By Fiona Manning, Senior ESG Research Analyst AMP Capital Australia
Social media companies offer myriad social benefits, enabling users to connect to friends and family but also in terms of freedom of expression. With social media, freedom of speech is no longer limited to those who have control over traditional media – everyone can be heard globally, for better or worse.
People have used social media as a means of raising awareness and fighting injustice. It has helped foster political movements, including playing a major role in enabling massive protests in Tunisia and Egypt to bring down dictatorships. Social media campaigns and attention on global supply chains have also exposed abusive labour practices, particularly child labour, and made consumers more aware of environmental issues.
On the flip-side, newly empowered voices are not necessarily desirable voices. For example, Facebook Live has broadcast numerous accounts of appalling violence and all social media companies face a constant fight against the spread of hatred and bullying. Social media companies are increasingly tasked with the implied responsibility of acting as some form of moderator of public discourse.
There has been a lot of attention on large tech businesses and whether these companies are fair trustees of the massive amounts of user data they collect and whether they are appropriately managing the content they host. Do companies have a responsibility to protect their users from abuse, from a breach of their private data, from controversial topics? These are the questions faced by the tech giants that we use and interact with every day.
What is social media?
Social media comprises technologies like websites and applications/’apps’ that enable users to create and share information and to network. Social media technologies include blogs, forums, business and social networks, photo/video sharing, social gaming and virtual worlds.
How do social media companies make money?
Social media companies typically make money by collecting user data and then using that data to sell advertising space. By collecting profile information, monitoring what pages are liked and tracking what other websites are visited, social media companies aim to identify specific types of users on their platforms and target advertisements accordingly. The more targeted the advertising, the more the companies pay for the privilege to reach specific users.
Most social media users are cognisant that the price they pay for their ‘free’ access to the platform is that their data and personal information will be used to subject them to targeted advertising. This is similar to accessing free-to-air commercial television, the main difference being the greater precision with which advertising or other content can be targeted within social media.
Why all the fuss about privacy?
How social media companies protect their users’ privacy is a hot topic because without the trust of their users, the social media business model – particularly for ‘free’ services – falls apart.
The trust users place in social media companies goes beyond a desire to simply have their information protected from theft by hackers. Users also trust that social media companies will only access and use their personal information in ways that they expect, such as advertising. However, with the rise of fake news, fake profiles and algorithm-driven profiling, users are increasingly at risk of having more than their shopping habits influenced, for example their political or social opinions. Social media companies must perform a very delicate balancing act between retaining the trust of their users and managing their relationships with commercial and other influences.
Governments are starting to respond to privacy concerns with regulation – such as the European Union’s General Data Protection Regulation that was implemented in 2018 – and users will decide whether social media companies can be trusted. The way social media companies respond to these and other laws and regulations being considered by governments all over the world to deal with privacy and the protection of users’ data will be critical. Investors will be watching the response of these companies carefully.
How social media companies manage privacy and commercial pressures is only part of the story. When it comes to handling other issues such as the freedoms of thought, opinion, word etc the path is even less clear. For example, how do we handle conflicts of human rights within social media – is there a point at which censoring or removing hate speech from social media is an infringement on the right to freedom of thought and opinion? How do we determine and agree where those tipping points are?
As platforms for a rapidly growing portion of public and private discourse, social media companies are playing a key role in what content their users do and don’t see. What is viewed as free speech by one user may well be felt as persecution by another and social media companies – profit-driven corporations which are not democratically elected – are taking on the role of being arbiters. Reaching a public consensus on the requisite ethical behaviour is a long way off, and may never be reached at all, so these issues are largely being tackled by the social media companies themselves.
Why improving business practices matters
Many social media users feel that providing their private data, which can then be monetised, is a fair exchange for the free services of social media platforms such as Facebook, Twitter and YouTube. But if user data is sold, stolen or mishandled, consumers question the safety of their information, undermining the companies’ business models. Therefore, the main concern for these companies is that more and more people will turn against these platforms, which will adversely impact the revenue they can bring in from advertising fees.
The business model of social media companies is built upon the trust of its users. Both allowing misleading or offensive content onto their platforms and misusing or neglecting the privacy of user’s data erodes the trust of users, which in turn can impact the financial performance of the social media company.
Is social media addictive/causing social harm? Social media companies have been accused of using tactics similar to those used by the gambling industry to get their users ‘hooked’ on their platforms. There has also been speculation that users experience a release of dopamine whenever they receive likes or comments on posts.
Harm may also be caused to unsophisticated users who do not fully comprehend the nature of social media with online expressions being automatically recorded and archived. It can also be hard to identify original content versus modified content and of course the potential visibility of content is enormous. Finally, there is public/private blurring with not all audiences being visible.
What we are doing about it
AMP Capital has been considering the numerous privacy and ethical issues associated with social media companies. As part of this work, we have entered discussions with other investors globally around engaging with social media companies on their efforts to manage user data with integrity and ensure there are appropriate safeguards in place to keep user data secure.
Ultimately, we want companies like Facebook, Alphabet and Twitter to put controls in place to prevent the live streaming and distribution of content that promotes or supports acts of torture, extreme violence or cruelty, rather than accepting that it may take social media companies time to take the content down. In addition, we want the data they collect to be safeguarded from theft, manipulation or other misuse.