After the Cambridge Analytica scandal, it became clear that tech giants reliant on user data, like Facebook (FB) - Get Report and Alphabet's Google (GOOGL) - Get Report , were harvesting that data. However, it seemed as if the tech industry would get a grip on the problems it had with managing that data.
But then GDPR (General Data Protection Regulation) went into effect in the European Union. Facebook's July-ended quarter revealed slowing user growth in the EU and the social media giant slashed full-year guidance. Facebook Chief Operating Officer Sheryl Sandberg - along with and Twitter Founder and CEO Jack Dorsey - appeared before Congress to discuss their company's data practices. And last month, Facebook revealed 50 million more accounts were hacked.
Google executives were absent from the congressional hearing, but it was revealed Monday that Google decided not to disclose a bug that revealed data of Google+ users to outside developers. Alphabet shares tumbled more than 1% after the news was reported.
So I have to ask: How do we value big data companies now? We no longer have any idea how much data are being exposed. The chances that potentially destructive data exposure isn't taking place at this moment are very slim. It doesn't matter that this last episode with Google only happened on Google+, a failed platform. I have zero confidence the big data industry is manageable. Serious, inhibitive regulation could be impending and that could crimp revenue. Therefore, it's impossible to know the true value of these companies.
To Google's credit, it announced in a blog post that it was shutting down Google+ for consumers. The post also revealed the company had launched an internal initiative called Project Strobe, which reviews third-party access to user data. After the hack at Facebook, the company immediately reported the issue publicly and said it fixed it internally. I want to give credit where it's due.
But none of these corrective actions necessarily mean these companies have users' data under control. Who knows what else is happening that these platforms aren't even aware of? Doing a valuation on these companies is tough.