter of 2017 as people grew wary of the social network. The latest analysis from eMarketer predicted that Facebook’s and Google’s share in the digital ad market in the US will be slightly falling in the next several years.
That being said, it is also important to acknowledge that as long as Facebook and Google can maintain their massive reach as attention aggregators, most brands won’t be cutting ad spending on their platforms anytime soon. Sure, last summer Procter & Gamble made a splash by cutting up to $140 million in digital ad spending due to brand safety concerns, but that number pales in comparison with a total of $2.4 billion that P&G spent on U.S. advertising last year. Most brands are not P&G, and they certainly won’t be abandoning Facebook and Google’s platforms anytime soon. With one in four U.S. consumers — and 39% of young adults below age 30 — go online “almost constantly” now, most brands simply can’t afford to forego those big online aggregators given the oversized role they now play in accessing consumer attention.
What Brands Can Learn From This
What most brands can do, however, is to learn from the ongoing “techlash” and better manage their brand trust so as to maintain their access to consumer data and attention. Transparency around data collection and security is table stake at this point, yet brands like Best Buy, Orbitz, and FedEx still recently found themselves in hot water for jeopardizing customer data in one way or another. When consumers become aware of such breaches, the cost is not only short-term financial loss³, but also a long-term reputational loss that is much harder to recover. According to a recent survey by Gemalto, 70% of consumers stated they would stop doing business with an organization if it experienced a data breach. Therefore, it is paramount that brands take data security and transparency seriously.
Transparency over rules and customer service is also very important in preventing the kind of PR disasters that United Airline has repeatedly inflicted on itself. Last week, the airline saw 140% increase in negative social chatter after news broke that malpractices led to the death of a pet dog on flight, continuing the downward spiral the airline brand has been suffering from since a string of PR disasters last year. It is fundamental to treat customers with care and respect, lest any small misconduct gets blown up in the age of social media.
Moreover, in order to truly win over consumer trust and build affinity, brands will need to consistently demonstrate their social responsibility and better align themselves with the value of their target audiences without coming off as opportunistic. A recent study finding that 58% of U.S. consumers believe that brands should share their opinions on social media.
For example, a number of brands celebrated the International Women’s Day with female empowerment initiatives that were mostly well-received. However, McDonald’s got called out by some critics and activists for its symbolic gesture of turning its golden arch upside down at one California location and across digital channels. In contrast, Walmart and Dick’s Sporting Goods saw their consumer perception rise significantly when the stores announced changes in their gun sales policies in response to the Parkland shooting,
For brands that can establish that strong trust, it becomes a differentiator that allows them to expand their business into new areas and get closer to their customers. Amazon, for example, has leveraged its high level of consumer trust to into new healthcare and smart home initiatives. Amazon Key, a service that leverages smart door locks to allow couriers to deliver Amazon packages directly into your house, is perhaps the best evidence of how much some customers trust Amazon.
Virgin is another good example of leveraging consumer trust to enter new areas. The company’s airline operation was acquired by Alaska airline in 2017, but the company is already leveraging its brand in travel to pre-sell a new cruise line that is launching in 2020. With few details, customers are already putting down $500 deposits to secure their place in line, largely because they know the brand and trust the kind of experience it stands for.
In the age of abundance, owning the customer relationship is a powerful strategy that many aggregator services and direct-to-consumer brands have used to their utmost advantages. Trust is the foundation of any healthy relationship, and it is high time that brands prioritize consumer interests and start taking active measures to earn their trust.
- In addition, a new Buzzfeed report detailed how Facebook Groups are being hijacked by trolls and spammers to spread misinformation, plan coordinated harassment, and even radicalize susceptible users.
- Snapchat’s case is particularly interesting, given how big a role the influencers play in Snapchat’s branding and how it relies on a veneer of cool to keep its young user base engaged in an increasingly competitive social media landscape. After Rihanna spoke out against the Snapchat ad that made fun of her incident, Snap’s stock prices fell around 4% that day, wiping out nearly $800 million from its market value. Last month, following mounting user complaints over the app redesign, Kylie Jenner, one of Snapchat’s most popular celebrity users, tweeted that she was no longer using the app, which promptly sent the company’s stock down 6%.
- A 2017 study by Centrify found that 113 companies experienced an average stock price decline of 5% immediately following the disclosure of their breach.
