Team Facebook Report

  Final Communication Plan  February 27, 2019  BCOM 314                        Blake Jaciow  Daniel Jimenez  Steve Tamayo  Haoxu Wang  Ryder Worden                               

 

Executive Summary    Introduction  Following the turmoil our company has experienced over the last 12 months due to the  Cambridge Analytica breach, it is imperative that we get to the root of why stakeholders are  being affected so greatly.    Bottom Line  To get back to our company mission of connecting friends and family around the world, we have  to realize that our users are the sole reason our company exists, today. They are our most  important stakeholder meaning we need to cater towards their wants in order to maintain their  use of our platform.    Stakeholders  As aforementioned, users are our definitive stakeholder. Investors as well as competitors are  also stakeholders of Facebook, however these stakeholders actions and views of our company  are derived from overall user sentiment. While our stock price has experienced a bear market in  the past year, overall investor sentiment is average except in one key area. Investors social  analysis of our company show that they are concerned with our commitment to social  standards, echoing the sentiment among our users. Additionally, competitors have noticed our  users disengagement, allowing them to grow their market share, with a majority of our users not  interacting with our platform in ways that they previously did.    Key Stakeholder  Our definitive stakeholder is without a doubt, our users. Our users are the backbone of our  company, demonstrated by our mission statement about connecting people in the world in a  way that has not been done before. Users are proven to be the key stakeholder because of the  impact that they have on two of our other stakeholders; competitors and investors. It is  worrisome that 33% of the most integral part of our company do not trust us.      Solutions  To fix our company’s issue, we need to regain our users trust by ensuring them that they have  more privacy and safety on our platform that they ever have had before. Our solution to solving  the issue of user trust is outlined in three steps. Our users need a new algorithm making up  their timeline, to ensure that users are interacting with content they want to see, and not  experiencing ads. Additionally, we have to show our users the measures we are taking, by  clearly showing changes we have made that is designed to increase user privacy, thus  increasing user’s trust in us. Last but not least, will build on our CEO’s previously outlined 3  step-plan, and focus on outside developers being banned from user data when they have  misused it or have not had direct engagement with that user in over 3 months.     Conclusion  Even though we have experienced a rough 12 months and have been publicly criticized for our  lack of social ethics, it is intriguing that with the right steps implemented, we can win back our  stakeholders. With our proposed solutions increasing revenues considerably, investors will  realize that we can maintain social ethics while still being a highly profitable company. With us  putting an emphasis back on user trust, we are bound to experience increasing sentiment on our  company across all three stakeholders. 

Introduction  In the past year and especially the recent months, we have faced scrutiny over a multitude of  concerns regarding the security of our users privacy. Issues have ranged from data breaches to  selling customer information to advertisers and political studies. We have been diligent in  finding a solution to these issues and gaining our users trust back so that Facebook can once  again be the company it was created to be.     Our Honest Mission  Our goal at Facebook is to bring the world together in a safe, respectful, and open online  community through our apps and services. We want the world to network on an individual level  and on a business level, where small businesses can advertise and thrive more than they ever  would without Facebook.     Concerned Stakeholders  Due to recent concerns with the data breaches in our systems, this goal has been tarnished in  the court of public opinion, as many people have listened to media sources over our own  company’s statements regarding these issues. In this report, we will be addressing who are  stakeholders are, their concerns, and conduct future research into finding 3 possible solutions  for our stakeholders in the following paragraphs.    Bottom Line  In this report, we first analyzed who affects our company and who is affected by our company  to discover our key stakeholders, which we found to be our consumers/users, stockholders, and  our competitors. Within our analysis we discover their areas of concern and what has been a  key factor in the issues with our communications. Finally, we will address each of the  stakeholders concerns regarding our controversies of the past, and we will develop a plan to fix  our communication and security. Our main area of focus is on the users themselves, as they are  what drives the decisions of our other stakeholders as well as the performance of the company.    CONSUMERS  Overview  The first stakeholder that we will discuss is our consumers, which are our users. We provide  social media services for our users and it is important to us that we satisfy their needs. Up until  the Cambridge Analytica incident, Facebook had done a phenomenal job of satisfying their  needs, however this incident was the biggest hit in our company’s history. With the breach of  over 87 million users data, Facebook influenced potentially helped influence political outcomes,  which deteriorated our user trust. (Kang, 2018).     Trusting Rate  Figure 1-1​ shows the change in our users’ trusting rate for our company throughout the our  history. Before the Cambridge Analytica Scandal, we had a stable trusting rate since 2011.  Markus Weisbaum, CEO of Times Magazine, stated Facebook experienced a sudden drop from  79% to 27% once the incident became relevant to the public. We expected to lose customer  trust, however we did not anticipate a 66% drop in the overall trusting rate. The biggest reason  for the decline is that some users think we sell their personal information intentionally, as “it is  all about economics.” (​Weisbaum, 2018).​It is undeniable that we bare the responsibility of the  user data breach. One thing that we are sure of, is that we never sold any users’ data to any  companies or organizations. 

