Here Are 5 Things To Watch For During Zuckerberg's Capitol Hill Testimony

Submitted by on Tue, 04/10/2018 - 10:40


Like the old saying goes, the most dangerous place in Washington is between a politician and a camera.

Expect that dynamic to be on full display this afternoon when Mark Zuckerberg appears before the Senate Judiciary Committee for his first day of testimony before lawmakers. Public hearings like these are an excellent opportunity for lawmakers to score political points and craft soundbites that can be used to pad their campaign ads - which is particularly important now, with the crucial 2018 midterms just months away.

Given the possibility that Zuckerberg's answers to lawmakers' questions could impact Facebook shares, it's worth considering what to expect during the upcoming hearing.

Here are a few excerpts from previews published by the Wall Street Journal, the Hill and Bloomberg, starting with what's perhaps the most important question of them all...

Can Zuckerberg Convince Lawmakers That He Is Truly Sorry?

During interviews with CNN, Vox and the New York Times, Zuckerberg insisted that, while Facebook is "deeply sorry" for not holding Cambridge Analytica accountable, the only thing the company did wrong was "trust" this nefarious third party.

Of course, the backlash against Facebook runs much deeper than Cambridge Analytica: Users want to know why the company didn't notify them about the breach when it happened, and also how the company uses their data to help target ads for its advertising clients.

Since the hearing will require "off-the-cuff responses"during the Q&A, will Zuckerberg be able to hold his tongue and refrain from making excuses for the company's behavior? Judging by both interviews with Zuckerberg and Sheryl Sandberg, this doesn't seem likely.

Would Facebook Consider A Paid Option? And If So, How Much Might It Cost?

As Bloomberg pointed out yesterday, members of Congress might ask Zuck about the feasibility of offering a paid option. However, it's extremely unlikely that Facebook would ever seriously consider a paid tier. The reason? By introducing a paid option, Facebook would "break" its lucrative advertising-based business model. While it would be difficult to quantify the exact impact on Facebook's bottom line if the company started to pare back its data collection, it's likely that the impact would be overwhelmingly negative. After all, "precision ads don't work if there's less precision."

How Will Zuckerberg Respond To Questions About Russian Interference?

In his written testimony, Zuckerberg confirmed that in the summer of 2016 the company shut down a group of accounts with suspected ties to the Kremlin. The entities behind the accounts "created fake personas that were used to seed stolen information to journalists," Zuckerberg said.

Facebook has admitted it was "too slow" to spot the Russian interference and has pledged to tighten safeguards on the platform - something Zuckerberg has said it will take the company three years to fix. It has already hired 15,000 of the 20,000 people needed to do it.

In what was perhaps the most impactful disclosure from Zuck's prepared remarks, he said the company's new security investments "will significantly impact profitability going forward."

Lawmakers will come prepared with more questions about its anti-interference efforts - including what Facebook is doing to stop similar interference during the 2018 race, something the company has said it's taking very seriously.

Will Lawmakers Discuss Regulation? And If So, How Will Zuckerberg React?

During his interview with CNN, Zuckerberg said he might be open to some regulation of Facebook and other social media platforms - as long as it's the right kind of regulation.

Already, Facebook has agreed to support the Honest Ads Act (despite lobbying against an FEC decision back in 2011 that would've imposed many of the same requirements). The act would apply many of the same disclosure rules for TV, print and radio ads to digital ads.

Some privacy hawks believe the US should adopt a regulatory framework like the European Union's General Data Protection Regulation (GDPR), a powerful law that will go into effect next month and gives internet users greater control over their own data. Zuckerberg has promised to extend these privacy controls to all Facebook users around the world.

Of course, Republicans and Democrats are bitterly divided on the need for regulation with both Chuck Grassley (Senate Judiciary Chairman) and John Thune appear uninterested, while Democrats like Mark Warner are in favor of imposing more restrictions around data privacy and the company's verification practices for ad buyers.

What else would Zuckerberg be willing to consider? And will lawmakers be satisfied with his answers?

Will Zuckerberg Disclose Any More Bad News?

Last week, the company revealed that the Cambridge breach could've affected some 87 million users, up from 50 million initially reported.

But what else might the company disclose? And could it materially impact shares and/or regulators' feelings about regulation?

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Facebook shares turned higher after the open after the company revealed that Facebook would launch a "data abuse" bounty to reward whistleblowers (ironically after it deleted the account of Christopher Wylie, the whistleblower who told the Guardian and New York Times about Cambridge Analytica's unauthorized use of the "stolen" Facebook data.

Zuckerberg met with Senators Bill Nelson and Dianne Feinstein yesterday - appearing publicly in a suit and tie for one of the first times in recent memory.

His hearing before the Senate Judiciary Committee begins at 2:15 pm ET.