Facebook is Losing Face: Reputation Declines in the US Signal an Elevation of Risk

Facebook losing faceIn certain Eastern cultures such as China, people think of reputation in association with “face” as somewhat of a proxy for honor and self-respect. In Western cultures such as the US, reputation is also associated with “face value” based on perceived corporate image in the way a company is viewed and as a reflection of what it stands for.

But whatever you call it or however you think about it, Facebook is continuing to lose face and face value, which translates to a decline in reputation traction — and it’s happening fast.

Figure One: Facebook’s Reputation in the US

figure1

Since the accusations related to Facebook’s role in the alleged Russian meddling of the 2016 US elections, its reputation has been in decline. Particularly on home turf in the US, Facebook has experienced major reputation free-fall due to the perceived delayed reactions in responses to many of the initial allegations.

More recently, the widely publicized data privacy issues and the amplified Cambridge Analytica crisis have only added fuel to the fire. Now, Facebook is at a point where it has lost control of its corporate narrative. With Senate hearings in April 2018, CEO Mark Zuckerberg had the chance to make things right.

Did Zuckerberg’s actions have the desired effect on the business, and was he able to bolster Facebook’s reputation?

Unfortunately, Zuckerberg’s Testimony at Congress Did Not Help

Based on our latest RepTrak data from the continuous measurement of reputation in the US, the company’s pulse score has fallen to a level that has put it in  the reputational penalty box. As it stands, Facebook’s reputation is dangerously close to the 40 range, a weak score, and were it to fall further, it  would decline into the realm of a poor reputation, making it very difficult for the company to quickly recover.

To its credit, Facebook has tried to make things right and after some initial stumbling in its attempt to manage the every-growing data privacy crisis. It took out full page ads in print media to accept responsibility and apologize for its lack of oversight. In delivering his testimony in front of Congress, Zuckerberg tried to explain the events surrounding the data privacy allegations and convey Facebook’s side of the story. But while the media pundits may have credited Zuckerberg with a “good performance” as part of the Congressional hearings, the General Public sees it differently and is not quite so forgiving.

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In just looking at Facebook’s perceptions of leadership, there is a significant decline year over year, with an overall -14.4pt drop in leadership credential since May 2017. The recent fall in Facebook’s leadership score to 56.1 means perceptions are now in the weak range, and suggests that Zuckerberg’s attempt of appeasement and apology, combined with the organization’s public elevation of other leaders to address the issue including COO Sheryl Sandberg   have not yielded the desired effect.

The concern for Facebook, is that in the past year the reputation of leadership has typically trended higher than the company. However, based on April 2018 data both the reputation of Facebook and its leadership are in the weak/vulnerable range, which in the short-term translates into an elevated risk for the business.

Figure Two: Facebook’s Leadership Credentials in the US

figure2

Loss of Support Could Hurt Facebook’s Business

No doubt, the overall reputation decline and loss of leadership credentials for Facebook is a concern. Furthermore, in looking at the behavioral support data, and in analyzing comparable time periods for 2017 vs. 2018 through the end of Q1, the severity of the situation is even more apparent with evidence of potential economic damage to the business.

By looking at behavioral intent related to Facebook as a proxy for the impact on key business KPIs, it’s evident that the reputation declines translate into significant loss of support among the General Public. While all the support data for the company is trending downwards, perhaps of most concern is the significant decline in the perceptions of benefit of the doubt.

While this data does not yet fully reflect the situation as it stands in Q2, it does indicate that the real impact on Facebook could be a lot worse before it gets better  if at all. The levels of support for Facebook in Q1 2018 are already markedly lower than in 2017, and this has not yet reflected in the impact of Congressional hearings.

Although to date, and on a positive note, these declines in reputation have yet to substantially impact the share price value of Facebook, which seems to have recovered in the short-term, and improved in May 2018 since the drop immediately following the Cambridge Analytica scandal  Facebook’s worst daily stock market decline in four years.

Figure Three: Facebook’s Support in the US Q1 2017 vs. Q1 2018

supportive

But Has Facebook Really Hit Reputation Rock Bottom Yet?

With everything considered, the question remains, as to whether Facebook will fully recover — and as to whether the apparent reputation decline is long-lasting, or just a short-term negative aberration. This key question would seem difficult to answer with an absolute high degree of certainty at this juncture. Perhaps the points of reputation tension are still in balance. But the weight of evidence would suggest that the reputation hangover may continue for a while longer, and perhaps longer than Facebook would like.

In the absence of any further accusations of wrong-doing, and assuming a positive outcome to all of Facebook’s own efforts, it might be six to nine months before Facebook’s reputation recovers to the realm of respectability. The financial markets have priced in a faster recovery than that, given that shares in Facebook are already trading at or close to an all-time high, on the assumption that the worst of its troubles are behind. And if the analysts are right, this would all suggest that Facebook’s perils will not be long-lasting.

What Can Facebook Do to Turn its Reputation Around Faster?

Facebook is still trapped in the penalty box of public opinion. To fully recover its reputation, there are perhaps five things it could accelerate:

  1. Self-impose and enforce high standards of data privacy on Facebook and its partners become the best practice leader in data privacy
  2. Be transparent every step of the way, other data privacy malpractices associated with Facebook are uncovered as part of its own investigations
  3. Zuckerberg must become a champion of moral responsibility — his voice as a CEO needs to be heard loud and clear on the issues that matter to Facebook
  4. Wholly comply with GDPR regulations in Europe, and commit to making things right in the rest of the world —  not just in the US
  5. Engage and inform key multi-stakeholder groups  (beyond the General Public) about key actions that Facebook has taken — these include: Regulators, the Media, Investors, and Opinion Elites

stephen-hahn-griffiths

Stephen Hahn-Griffiths
Executive Partner, Chief Reputation Officer
Reputation Institute
shahn@reputationinstitute.com
@shahngriff

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