Privacy Concerns  Furthermore, we found out our users have increased concerns regarding personal information  and privacy. Refer to Figure 1-2, this chart lists the top two concerns among our users following  the Cambridge Analytica scandal. 55% users worried about their personal information with  users concern about the invasion of privacy increasing 13% since last year (McCarthy, 2018).  From this poll, we understand our users’ concerns because all they want is a greater protection  of their personal data.    New Flames Burning Out  As discussed above, the Cambridge Analytica scandal was one of the biggest scandals in our  company. During the time this was issue was circulating the internet and social media, our CEO  and the company decided to introduce a new app that will put Facebook into the matchmaking  dating sector. Many people were very concerned about this due to the fact it was announced  right after the data scandal had surfaced.     A major reason as to why our users are concerned about using the matchmaking dating app on  our platform is because of the additional amount of personal data it requires. Clearly this will  raise concern for our users because our company has been under major scrutiny from the  recent breaches of data. In Figure 1-3 , the director of Consumer Privacy at Stanford Law even  warned our users of the risk they are taking should they decide to partake. Although a beta  version of the dating app has been released in Canada, Colombia, and Thailand, there has been  minimal fanfare to the service.    Public Distrust of Social Media  But, social media in general has seen a widespread of concern regarding the safety of users’  data. In Figure 1-4, about 50 percent of adult Americans do not have confidence that their data  is being safely secured in social media websites and the federal government. Even though these  are completely two different areas in which data is stored, there is still the similarity in how  people lack confidence is the security of their data in these institutions. With our users being  very important stakeholders at Facebook, our investors and stockholders are incredibly  important as well.     INVESTORS  Overview  The keystone stakeholder of our company is our investors and stockholders, without them we  would not be able to function to our best ability in providing what our mission is as a company.  Stockholders are one of the most important aspects of Facebook Inc., and that is why it is  critical that we communicate to them accurately yet positively. To address our stockholders’  concerns, we must look at how our stock has been performing in the previous year.     “The Conference Call”  Looking at Figure 2-1 below, you can see exactly how our stockholders have responded to our  recent turmoil in the company. While the Cambridge Analytica scandal and Mark Zuckerberg’s  testimony showed a ripple in stock prices, our biggest drop that has created a six month bear  market is known infamously as “The Conference Call.” On July 26th, 2018, we experienced the  largest selloff of our stock to date, it totaled 168,000,000 trades in a single day with a 19%  overall decrease in our stock price, wiping out over $120 billion in shareholder wealth.    

