When Boycotts Work: A Guide To The Facebook/Cambridge Analytica Scandal

Facebook has always had its share of critics, but now the company is enveloped in a scandal that is steamrolling into boycott territory. Millions of users' personal data shuttled from Facebook to the consulting firm Cambridge Analytica during the 2016 presidential election cycle, and that information was reportedly used by Russian operatives to manipulate public opinion -- through Facebook itself as well as other social media. To complicate matters further, evidence is mounting that members of the Trump campaign met with Russian operatives during the election cycle.

Co-founder and CEO Mark Zuckerberg will need to do some serious crisis management to step away from the Cambridge Analytica scandal and salvage the company's reputation. That could mean a significant change in corporate culture is in store. The question is whether or not Zuckerberg will act on one source of the company's woes, namely, board member Peter Thiel's aggressive support for President Trump during and after the 2016 election cycle.

When boycotts work

Focusing on the boycott angle is one way to sift through Facebook's web of troubles as the Cambridge Analytica scandal grows, so let's catch up with that first.

Triple Pundit began exploring boycotts during the 2016 election cycle, when then-candidate Trump sparked the Grab Your Wallet and Sleeping Giants campaigns.

These two campaigns appear to have learned one simple fact about consumer boycotts: they almost never work. Recall how many times Starbucks has been targeted for lavishly publicized boycotts in the past few years (Christmas cups, anyone?), and you can see why consumer-focused activism tends to die on the vine.

Another good example of a boycott survivor is Dick's Sporting Goods. The company took a strong stand on gun control after the Parkland murders, prompting gun "rights" advocates to call for a boycott. However, polling showed that more consumers reacted favorably, and store traffic actually increased in the weeks after the company announced its new policy on guns.

When boycotts do work, at least three factors are involved. First, the boycott involves the wider business community. The strength of this strategy lies in its leverage of brand risk. In one good example, last year advertisers deserted Fox television personality Bill O'Reilly after word of his sexual harassment settlements leaked out. Another Fox personality, Laura Ingraham, is facing the same kind of advertiser blowback after bullying one of the Parkland survivors through social media.

The second factor involves the health of the targeted company. Strong brands that are showing signs of weakness can be more susceptible to boycotts. In this regard it's important to note that boycotts are not always intended to drive a company out of business. They can simply aim for behavior change, and responsive companies can turn that to their advantage.  The Guardian cites the example of the 1990's Nike boycott over child labor issues:

...while the short-term hit to Nike’s profits was significant, the most impressive long-term impact came from the hit that the company took to its brand. Since the 90s, Nike has worked hard not only to rehabilitate its reputation, but to become a sustainability leader.

If a company fails to respond with concrete action, the third element in a successful boycott kicks in. That's when investors lose faith, putting the company at risk of permanent damage if not outright destruction.

Will the Facebook boycott work?

That thing about strong brands showing signs of weakness describes the Facebook situation almost perfectly.

Even aside from general issues like online bullying, Facebook's reputation has been suffering more than usual in recent years. That's partly due to privacy concerns, but another significant factor is that Facebook has become associated with parents and other older users. It is losing the up-and-coming generation of social media users.

The business community's issues with Facebook have also grown more fraught in recent years, especially among publishing companies. The Cambridge Analytica scandal has provided them with a powerful new opportunity to lay out their concerns and flay Facebook's corporate culture in public.

The list of high profile companies openly criticizing Facebook or publicly deleting their Facebook accounts now includes Apple, Mozilla Playboy, and the Elon Musk companies Tesla and SpaceX.

Brands have also begun paying attention to the broader risks and hazards of associating with social media sites that fail to block hate speech, child exploitation and other toxic content. In one outstanding example, last week Unilever CMO Keith Weed slammed social media for breaching public trust -- including the issue of Russian election interference -- and outlined how his company will leverage its advertising dollars to force change.

The website Tech.co summed up the state of play between Facebook and the business community last January:

After all, brand and publisher content pages have seen an unprecedented decline in engagement in recent years; engagement that these businesses have relied on for subscriptions, purchases, and generally staying afloat. The persistent attack has forced these publishers and brands to ask an even more important question: why does Facebook hate businesses so much?

