On Thursday, members of the Federal Communications Commission voted to overturn Obama-era net neutrality rules in a controversial decision that threatens to change the way Americans purchase and receive internet service and online content.
At the core of the net neutrality debate is a disagreement over what the nature of the internet should be. To some, it seems that internet service providers are delivering a product, just like any other business, and should be free of unnecessary government regulations. To others, it feels appropriate for the government to protect the internet’s status as an equal playing field that is immune from conflicts of interest.
Net neutrality is one of several important ongoing debates about how the internet should function, and with the number of connected devices worldwide set to grow exponentially over the next few years, these debates should become more and more consequential.
Along with net neutrality, one of the more public conversations about the internet that is happening throughout our society relates to how web-based companies handle the private information of their users.
The average person living in a nation with a developed economy and widespread internet infrastructure is online more frequently than ever before. But that also means that all the personal information associated with their online activity—including their name, address, credit card information, shopping habits, and personal relationships—is more vulnerable than ever before.
Public awareness of digital privacy has been increasing for years, but scrutiny over the failure of companies to properly protect user data was punctuated by the devastating Equifax EFX hack in 2017.
What’s more, several notable social media companies have been forced to answer questions related to the use of its website to spread disinformation during the 2016 presidential campaign cycle. As it turns out, a large part of Russia’s concentrated efforts to interfere in the U.S. election took place on public internet forums, and new findings suggest that users on Twitter TWTR, Facebook FB, and Google GOOGL, among others, were subjected to the country’s propaganda campaign.
Now, as we approache the New Year, it looks like user privacy will emerge as the most important tech topic of 2018. Before the “cooler” new trends—including the expansion of the Internet of Things, the deployment of self-driving cars, and the development of artificial intelligence—can really take off, internet companies will need to ensure that user data is secure.
From an investing perspective, user privacy is even more important because we already know that our favorite internet firms are planning to spend tons of cash on security in the upcoming year (also read: One Thing That Could Slow Facebook Stock Down in 2018).
“We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits,” Facebook CEO Mark Zuckerberg said in a recent earnings call. “We already have about 10,000 people working on safety and security, and we're planning to double that to 20,000 in the next year to better enforce our Community Standards and review ads.”
Meanwhile, Apple AAPL was recently compelled to publish a blog post explaining the details of its “differential privacy” practices, which are the company’s own strategies to protect user information—especially sensitive information like keystrokes and traffic history.
Apple first introduced differential privacy in iOS 10 to support data collection that aims to improve QuickType, emoji, and media playback within Safari. In the company’s own words, differential privacy is “rooted in the idea that carefully calibrated noise can mask a user’s data.”
“When many people submit data, the noise that has been added averages out and meaningful information emerges,” Apple continued.
The collection of this highly-sensitive data is enough to make users uneasy in these hyper-aware times for online privacy. Apple’s recent blog is the seventh post in its “Privacy at Scale” series that attempts to explain its security techniques.
Elsewhere, Twitter continues to find itself in the hot seat over its sluggish response to an influx of Russian bot accounts on its platform. According to the Daily Beast, the Jack Dorsey-led company had not provided congressional investigators with information on any additional Kremlin-linked bots nearly a month after identifying 36,746 such accounts at a hearing.
It seems obvious that a social media company would want to reduce the number of malicious accounts on its website. But for Twitter, the problem has been attempting to draw the line between reasonable site maintenance and invading its users’ privacy.
“The tools we use to fight malicious automation and disinformation have to be both globally applicable and scalable for the Twitter platform and the nearly half a billion Tweets served every day,” a Twitter spokesperson said. “We are constantly driving innovation and machine learning to improve our techniques in fighting these challenges across time zones and national borders. We also have to do all of this in a way that protects user privacy and security.”
The security frustrations of Facebook, Apple, and Twitter are just a tiny sliver of a massive issue affecting every company that has the internet at the core of its business. The stakes are incredibly high right now, and it is an issue that will affect bottom lines throughout 2018—and beyond.
As investors, we need to recognize this issue, as the bottom line performance of these companies affects our portfolios. And if you own any buy-and-hold internet stocks that you truly believe in, you might have to cut that company some slack when it decides to spend cash on security.
Want more stock market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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