Facebook data leak scandal won’t deter advertisers unless two things happen, industry insiders say

Facebook is being rocked by a data leak scandal, but most advertisers are not planning to reduce their spend, according to conversations seven people involved in the advertising and media industry who work with Facebook. Some of these people requested anonymity because they were not authorized to speak about their relationship with the company.

Advertising agencies and companies are keeping a close eye and growing cautiously wary of the social network, which has been mired in controversy over the past 12 months, from misreporting key advertising metrics to serving as an avenue for Russian nationals to influence the 2016 presidential election.

One source said the Cambridge Analytica issue was just another major issue on a list of problems Facebook is dealing with. While alone it was not concerning, everything combined is making Facebook more vulnerable to digital advertising competitors.

In particular, companies are monitoring for two possible moves tied to the Cambridge Analytica story:

* Whether privacy concerns will spark a mass exodus of users

* Whether the stricter data safeguards Facebook is planning will limit advertisers’ ability to target users effectively.

“If the changes that Facebook does make impact for the legitimate apps from brands consuming their platform and using it ethically, that’s when you’re going to see people start to pull ads,” said Parker Ray, chief digital strategist for agency MWWPR. “At the end of the day, it’s another marketing platform.”

“This is a story that is geared towards agencies and businesses,” Ray said. “It hasn’t trickled down to how this is going to impact consumers or how customers would care.”

What is concerning advertisers is how Facebook might crack down on the data they can use. Advertising technology companies legally use authorized information from Facebook apps to find the right customers – though it’s “shady genius” for Cambridge Analytica to allegedly use a psychology quiz because it provides deeper insights, noted Jesse Math, Group Director, PMX Agency paid social and display group director.

If Facebook restricts legitimate apps from collecting data or limits the amount of useful information they can gather, it could limit its effectiveness for advertising. But it’s too early to tell.

Most people say they are a few weeks out before being able to make any solid recommendations or decisions.

“Abandoning Facebook would be a huge revenue and traffic referral stream hit,” Math said. “There may be a viable alternative in the future that’s better for everyone. But I don’t believe that platform even exists today.”

See the original article here in CNBC Digital

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