Investor Backlash  This single day sent us spiraling from being on the cusp of a bull market to a 6 month long bear  market. The cause for this was our quarterly conference call, in which our executive team had  shown a less than optimal earnings report, with bad news relating to our sales growth leveling  off and our profit decreasing from reinvestment into cybersecurity. Our shareholders has  responded very angrily to our issues with cyber-security that was affecting our bottom line  profitability, and this negatively affected our long-term investors in the company.     Communication Error  A major communication disconnect that we faced on that day was that we failed to properly  communicate to our stockholders our reasons for loss in profit margin. We were starting  reinvestment into cybersecurity and hiring more people to help discover key issues with our  company’s security breaches and therefore our bottom line profit has suffered. A possible way  of preventing a massive sell-off like that, or even thinking retrospectively, we could have  communicated that this temporary loss in profit margin would have a good chance of the  leveling trend in our consumers logging into Facebook due to increased security of their data.    Back in the Black  Half a year after this historical sell-off sent us into a bear market, we have started to rebound  from bettering our image as a company, although we have much to improve. From an investing  standpoint, we can see from the Recognia Analysis in Figure 2-2 that our stock is a strong buy  from short to long term sentiments. Also in this figure, we can see from an S&P Capital IQ  analysis that our stock is currently undervalued, with quality of earnings being above average,  growth stability being extremely high, and our financial health being relatively healthy compared  to last years decreases in profit.    Opportunity to Improve  When stockholders look at the health of the company, they don’t only look at our financials, but  they also look into our ESG analysis or Environment, Social and Governance Analysis. In Figure  2-3, MCSI Industry Research has performed an analysis on our company, and our social rating  can be alarming to stockholders that want us to be socially responsible. Overall, our company is  seen as average on an ESG analysis, which can turn off investors who want to be a part of a  truly outstanding company and this is a major force that we can alter in the future with better  communication and planning.    COMPETITORS  Overview  Following the Cambridge Analytica scandal the German Anti-Trust office investigated how we  use our data. This recently led to German regulators placing restrictions on how we can use  data to create profiles of people, in their country (Wagner, 2019). With sentiment decreasing  abroad, we need to make sure we do not lose market share among competitors. Additionally,  competitors such as Google, and even companies like Amazon who have access to user data  have not had breaches, and many of them are confident that a breach the size of Facebook’s  can not happen (Lim, 2018).    Revamped Security  Furthermore, Google has set a precedent among the importance of protecting user data.  Following the breach, we have decided to follow suit by adding 10,000 people to our safety staff 

(​Balakrishnan, 2018). ​While there are many similarities among Google and Facebook’s data  practices, we are hopeful that we can win back stakeholders by beginning to put user data first.    Gen-Z Effect  Lastly, Gen-Zs are known to be tech-savvy and individualistic, leading to a decline in Facebook  popularity among their generational cohort. Making up nearly 25% of the United States  population, this tech-savvy cohort is by far the biggest generational presence, online. With 45%  of teens surveyed answering that they ‘remain online constantly,’ 44% saying they are online  ‘several times a day, and the last 11% say they are on social media once a day or several times a  week, we find it upsetting that only 10% of teens say they use Facebook most often. (​Figure 3-1)  Instead, teens are turning towards Snapchat and Facebook subsidiary, Instagram, due to less  advertisements and more anonymity (​Anderson-Jiang, 2018).   

FINDING SOLUTIONS/ RECOMMENDATIONS    Analyzing Importance of Singular Stakeholder  Of all of our stakeholders, we have found that our users are the key to our company. Without  users, we would not generate revenue, have competitors, or even have stockholders. Simply  put, users are the key to what drives our company. Also, our stockholders and competitors are  directly affected by our users when they either trust us or have a negative opinion, because this  affects our stock price along with the public opinion on all social media sites as a whole. This  reasoning is why we will be addressing the concerns of our users when finding solutions to the  issues that have plagued our company over the last year.     Many Solutions for Many Problems  Through our research on the matters of data security, privacy, annoyance with ads, and the  inevitable public distrust we have attained in the past year, we have developed three solutions  that can be efficient in curbing these issues and creating a platform that brings us back to what  we intended Facebook to be. Our three solutions are different in approach, however, they all  have the ability to better our company and regain our users trust, helping our bottom line and  improving our relations with our stockholders and competitors through helping our users. The  three options that will be discussed are changing our algorithms to boost posting, a 3 step plan  to address security concerns, and a communication plan to relay the efforts we’ve put into  cybersecurity over the past year and beyond.    