That brings us to the investor community. When the issue of Facebook's role in Russian propaganda came up shortly after Election Day 2016, Zuckerberg dismissed the notion as " a crazy idea."

However, by last fall the criticism picked up steam as part of a broader "tech backlash." In December 2017 Newsweek teased out an observation that sums it up:

Roger McNamee, a big early investor in Facebook, recently told Techonomy, “Facebook has the largest margins of any company of similar size in the American economy. They’re functioning like a drug company without doing clinical trials.”

In addition to evidence of Facebook's role in the 2016 election cycle, the Federal Trade Commission is also looking into the company's affairs, prompting another wave of concern among investors. As of this writing the company's stock has recovered some of its losses, but as recently as last week it had dropped 18% or $80 billion.

To sum up, all three factors in a successful boycott -- consumers, businesses and investors -- are joined in force against Facebook.

What's this about Peter Thiel?

Circling back to idea that good brands in decline are especially vulnerable to boycotts, one factor that deserves closer scrutiny is the role of Facebook board member Peter Thiel in the company's reputation issues.

Just a few weeks ago, Triple Pundit was wondering why Thiel's name has never come up when the topic turns to the Russian involvement in the 2016 campaign. Well, now it has.

Thiel was an early supporter of Trump as far back as the primary cycle, puzzling Silicon Valley observers who wondered why he would risk his A-list status on a seemingly ridiculous long shot.

Thiel's association with Trump put Facebook in a touchy position. Critics questioned why the company would tolerate a board member who actively supported Trump. More to the point, critics questioned why Facebook would tolerate Peter Thiel, who has been linked to anti-immigrant and white supremacist organizations in his own right, over and above his association with Trump.

The criticism intensified in the runup to after Election Day and after, when the President's incendiary campaign rhetoric crossed the line into national policy.

As for why Thiel bet on Trump, the answer could be as simple as access.

His relationship with President Trump may seem rocky at times, but Thiel has been an advisor to the administration on technology policy. As late as September 2017 he was also reported to be in consideration for a position on Trump's Intelligence Advisory Board.

In that context, the bottom line factor kicks in. Thiel's data mining company Palantir already had federal contracts under its belt before the 2016 election cycle. Given Trump's campaign rhetoric on crime, national security and immigration, the prospects for additional Palantir contracts in a Trump administration must have looked good.

And, that brings us right back around to the Facebook/Cambridge Analytica scandal.

Palantir has played a role in carrying out Trump's immigration policies, and according to recent reports Palantir's efforts have gotten an assist from Facebook users' private information.

The Cambridge Analytica connection came in 2013-2014, when a Palantir employee reportedly developed a Facebook data harvesting app for Cambridge Analytica.

Palantir now characterizes that work as unauthorized freelancing by "a rogue employee," but there is a more recent connection between Palantir and Cambridge Analytica. In 2016, Peter Thiel's assistance to the Trump campaign included a large donation to the Make America #1 PAC, which employed Cambridge Analytica during the election cycle.

So, freelance activity by a rogue owner?

The news about Peter Thiel's connection to Cambridge Analytica couldn't come at a worse time for Zuckerberg. In the latest turn of events, Zuckerberg is trying to distance the company from a newly leaked 2016 memo on the "ugly" side of its business model, written by Facebook VP Andrew "Boz" Bosworth.

The last thing Zuckerberg needs is another Facebook relationship to disavow, but after defending Peter Thiel vigorously all throughout the 2016 campaign he may finally have to cut the cord.

Meanwhile, Zuckerberg's other damage control steps include issuing a public apology, acknowledging that more government oversight of social media may be needed, and outlining steps that Facebook is taking to protect user privacy.

If that sounds like pretty weak tea, it is. None of this speaks to any plans for a change in the company's corporate culture.

If Zuckerberg follows through on his pledge to testify before Congress, he might want to prepare an answer just in case somebody asks what was Peter Thiel doing on his company's board of directors, and why he is still there.

Photo (cropped/rotated): Peter Thiel via sportsfile/flickr.