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Facebook reaches a tipping point

Illustration: Rebecca Zisser/Axios 

Of all the news crises Facebook has faced during the past year, the Cambridge Analytica scandal is playing out to be the worst and most damaging.

Why it matters: It's not that the reports reveal anything particularly new about how Facebook's back end works — developers have understood the vulnerabilities of Facebook's interface for years. But stakeholders crucial to the company's success — as well as the public seem less willing to listen to its side of the story this time around.

The latest: The saga, which has been flooding cable news for days, got even worse Monday night when the New York Times reported that the company's chief information security officer, Alex Stamos, is leaving the company after clashing with colleagues on how to handle disclosures of Russian activity on Facebook. Stamos tweeted that he's still at Facebook, but his role has changed.

Data: Money.net; Chart: Axios Visuals
  • Facebook shares fell nearly 7% at market close on Monday. Its stock hasn't seen this type of a drop in response to any of the major scandals its faced over the past year. Even during the Russia hearings on Capitol Hill, Facebook stock hit record highs.
  • Republicans were unusually swift to call for action. GOP Sen. John Kennedy and Democratic Sen. Amy Klobuchar sent a letter to Senate Judiciary Committee Chairman Chuck Grassley calling on Facebook CEO Mark Zuckerberg to testify before Congress. Republican Sen. John Thune said he'd send questions to Facebook Monday night.
  • In Europe, regulators are calling on Zuckerberg to testify before the U.K. Parliament's Digital, Culture, Media and Sport Committee. The British Information Commissioner, Elizabeth Denham, said her office was "investigating the circumstances in which Facebook data may have been illegally acquired and used."
  • Consumers are balking at the news, with the hashtag #DeleteFacebook sweeping across Twitter, somewhat ironically.
  • Media scrutiny is intensifying for Facebook, especially in light of the way it has responded to the news reports about the story. The story was the subject of cable news reports all day on Monday.

Facebook's response: The company responded with a rapid-fire defense with executive-penned blog posts and tweet storms — and sent out executives to let everyone know it was outraged.

  • Facebook repeatedly explained how Cambridge Analytica was the real culprit— and that Facebook took appropriate action once it learned of the abuse of its platform.
  • At a conference in New York on Monday, Carolyn Everson, Facebook's vice president of marketing, called Cambridge Analytica's reported actions "an incredible violation of everything that we stand for," per CNBC.
  • It has hired a digital forensics firm to investigate Cambridge Analytica (which is cooperating).
  • It has suspended the Cambridge whistleblower's accounts.

Yes, but: Facebook has played the "we didn't know this was happening" card before, causing stakeholders to grow impatient and making them less willing to give the company the benefit of the doubt.

  • Zuckerberg admitted last September that he should have taken the fake news controversy during the the election more seriously. "‘Calling that crazy was dismissive and I regret it," he said in a blog post.
  • The company repeatedly apologized in response to ProPublica reports last year that its ads system was abused by bad actors to target people based on nefarious religious terms, like "Jew hater," or to discriminate against people by race.

The long tail of the Russia investigation: The probe opened a Pandora's box about how Facebook works, how it uses data, and what its vulnerabilities are. With each new finding, Facebook is forced to deal with its demons from the past and reckon with the larger ramifications for democracy.

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