The Algorithm Method  “People can see what they care about first, and don't miss important stuff from their  friends”-Adam Mosseri, VP of News Feed product management    Reduced Posting is Bad News  Since the Cambridge Analytica Scandal and the increasing prominence of ads on Facebook, we  have noticed a 21% reduction in sharing by our users. This has correlated to a 5.5% drop in our  revenues due to people logging off or being inactive, therefore making ad and service revenue  decrease.        

Rank System for Posting  In order to increase posting, we want our users to log on and see what they really care about:  their friends and family. Our new algorithm plan allows for users to have priority on their own  posts and viewing their friends and family’s posts rather than ads, news, and entertainment by  use of a rank system.    The rank system goes as follows:   1. Friends & Family   2. News & Events  3. Entertainment.   4. Ads    Benefits  Through changing our algorithms to focus on our users posts, we predict that posts by our  users will increase significantly. With this increase in posting, we can see an increase of  revenues as more people will be reading their feed and keep their interest on the service while  only a few ads are seen throughout their experience. This will also change how ad companies  reach out to our users by preventing them from permanently forcing people to interact with their  posts and view them, which will decrease data mining from accounts that interact with their  posts. Users will notice a change in what they are viewing and believe our mission statement of  bringing the world together on a platform meant for communicating.    Negatives  While this method will provide an increase in posting and give users an increased sense of our  benevolence as a company, it does few things to address cybersecurity. Public opinion of who  we are as a company will change, however users will still notice issues with data breaches if  this method is used without investment into better cybersecurity.    Cost-Benefit Analysis  There is negligible cost for programmers to create the new algorithm with this method and the  Residual Income (assuming 5.5% growth predicted) added to our estimated revenue gain on  Implementation in the first year would be $2,904,000,000, with a 3 year revenue growth  prediction of $8,712,000,000.   

The 3-Step Plan  Our 3 Step plan was outlined recently by Mark Zuckerberg, he stated our steps were:  1) Investigate all apps with “access to large amounts of information” with a plan to ban  developers that “misused personally identifiable information.”    2) Remove developer access to your data if you don’t use an app for over three months and  restricting how much of your data developers can access at all.    3) Make sure users understand how apps can access their data and making it clear how to  revoke that access.     

Benefits  The benefits that come with this plan are numerous, firstly this solution will address “data  mining” concerns, making people feel more secure and less susceptible to marketers harvesting  their information. Second, this method will prevent another Cambridge Analytica Scandal by  removing access to your data when you are inactive or change your privacy settings manually.  Third, this method will educate users on how to protect their data by simplification and  explanation of privacy settings. These benefits will help customers regain trust in our company  and log on more frequently.    Negatives  There is truly only a financial negative of this solution as the cost to implement is significant  compared to other methods. With this method, our company will have to hire roughly 10,000  new security programmers to keep up with constant “data mining” issues and prevent them.  This will cost us a significant amount, however the ROI in the first year alone makes this  expense feasible, as seen in the Cost-Benefit Analysis below.    Cost-Benefit Analysis    Average Security Salary 

$79,502 

Required New Hirings 

10,000 Immediate FY 

Total Cost of Implementation 

$795,020,000 

Estimated Annual Revenue Growth added  using historical growth data (pre-scandal) 

5-13% 

First FY Return 

$2,040,000,000 

Total Gain in 1st Year 

$1,244,980,000 

   

The Communication Solution  The largest factor of our communication disconnect, is that users don’t know how we’re  addressing their concerns. We have designed new algorithms and data security systems,  however, the majority of users do not notice our privacy changes. What has caused this is that  we have not explained our efforts clearly to our users. With the Communication Solution, we will  explain our efforts as simply as possible to our users, focus our restructuring of trust on  communication and education, and continue providing simplistic privacy settings and simplify  our Privacy Policy so that people are aware of data usage.       

