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Munster Lays Out 3 Layers To Facebook's Problems, Says Its Best Days Are Long Gone

Munster Lays Out 3 Layers To Facebook's Problems, Says Its Best Days Are Long Gone

Social media giant Facebook, Inc. (NASDAQ: FB) was rocked this week by yet another scandal after The New York Times reported a deep dive investigation suggests the company agreed to share user data with more than 150 companies.

Gene Munster: 3 Layers Of Facebook's Problems

Facebook's latest privacy scandal indicates there are "three layers" of structural problems at the company, Loup Ventures' Gene Munster told CNBC Wednesday afternoon.

  • The first layer relates to compliance and legal issues as the company now faces a lawsuit on behalf of District of Columbia Attorney General Karl Racine.
  • The second layer involves an "erosion of faith" among users who are now questioning if the social media company is taking the right action to protect their privacy.
  • The third issue has yet to fully materialize, but consists of the question of Facebook and Instagram's role of "making the world a better place."

"Ultimately most people don't feel better about themselves after they use these networks because of the comparison effect," Munster said. "So I think the best days of Facebook unfortunately are behind them."

Looking forward to this time next year, Munster thinks it's unlikely Facebook will implement any high-level executive changes. But the company will implement some changes to its underlying business that "may surprise investors."

Former FTC Exec: Facebook Is Violating Agreements

Facebook reached an agreement with the Federal Trade Commission several year ago in which the company agreed not to be deceptive in statements related to privacy, Ashkan Soltani, former chief technology officer at the FTC, told CNBC. Recent media reports suggest Facebook didn't "follow through" with its promises although this was generally known.

But what is new and surprising is the "scale and scope" of which Facebook is reportedly handing out data to other companies, he said. Facebook may be truthful in saying it doesn't sell data in exchange for money, but it may be exchange data for "integration onto new platforms or partnerships where developers build apps for them -- so it is a sale."

Facebook fell 7 percent Wednesday to close at $133.24 per share.

Related Links:

Facebook Takes Heat From NAACP, Muslim Advocates And Trump

Munster: There's Something 'Fundamentally Wrong' With Facebook


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