Will Obama Listen to Zuckerberg? - Analyst Blog

Since the revelation of Edward Snowden's documents and National Security Agency ‘s (NSA) controversial surveillance practices, Facebook's FB founder and Chief Executive Officer CEO Mark Zuckerberg has criticized the U.S. government several times in public.

However, for the first time, Zuckerberg directly telephoned President Obama after a media report indicated that NSA has the technology to infect millions of computers globally through malware. The report also alleged that NSA can impersonate a Facebook server and easily infect targeted computers.

Although the discussion has been confirmed by White House, the exact details were not made available. Apparently, the discussion did not satisfy Zuckerberg, who later lambasted U.S. government's stance in a public post:

“The US government should be the champion for the Internet, not a threat. They need to be much more transparent about what they're doing, or otherwise people will believe the worst.

I've called President Obama to express my frustration over the damage the government is creating for all of our future. Unfortunately, it seems like it will take a very long time for true full reform.”

The statement sums up the overall mood in the Silicon Valley, as the concerns over Internet's security and privacy continue to escalate each day. Although NSA's denial tried to soothe nerves, the growing mistrust between the government and Industry is a major concern.

Although the spying allegations affect most of the IT companies including Microsoft MSFT, Google GOOG and Yahoo YHOO, we believe Facebook stands to lose the most as its business is entirely dependent on trust. The company handles huge amount of data and sensitive information of its 1.2 billion users.

To protect it from any kind of espionage, including impersonation, Facebook started encrypting all its pages from 2013. However, increasing government surveillance may alienate users, who will fear that using Facebook will put their privacy at stake. Moreover, this can significantly jeopardize Facebook's dream project Internet.org.

The initiative aims at connecting billions of people, particularly in emerging markets, who will be able to access basic data services such as search and Facebook. For this, Facebook is looking to partner regional carriers. However, the spying allegations may prevent local carriers to join this initiative on the ground that it will bring them into direct surveillance of the U.S. government.

Hence, Zuckerberg's outrage and the resultant phone call to the President are justified. But will it be enough to move Obama? We will be eagerly awaiting the outcome.

Currently, Facebook has a Zacks Rank #2 (Buy).