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In 2014, approximately 270,000 people used a Facebook app to take a personality test for academic research purposes. Because of Facebook's terms of service and its application programming interface (API) at the time, however, the app's developer, Aleksandr Kogan, was also allowed to collect information about users' Facebook friends (a function it shut down in 2015). Ultimately, Kogan
obtained data from up to 87 million users, which he then handed to political consulting firm Cambridge Analytica, which in turn used it to build profiles of individual voters and their political preferences to best target advertising and sway voter sentiment. According to Cambridge Analytica whistleblower Christopher Wylie, the firm used this data to help Donald Trump's campaign predict and influence voters in the 2016 presidential election.
While many have called this incident a data breach, that is technically inaccurate and misleading, and risks obscuring the critical lessons for both individuals and businesses. This was neither a breach nor a bug: APIs are officially sanctioned ways to access data from a company's databases, so while perhaps a breach of user trust, there was no breach of Facebook's security measures or its user database. Facebook sanctioned access to this breadth of data when asking users to grant permissions to apps and Facebook's terms of service asked users to acknowledge that their friends could authorize access to their data. The company knew a third party was collecting user data, but it did not know that the data would be passed to an additional party and used the way it was. The quiz-takers had to consent to using the app, but their friends had no way of knowing that their data was being harvested as well.
The scandal broke the evening of Friday, March 16. The following Monday, Facebook shares fell 7%, wiping almost $40 billion offthe company's value, and the company posted a series of subsequent losses as the scandal continued unfolding. By the end of March, Facebook had lost more than $60 billion in market capitalization.
Class action lawsuits have been filed on behalf of both Facebook users whose data Cambridge Analytica obtained and investors looking to recoup losses from the stock hit. Regulators in the United States and Europe were quick to demand answers about the company's...