Benefits  This solutions major benefits will be improving user trust, stopping privacy breaches by  informing our users how to adjust settings, and clarifying that our goal at Facebook is to provide  a social media site for “The People’ rather than large data harvesting firms. All of these benefits  will not have added cost associated with them as they are already scheduled investments into  app updates.    Negatives  One thing that this communication plan does not address, is the reinvestment into actual  security measures added to the already numerous ones we have done in the past year. Without  using the 3-step plan outlined above, this will give users a heightened sense of security than  previously, without actual proof that we’ve continued to invest in our users privacy.     Cost-Benefit Analysis    Total Cost of Implementation 

N/A cost negligible 

Estimated Annual Revenue Growth added  using historical growth data (pre-scandal) 

10-15% 

First FY Return 

$6,700,560,000 

 

Total Implementation Cost and Benefit of All Solutions    Cost of Total Implementation

$795,020,000

Revenue Growth Prediction over 1st year

$7,925,540,000

1st year Gain on Investment

$7,130,520,000

 

Summary/Conclusion  Keystone Stakeholder  Our keystone stakeholder is our users due to the fact that they are what affects our other  stakeholders directly. This group of stakeholders is most concerned about their privacy and  data security after the Cambridge Analytica Scandal.    Synopsis of Solutions  The Algorithm Method uses a ranking system to show users the importance of their posts to our  company. The ranking system goes as follows: 1 ​ . Friends & Family, 2. News & Events, 3.  Entertainment, 4. Ads. This new algorithm will help increase user posting which will directly  increase our revenues.   

The 3-Step Method was outlined by Mark Zuckerberg, and this method focuses on security; this  plan goes as follows: ​1) Investigate all apps with “access to large amounts of information” with  a plan to ban developers that “misused personally identifiable information.” 2) Remove  developer access to your data if you don’t use an app for over three months and restricting how  much of your data developers can access at all. 3) Make sure users understand how apps can  access their data and making it clear how to revoke that access.    The 3rd method focuses on our communication with our customers, as we have historically  shown poor efforts to communicate issues and advances we have made, causing the public to  distrust us and our mission. With the Communication Solution, we will explain our efforts as  simply as possible to our users, focus our restructuring of trust on communication and  education, and continue providing simplistic privacy settings and simplify our Privacy Policy so  that people are aware of data usage.    Benefits/Costs  Starting with the overall implementation costs and benefits, we can see that overall costs will be   $795,020,000, stemming mostly from the 3-step plan. This may seem like a very steep cost,  however, the first year ROI is estimated at ​$7,130,520,000, coming directly from the estimated 10-15% revenue increase under these solutions.   Splitting up the value of each plan, we can see that there is negligible cost for programmers to  create the new algorithm with the Algorithm Method and the Residual Income (assuming 5.5%  growth predicted) added to our estimated revenue gain on Implementation in the first year  would be $2,904,000,000, with a 3 year revenue growth prediction of $8,712,000,000.    With the 3-Step Method, we see a large price tag of $795,020,000 but a large return of  $1,244,980,000, which would double our investment. This method is one of the most important  as it can be used in conjunction with others to highly benefit our users and Facebook itself.    The Communication Method has no discernible cost, much like the Algorithm Method, but by  getting across our message to users we can highly increase posting within the first year, and  estimates show revenue growing by $6,700,560,000. The communication method is best used  in conjunction with the 3-Step, due to it not actually affecting the security of the site itself, but  rather making it easier for users to protect their privacy.    Overall  Data Security and user privacy is a major concern of our users, and that is why we must act on  these issues. The solutions presented provide quantitative and qualitative information that  shows it is beneficial for our company to invest in these matters. We have recommended  through our solutions that these are best implemented in conjunction with each other, as the  profit benefits and user complacency will benefit greatest. With the implementation of these  solutions, our users will feel more secure and trust us to be the company we claim to be.        

Figure 1-1 (Facebook users’ trusting rate)

  Figure 1-2 (Facebook users’ concerns) Information from Gallup  

    Figure 1-3 (Jen King statement on Facebook Dating app) Quote from article at Cnet              Figure 1-4 (Percentages of U.S adults and their confidence in the safety of their data)  Chart from Pewresearch                  Figure 2-1 (February 2018-February 2019 stock trend) Chart by:Fidelity Investments 

 

  Figure 2-2 (Stock/ Company strength analysis) 

  Figure 2-3 (ESG Analysis) 

       

Figure 3-1 (Teen Social Media Graph provided by PewResearch) 

   

 

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