6 Reasons Why Reputation Management is Crucial for Facebook’s Next CMO

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Recently, Facebook has been on the hunt for a new Chief Marketing Officer, set to replace Gary Briggs, who announced his resignation this past January.

Given the tumultuous few years Facebook has had — from data privacy scandals to fake news allegations, Russian election interference and CEO Mark Zuckerberg’s testimony in Congress — this new executive will have one of the most challenging leadership positions in Silicon Valley (and the world), with a key role in shaping the future storytelling of Facebook’s damaged brand.

Since the Cambridge Analytica crisis, revealing Facebook had willingly given user data to a propagator of viral fake news, Facebook has been ranked among some of the lowest reputation scores we’ve seen, with an all-time low of 46.6 in April of this year. Since then, Facebook has been able to recover, but it’s going to take much more work for it to repair its currently weak reputation, work that the next CMO will be held responsible to improve.

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Two weeks ago, Facebook posted the job description on its website, highlighting how this CMO must be “focused on its consumer business and overall company reputation.”

Here at Reputation Institute, we couldn’t agree more with Facebook: that revitalizing the tech giant’s reputation will be paramount for the next CMO — and the future success of the company. Here’s why reputation management should matter to all executive teams — specifically to Chief Marketing and Chief Communication Officers:

#1. Reputation tracking guides corporate communication and marketing strategy. Understanding what the public prioritizes can direct communication efforts and language more strategically. Emphasizing Facebook’s Innovation or Performance won’t sway the general public like promoting its Governance or Citizenship will. By understanding the more impactful dimensions of reputation, Facebook can sharpen its marketing message and increase emotional connection with its stakeholders more effectively.

#2. Reputation insights deliver direct competitor analysis. How does Facebook stack up against other tech titans? Against other information services companies? Currently, not so well. Compared to benchmarks of LinkedIn, Microsoft, Google, and Netflix, Facebook is trailing and is the only company in the weak range—15.7 points below average. If Facebook wants to improve on reputation, it needs to know how it measures up, and why its competitors outperform.

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#3. Reputation tracking is a marketing risk mitigator. Data privacy scandals are no longer a looming threat to Facebook, they are a reality, exemplified by the recent Cambridge Analytica scandal that brought significant reputation declines to Facebook. If a future breach were to occur, it could drastically decrease the company’s reputation score further than it has already plunged—a risk Facebook cannot take.

To understand the impact of data privacy on Facebook’s reputation, we asked the public to evaluate Facebook’s pulse and dimension scores discretely and then asked the public how they would rate Facebook’s pulse and dimension scores if Facebook were to hypothetically break another data privacy rule and/or misuse more sensitive data of its customers. We see that before asking the public about a hypothetical data breach, they rate the company higher across all dimensions and in reputation score.

However, after asking the public this question, their perception drops, with a 12.8-point reputation score decline, with the largest dimension score declines in Products/Services and Performance. Reputation tracking can show the impact of a worst-case scenario on a company’s reputation, but it can also help mitigate risk by reducing impact severity and probability of occurrence.

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#4. Reputation management increases stock market value. On Wednesday, July 25, Facebook announced its Q2 earnings, which missed expectations on revenue and showed slow user growth. Consequentially, Facebook lost about $120 billion in market capitalization and its stock dropped roughly 20%, in its biggest stock market decline since 2012. Analysts were quick to cite Facebook’s Cambridge Analytica controversy — and PR crisis — as major reasons for the drop.

At Reputation Institute, we understand the link between financial performance and reputation. The top 10 most highly reputable companies on the S&P 500 Index outperform the financial market, with 2.5x better stock performance.

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A 1-point increase in reputation translates to a 2.6x increase in market capitalization, translating to a $1 billion dollar increase in revenue. If Facebook’s next CMO actively measures and manages Facebook reputation, Facebook will see financial results improve.IS

#5. Reputation insights empower CMOs to understand stakeholder priorities. When evaluating reputation, the public prioritizes certain aspects of reputation differently depending on the type of company. For the information services industry — companies like Facebook, Netflix, and LinkedIn — the public values Governance first and foremost; it is the most impactful dimension on reputation, with an 18.8% weight. Being open and transparent with the public, behaving ethically, and practicing business in a fair manner will help Facebook increase its Governance score, which currently stands at 51.1, its lowest score of all its dimensions.

#6. Reputation insights measure relevant attributes. In the wake of the Cambridge Analytica crisis and the continuous fake news allegations, Facebook’s scores in data privacy security and responsible product marketing/advertising have severely declined since January 2018. When looking at scores on a month-over-month basis, we see the biggest drops were between March and April, right when the Cambridge Analytica scandal broke. Facebook’s future CMO will have a difficult job of gaining trust back in these areas from the public. But, a CMO cannot manage what he or she does not measure. By tracking these relevant attributes, Facebook can better understand how the public feels about trending topics that matter.

Signs of Reputational Recovery on Facebook’s Horizon

Facebook’s future CMO will have a lot on his or her plate, however, signs of a reputational recovery for Facebook are promising.

Facebook has bounced back to its pre-Cambridge Analytica score, and as of July 2018 is only 1-point shy of its score in January. But with a score in the weak range, it has a long way to go until attaining a real reputational success story. By managing and measuring its reputation, the new CMO can not only predict signs of future crisis, he or she can also better navigate the vision of the company in a way that feels authentic and meaningful to the public.

Facebook’s story is on the brink of a major change, which will primarily rest on how the next CMO decides to manage Facebook’s reputation. We wish the future CMO the best of luck in spearheading this momentous project and urge this next great leader to connect with us for reputational guidance!

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