After Q1 earnings reports, Twitter and Facebook talk privacy and user safety

Facebook's Zuckerberg and Twitter's Dorsey explain how they plan to keep users safe going forward

Financial trends and news by Steven Loeb
April 26, 2018
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This is proving to be an interesting week for tech, as three companies who find themselves smack dab in the middle of one of the biggest privacy scandals ever, are all releasing earnings reports. In fact, two of them just came out on the same day!

First was Google on Monday, in which the company did talk about issues of data privacy a little bit, but only in relation to the European Union and its upcoming regulation, not how it handles user data in the U.S.

On Wednesday both Twitter and Facebook both revealed their earnings reports as well.

In Twitter's earnings, which came out early this morning, Twitter posted earnings per share of 16 cents, higher than the projected EPS of 12 cents, and revenue of $655 million versus the expected $608 million. The company even came out ahead in terms of monthly active users, with 336 million versus an expected 334.2 million.

Facebook, meanwhile, also beat expectations with EPS of $1.69, versus the $1.35 estimate, and revenue of $11.97 billion, higher than the projected $11.4 billion.  

Both companies were asked about the question of privacy on their respective earnings calls. Here's how they responded. 


The issue of privacy came up a few times on the call with Twitter, and were answered by CEO Jack Dorsey.

The first question came from Anthony DiClemente of Evercore Group.

"Jack, just on everything that's gone on in terms of data privacy, I think investors are wondering about the data licensing business that Twitter has and perhaps how should we think about that business in light of potential privacy regulation? Is it possible that there would be a business impact to that presumably high-margin business that Twitter has?" he asked. 

"So we believe that privacy is a fundamental right for everyone we serve on our service. Our data business is something we continue to feel really good about. We are different from our peers in that Twitter is public, and we serve the public conversations, so all of our data is out in the public, out in the open. And our data business just organizes that public data in real-time to make it easier for brands, researchers, and organizations to utilize it," Dorsey responded. 

He gave some examples of how people use the data business, including Virginia's Department of Emergency, "which provides citizen info for the residents and also research."

"We do not provide any personal identifiable information that's not already visible on the service. So we feel really good around the data business, especially with all the conversations going on, and we will continue to hold ourselves publicly accountable to make sure that we fulfill that fundamental right of privacy."

The next analyst to ask about privacy was Colin Alan Sebastian of Robert W. Baird & Co.

"Just given all the headlines around social media and data privacy in particular during March, I wonder if there's any notable change in the linearity of your business worth calling out as you went through the quarter," he said. 

"We haven't seen any change in the linearity of our business. We just released a new privacy policy yesterday to everyone on our service and we continue to make sure that we're pushing ourselves around giving people simple, easy controls around protecting their privacy and seeing the data immediately that we have around them," Dorsey responded.

Kunal Madhukar of Deutsche Bank Securities then asked about the new privacy policy that Dorsey has mentioned. 

"On this new privacy policy that you just rolled out yesterday, how much of the data are you sharing with or actually sharing with third-parties?" asked Madhukar.

"In terms of data to third parties, again, our data business is a little bit different from our peers in that we organize the public information, so that people can gauge insights from them," said Dorsey.

"Normally, this is used for brands, sentiment analysis for citizen services, governments, local governments in particular, and researchers. And we have a Know Your Customer policy, so that we do extensive research in terms of who is our customer around the data. But again, a lot of the data is in the public, and we do not sell any personal identifiable information."


Perhaps not surprisingly, considering the heat that Facebook has faced on this issue, including from the U.S. Congress, both Mark Zuckerberg and Sheryl Sandberg opened the call by discussing the initiatives the company is taking to protect the privacy of their users going forward, and to make sure that something like the Cambridge Analytica scandal doesn't happen again.

“As you know, we have important issues to address. For most of our existence we’ve focused on all the good that connecting people can bring, but it’s clear now that we didn’t do enough to prevent these tools from being used for harm as well. Whether that’s foreign interference in elections, fake news, hate speech or app developers and data privacy. So now we’re going through every part of our relationship with people and making sure we’re taking a broad enough view of our responsibility, not just to build tools but to make sure those tools are used for good. This means continuing to invest heavily in safety, security and privacy," said Zuckerberg.

The company has restricted the data developers can access, built advanced AI tools to help detect and remove tens of thousands of fake accounts, and it has plans to continue to beef up its content review staff to more than 20,000 people by the end of this year. It will also make ads more transparent.

"We recently announced that, from now on, we will require everyone running political and issue ads, or running a large page, to be verified with government ID. We’re also starting to roll out ads transparency tools that bring our ads to an even higher standard of transparency than even TV or print ads. You’ll be able to see who’s running a political ad, who they’re targeting, how much they’re paying, and what other messages they’re sending to different people. We’re going to get this done in time for the 2018 U.S. midterms, as well as upcoming elections in Mexico, Brazil, India, Pakistan and more," he said.

While doing all of that, Zuckerberg also made sure to note that that doesn't mean that Facebook will be stepping back from its other stated mission of connecting everyone in the world. 

"We have a responsibility to keep our community safe and secure, and we’re going to invest heavily to do that. At the same time, we also have a responsibility to keep moving forward and keep building tools that bring people together in meaningful new ways. That’s what makes Facebook so important to so many people, and that’s our responsibility too," he said.

“Beyond the investments we’re making to secure our platform, we’re going to invest even more in building the experiences that bring people together on Facebook in the first place. Over the next three years, we’re going to keep building Facebook to not only be a service that people love to use but also one that’s good for people and good for society.”

When Sandberg spoke, she talked about privacy issues in regards to data and how it is used for ad targeting.

“At Facebook, we have always built privacy protects into our ad systems. We use the information you provide, and that we receive from websites, to target ads for advertisers but we don’t tell them who you are. We don’t sell your information to advertisers or anyone else. We also believe that people should control their advertising experience. For every ad we show, there’s an option to find out why you’re seeing that ad and to turn off ads from that advertiser entirely. You can opt out of being targeted based on certain information, like the websites you visit or your relationship status," she said.

"Advertising and protecting people’s information are not at odds, we do both. Targeted ads that respect privacy are better ads; they show people things that they’ve more likely to be interested in. We regularly hear from people who use Facebook that they prefer to see ads that are relevant to them and their lives.”

Later on, Zuckerberg was asked by DiClemente to discuss his testimony in front of the U.S. Senate and the U.S. House of Representatives and what he learned from that.

"These are important issues and I think that that was an important moment to be able to go and hear what people were wondering about and just to have a public hearing of answering all of the questions around Cambridge Analytica and what we knew and all the steps that we’re taking data privacy and developers to make sure that this doesn’t happen again and to lay out all the different things that we’re doing," he answered.

"The hearings didn’t just touch on that; they also touched on a number of other issues that we’re facing. Including foreign interference in elections and that’s something we’re incredibly focused on. 2018 is going to be an incredibly important year. There are big election, not just the U.S. midterms, but the major elections upcoming in Mexico and Brazil and India and Pakistan and a number of other countries around the world. So this is important and it was an important moment for the company to hear the feedback and to show what we’re doing. And now I think the important thing is that we execute on all the things we need to do to make sure that we keep people safe."

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