Examining the Relationship Between Privacy Setting Policy, Public Discourse, Business Models and Financial Performance of Facebook

Background: We use Facebook as a case study to investigate the complex relationship between the firm’s public discourse (and actions) surrounding data privacy and the performance of a business model based on monetizing user’s data. Specifically, this paper aims to address the question around the relationship between public discourse during the privacy crisis and Key Performance Indications i.e., active users, revenue, and stock market prices. The study sheds light on how the platform providers like Facebook, influence users to share personal information despite privacy concerns. Methods: For the first research question, we analyze the evolution of public discourse on Facebook from 2004 to 2021, connecting topics to revenue and stock market trends. Utilizing text analytic techniques with data from sources like the Zuckerberg files, we identify 19 topics grouped into six major themes. Addressing the second research question involves regressing public discourse-related parameters against key performance indicators—active users, revenue, and stock market prices—to discern their significance in explaining outcomes. Results: We found a significant relationship between the topics of privacy and social media/technology, sentiment score, and stock market prices. Revenue is found to be impacted by topics about politics and new product and service innovations, while the number of active users is not impacted by the topics. Conclusion: We demonstrate the use of persuasive corporate language that reframes the privacy issue, emphasizing greater user control and responsibility. Additionally, our research evaluates the financial impact of privacy disclosures on social media firms. This study contributes to the privacy paradox literature by exploring platform providers' tactics to encourage data sharing amid privacy concerns. The practical implications suggest that assuring users of data security, highlighting technological trends, and employing positive language positively influence firm performance.