Facebook User Engagement Data Goes From Bad To Worse

Facebook user engagement was already starting to fall by the wayside and the company was already scrambling to figure out new methods for boosting its user engagement before it came under fire over the past month for the Cambridge Analytica scandal.

Now, new data from Cowen's monthly social engagement survey shows that activity continues to fall. As reported by Bloomberg:

Facebook CEO Mark Zuckerberg did well under Congress’ microscope, but Facebook has more hurdles to overcome as data shows a decline in user engagement, writes Cowen analyst John Blackledge.

Cowen’s monthly social engagement survey found that time spent per day by U.S. users declined moderately in 1Q y/y; likely due to platform management changes from 2H17 

Despite the data, Cowen was bullish on all things left open for interpretation, stating that "political and regulatory hurdles will likely persist, but FB is open to working together to solve the issues". 

In a seperate note put out by Cowen's Washington correspondence, analyst Paul Gallant noted that an FTC investigation into the company's compliance with its consent decree remains a risk and that "Democrats are unhappy and want legislation". What else is new.  

3. DEMOCRATS UNHAPPY & WANT LEGISLATION. Numerous Democrats said Facebook's
advertising model is fundamentally in tension with user privacy and that Facebook has not
lived up to prior commitments of self-regulation. Most indicated that legislation -- not self
regulation -- is the only way to protect consumers at this point.

4. LEGISLATION UNLIKELY. After watching the hearings, our sense is Facebook has a
window to improve on its own. If 6-9 months months pass and little changes, Republicans
may well shift to legislation. But in the hearings, most Republicans retained their preference
for light-touch regulation, including some who said formal regulation would actually lock
in Facebook (and Google's) dominance and prevent the next Facebook from emerging. But
midterms important: Democrats' call for privacy legislation was led by Reps. Pallone and
Eshoo, who appear to favor comprehensive GDPR legislation. If Democrats win the House in
November, the chances of legislation would rise, although a likely Republican Senate would
still make passage an uphill battle.


5. FTC IS KEY. We think the FTC's investigation of Facebook's consent decree compliance is
quite important. At a minimum, we expect a big fine -- probably in the billions. We also think
the FTC could impose some privacy changes -- perhaps data breach notification, clearer
data usage notifications to users, etc -- in a new consent decree. But we think new FTC
requirements would not be game-changing -- such as mandating GDPR-like opt-in consent
-- given that key members of Congress are saying legislation would be required for opt-in
(as it was in Europe).

It was less than two months ago that we wrote about Facebook's most recent "dirty trick" for trying to boost its user engagement numbers - using phone numbers provided for two-factor authentication to send users data they can "engage with" but didn't sign up for recieiving via text message. In that article we told the story of Gabriel Lewis, who tweeted that Facebook texted "spam" to the phone number he submitted for the purposes of 2-factor authenticationAnd no, he insists he did not have mobile notifications turned on. 

What's more, when he replied "stop" and "DO NOT TEXT ME," he says those message showed up on his Facebook wall.

Lewis had explained his version of the story to Mashable via Twitter direct message. 

"[Recently] I decided to sign up for 2FA on all of my accounts including FaceBook, shortly afterwards they started sending me notifications from the same phone number. I never signed up for it and I don't even have the FB app on my phone."

Lewis further explained that he can go "for months" without signing into Facebook, which suggests the possibility that Mark Zuckerberg's creation was feeling a little neglected and trying to get him back. According to Lewis, he signed up for two factor authentication on Dec. 17 and the alleged spamming began on Jan. 5. Importantly, Lewis wasn't the only person who claims this happened to him. One Facebook user says he accidentally told "friends and family to go [to] hell" when he "replied to the spam."

Of course, despite this Cowen survey providing a less than optimistic forecast for Facebook's user engagement heading into Q2, Cowen still called the company one its its "top picks in the universe" and kept the company at outperform with a $210 price target.