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Facebook scandal will give privacy a boost

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The right to user privacy on the Internet continued to make news headlines last week as the Facebook data breach saga headed to Washington. GIL SPERLING, CTO, Popimedia, believes this will provide positive developments for data privacy and consumer protection.

Advertisers, marketers and brands are obviously keeping close tabs on what effect, if any, this latest scandal to befall the world’s largest and most influential social media network will have on the Facebook user base, or to their level of engagement.

Obviously, a mass exodus of users, or a drop in their willingness to engage on the platform will reduce the effectiveness of Facebook’s data-driven advertising model. Should this happen, advertisers will have to ask if the platform can continue to deliver adequate returns on ad spend.

The fundamental issues surrounding the scandal – the privacy and use of users’ personal data – is not new. This is just the latest in a number of issues related to the misuse and abuse of user information, of which Facebook is not the sole perpetrator. Similar data breaches have happened at other Internet companies and social media platforms.

While I don’t believe that there’s widespread apathy towards these breaches among users, I doubt that these latest revelations will be the tipping point for a mass exodus.

The main reason for this is that Zuckerberg and Facebook moved relatively quickly to respond. They have accepted blame and publicly acknowledged that ‘mistakes were made’. They are also implementing corrective steps.

Coming out of Congress

Facing a five-hour barrage of questioning from Congress in Washington, Zuckerberg reaffirmed that the company’s mission of “connecting people” would continue to take precedence over advertisers and developers.

In the session, Zuckerberg stated that: “We need to take a more active view in policing the ecosystem and watching and looking out and making sure that all the members in our community are using these tools in a way that’s going to be good and healthy.”

Obviously, such words are superfluous without meaningful action to back them up, but there has certainly been changes at Facebook since the scandal broke. Having taken responsibility for the breach, Facebook is now acting by assigning resources to solve the issues.

Zuckerberg announced sweeping measures that have already, or will be, implemented across various aspects of the Facebook platform as part of the second phase of the Cambridge Analytica ‘clean up’.

Word up

He is keeping to the promises made about addressing and resolving the issues and he is widely viewed to be acting responsibility.

These measures include notifying all Facebook users whether they were affected by the leak. This will include a notification prompting users to review which apps and websites have permission to see their data. The roll-out of this element started last Monday.

Facebook also adjusted its privacy settings and ad targeting tools to give users more control over their information and is creating a tool to make it easier for users to approve what information is shared about them.

In addition, Facebook is reviewing where additional risks for data leaks exist. Already underway is an audit of all third-party apps that offer the outside world access to the platform via their API. Any app that collected and misused data will be banned from the platform, and every user who engaged with the app in question will be notified.

Further restrictions imposed on access to user data include a lockdown of the Groups, Events and Gaming APIs. These provided data to developers – such as the number of types of events attended by users – that Facebook now says is unnecessary as they should be able to create useful experiences without scraping this information.

Following Zuckerberg’s appearance on Capitol Hill, Facebook also announced a novel bounty programme, which will reward people who find and report cases of data abuse on its platforms with between $500 to $40,000, depending on the significance of the discovery.

While welcomed, these sweeping changes and reforms that seek to impose stricter data safeguards understandably has Facebook marketing partners and advertisers wondering if their ability to target users effectively and deliver a return on their ad spend will now be limited.

Impact on advertisers

South African-based advertisers and agencies needn’t be concerned, though, as the planned changes to the platform will have a minimal impact, if any, on Facebook advertising in our region.

That’s not to say that significant changes weren’t announced, though. For instance, the shutting down of Partner Categories, a feature that enabled ad targeting on the platform by using third-party data provided by data brokers, could have ramifications across the Internet-based and social media marketing industries. However, its impact will be felt predominantly in the US and parts of the EU where the use of third-party data for narrow targeting is common practice.

This approach was not adopted in South Africa, and we believe that this is a move in the right direction to improve industry best practices and ensure greater transparency regarding the responsible use of end-user data.

There have also been a few minor changes to the platform’s automated leads development solution, but these won’t have an impact on the technical capabilities of the solution.

Are these steps sufficient to stave off a significant backlash from users and advertisers?

We believe so.

For brands to continue realising a return on their ad spend on the platform, Facebook needs to ensure that users keep coming back, remain engaged with the content, and continue to feel like they are getting value.

For that to happen, they can’t feel like their right to privacy is being abused.

Based on recent announcements and the steps already taken, it is clear that Facebook has realised the importance of fundamentally changing its data practices to restore trust among users. We feel that Facebook has achieved that with the measures implemented.

This stance aligns with current user and ad data metrics, which haven’t seen a drop off since news of the data breach first broke. Granted, there was a loss in investor value for holders of Facebook stock, but the fundamental value proposition to users and advertisers seems to still be intact.

Protecting the revenue stream

Zuckerberg also reaffirmed the company’s commitment to its advertising model as the primary source of revenue. That means Facebook’s future depends on its ability to deliver a return on ad spend. When asked whether he has considered offering an ad-free, subscription option for users, Zuckerberg didn’t dismiss the idea, but stated that there will always be a free version of Facebook available.

I also believe that the sunk investments made by most users in the platform, having built their profiles over years, even a decade for some, means that something more significant would have to happen for them to divest from the platform.

Obviously, there’s a threshold of user tolerance and many are already weary of the continual breaches in trust. However, Facebook has now taken accountability and has implemented bold and decisive action.

We’re therefore confident that it will remain business as usual for the brands that leverage the platform ethically to effectively reach their target audiences.

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VoD cuts the cord in SA

Some 20% of South Africans who sign up for a subscription video on demand (SVOD) service such as Netflix or Showmax do so with the intention of cancelling their pay television subscription.

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That’s according to GfK’s international ViewScape survey*, which this year covers Africa (South Africa, Kenya and Nigeria) for the first time.

The study—which surveyed 1,250 people representative of urban South African adults with Internet access—shows that 90% of the country’s online adults today use at least one online video service and that just over half are paying to view digital online content. The average user spends around 7 hours and two minutes a day consuming video content, with broadcast television accounting for just 42% of the time South Africans spend in front of a screen.

Consumers in South Africa spend nearly as much of their daily viewing time – 39% of the total – watching free digital video sources such as YouTube and Facebook as they do on linear television. People aged 18 to 24 years spend more than eight hours a day watching video content as they tend to spend more time with free digital video than people above their age.

Says Benjamin Ballensiefen, managing director for Sub Sahara Africa at GfK: “The media industry is experiencing a revolution as digital platforms transform viewers’ video consumption behaviour. The GfK ViewScape study is one of the first to not only examine broadcast television consumption in Kenya, Nigeria and South Africa, but also to quantify how linear and online forms of content distribution fit together in the dynamic world of video consumption.”

The study finds that just over a third of South African adults are using streaming video on demand (SVOD) services, with only 16% of SVOD users subscribing to multiple services. Around 23% use per-pay-view platforms such as DSTV Box Office, while about 10% download pirated content from the Internet. Around 82% still sometimes watch content on disc-based media.

“Linear and non-linear television both play significant roles in South Africa’s video landscape, though disruption from digital players poses a growing threat to the incumbents,” says Molemo Moahloli, general manager for media research & regional business development at GfK Sub Sahara Africa. “Among most demographics, usage of paid online content is incremental to consumption of linear television, but there are signs that younger consumers are beginning to substitute SVOD for pay-television subscriptions.”

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New data rules raise business trust challenges

When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.

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The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.

GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.

The fundamentals of trust

GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.

The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.

This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.

What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.

The risk of compliance

Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.

A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.

A three-step plan of action

So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:

Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.

Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.

Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.

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