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Facebook Inc (FB), Google Inc (GOOG), Microsoft Corporation (MSFT) & Apple Inc. (AAPL): Why Big Tech’s Privacy Concerns Are Overblown

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Lately the news has been in an uproar over the American surveillance program, PRISM. The government program sucks up data collected by major tech companies. If consumers placed a premium on their privacy, this would spell trouble for many large tech firms that make their living by collecting all sorts of personal data. The reality isn’t that grim for America’s corporate giants. Recent polls suggest that 45% of Americans support the government tracking everyone’s online activities.

Facebook Inc (NASDAQ:FB)

Government tracking of electronic activity isn’t a surprise

The media uproar over PRISM is overblown. For years it has been obvious that the U.S. government has been engaged in widespread tracking of electronic data. Researchers have known that government agencies installed tracking technology in the internet’s backbone to siphon off as much data as possible. The NSA is building new datacenters with massive storage capacities, perfect for analyzing mountains of data.

Is the tech industry a willing participant?

It is important to note that almost every major tech company has denied that they have given the U.S. government unlimited access to their servers for the PRISM program. This suggests that the government is plugging itself directly into the internet backbone and siphoning off data without having to ask for permission. By framing the narrative in this manner, corporations can frame the conflict as the government against the people and private corporations, not the government and private corporations against the people.

AAPL data by YCharts

The impact on the bottom line

Facebook Inc (NASDAQ:FB) is one of companies most exposed to potential privacy concerns. While search engine operators record users’ searchers and search locations, Facebook has access to more intimate information. Facebook knows who your friends are, where they live, where you live, and a host of other personal data. The fact that billions of people have already put their personal data on Facebook Inc (NASDAQ:FB) suggests that the majority of people are fine with giving a corporation such private information.

Facebook’s claim to fame is their ability to sell demographic ads. While competitors are forced to guess individuals’ demographics based upon the sites they visit, users tell Facebook Inc (NASDAQ:FB) their sex, birthday and a host of other data points. With a slim profit margin of 0.3%, an earnings before interest and taxes (EBIT) margin of 9.4% and earnings per share (EPS) of $0.01, Facebook needs all of the money their demographically targeted ads offer.

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