Facebook (NASDAQ:FB) recently disclosed the discovery of a security flaw affecting nearly 50 million accounts. The company claims that hackers exploited the “View As” feature — which lets users see what their profiles look like to other users — to obtain access tokens to take over users’ accounts.
Facebook stated that it had already patched the vulnerability, but the breach is another black eye for the tech giant — which is still struggling to address concerns about the proliferation of fake news, vulnerability to foreign propaganda, fallout from the Cambridge Analytica scandal, decelerating sales growth, and departures of key executives and founders.
This breach probably won’t be as serious as Cambridge Analytica unless it’s revealed that the leaked data was sold to third parties. However, Facebook’s latest setback could represent a growth opportunity for several other tech companies — including FireEye (NASDAQ:FEYE), Snap (NYSE:SNAP), and Amazon (NASDAQ:AMZN).
A tighter relationship with FireEye?
Facebook’s most damning executive departure was arguably the resignation of Chief Security Officer Alex Stamos in early August. Facebook stated that it wouldn’t replace Stamos, who served as its CSO for just more than three years. The decision was surprising, but some people speculated that Facebook might outsource its security needs to a cybersecurity company instead.
The target for much of that speculation was FireEye. Shortly after Stamos’ departure, The New York Times reported that FireEye helped Facebook spot disinformation campaigns in Iran and Russia. Alphabet‘s Google also thanked FireEye for helping it identify and disable suspicious accounts.
That report indicated that FireEye, which offers threat-detection services to a large number of Fortune 500 companies, could land Facebook as a major customer. That would be a major win for FireEye, which has struggled with lackluster sales growth in recent quarters as it pivoted from appliance sales toward cloud-based services.
A stay of execution for Snapchat?
Snap’s Snapchat suffered its first-ever sequential decline in daily active users (DAUs) last quarter, which fell by three million to 188 million. Most analysts attributed Snapchat’s decline to the growth of Facebook’s Instagram, which cloned most of Snapchat’s defining features — including ephemeral messages, filters, and short video stories. Instagram Stories notably topped 400 million DAUs earlier this year.
However, Facebook admitted that users of Instagram and other apps that utilized the “Facebook Login” feature were still exposed to its latest data breach. This gives Snap CEO Evan Spiegel, who has repeatedly condemned Facebook’s privacy practices, a chance to go on the offensive.
At Recode’s annual Code Conference in May, Spiegel mocked Facebook’s tendency to copy Snapchat’s features and stated that Snap would “really appreciate it” if it also “copied our data protection practices.” Snap launched its Snap Kit API for third-party apps the following month but blocked developers from accessing user data in a clear jab at Facebook.
A recent Survey Monkey study for Common Sense Media found that 69% of teens — who overwhelmingly prefer Snapchat and Instagram to Facebook — stated that it was “extremely important” for sites to request permission from users before selling or sharing their personal data. Therefore, Facebook’s latest debacle might hurt Instagram and cause more users to shift back to Snapchat.
An advertising opportunity for Amazon?
Amazon, which recently partnered with Snapchat for visual e-commerce searches, is generally considered an e-commerce or cloud services company. However, a recent eMarketer survey revealed that Amazon will also become the third-largest online ad platform in the US this year after Google and Facebook.
The firm claims that Amazon will generate $4.6 billion in ad revenues this year and claim 4.1% of the overall market. Amazon generates ad revenues by selling display ads across its online marketplace, hardware devices, and other associated websites.
Google and Facebook’s combined ad revenues should still account for 57.7% of the market this year. However, privacy concerns surrounding both tech giants could send advertisers flocking to alternative advertising platforms like Amazon — which crafts targeted ads based on the less-invasive record of a user’s past purchases or activities across its digital platforms. Therefore, Facebook’s latest setback could be great news for Amazon’s ad unit.
But let’s not get ahead of ourselves…
A data breach involving 50 million users is significant, but it only represents 2% of Facebook’s monthly active users (MAUs) worldwide. Facebook also reported and fixed the issue promptly — unlike other companies that have sat on data breaches for months before admitting their mistakes. Facebook’s data breach might help out these three companies, but we also shouldn’t get ahead of ourselves and exaggerate the overall impact.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Amazon and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Facebook. The Motley Fool recommends FireEye. The Motley Fool has a disclosure policy.