Social media companies continue to prosper, but they didn't fare so well in a recent poll that asked consumers how much they trust certain tech firms. The likes of Facebook (FB) and Twitter (TWTR) brought up the rear when it came to questions of protecting personal information and data privacy.
XThe survey by Investor's Business Daily and polling partner TechnoMetrica Market Intelligence found Facebook and Twitter, along with and Snapchat-owner Snap (SNAP) and China's TikTok landed in the bottom four slots. That made social media companies the weakest sector in the 24-company survey. Facebook's Instagram scored a little higher while Pinterest (PINS) got the best marks among the group.
Meanwhile, the survey almost defies logic because the sites continue to add users at a healthy clip, and shares of the publicly traded firms are performing well. But there seems to be one common thread that complicates matters for the trust-hungry sites: politics.
Political Entanglements Create Distrust
"The more entangled you get in politics, the more you pay for it," said Raghavan Mayur, president of TechnoMetrica. He notes that "social media companies get politicized by their very nature."
The poll's scores indicated positive trust for any company that gets above 50. Most social media companies, however, failed to reach that plateau. TikTok was dead last with a score of 41. Second to last was Twitter with 44.6. Snap followed with 45 and Facebook came in fourth to last, with an overall score of 46.2.
However, a couple of social media companies managed to get somewhat positive marks in the survey. Facebook-owned Instagram came in at No. 15 out of the 24 companies, scoring 52.6. Pinterest bested them all, at No. 9, with a score of 58.3.
"I think they are more oriented toward passions or interests," Mayur said of Pinterest and Instagram. "I think it is further away from politics."
Social Media Companies: Despite Data Privacy Hits, User Growth Continues
For the survey, TechnoMetrica developed a Trust Index to gauge which tech companies are perceived as the best stewards of people's data.
It surveyed 4,029 U.S. adults from April through June. Respondents rated their level of trust in protecting their personal information from the 24 firms, which were chosen by the IBD editorial team. The list also includes companies in e-commerce, financial technology and software.
Additionally, the Trust Index scale ranged from 0 to 100, with higher numbers associated with higher levels of trust. TechnoMetrica scaled the responses to create a score where above 50 represents a positive level of trust and under 50 indicates negative trust.
| How Companies Ranked in Trusted Tech Survey | |||
| 1 | Amazon | AMZN | 69.6 |
| 2 | Netflix | NFLX | 69.2 |
| 3 | PayPal/Venmo | PYPL | 69.2 |
| 4 | GOOGL | 64.6 | |
| 5 | Apple | AAPL | 64.4 |
| 6 | Microsoft | MSFT | 64.3 |
| 7 | YouTube | GOOGL | 61.7 |
| 8 | Spotify | SPOT | 59.0 |
| 9 | PINS | 58.3 | |
| 10 | EBay | EBAY | 57.6 |
| 11 | Square | SQ | 57.1 |
| 12 | Etsy | ETSY | 57.1 |
| 13 | Zoom | ZM | 55.7 |
| 14 | Lyft | LYFT | 54.2 |
| 15 | Yahoo | APO | 54.0 |
| 16 | Airbnb | ABNB | 53.2 |
| 17 | Shopify | SHOP | 52.9 |
| 18 | FB | 52.6 | |
| 19 | Uber | UBER | 51.6 |
| 20 | Yelp | YELP | 49.6 |
| 21 | FB | 46.2 | |
| 22 | Snapchat | SNAP | 45.0 |
| 23 | TWTR | 44.6 | |
| 24 | TikTok | N.A. | 41.1 |
| Sources: IBD, TechnoMetrica | |||
Overall, the survey showed that Amazon (AMZN) scored highest, with a score of 69.6. Netflix (NFLX) and PayPal (PYPL) tied for second place with a score of 69.2. Alphabet (GOOGL)-owned Google was next at 64.6, then Apple (AAPL) at 64.4.
Despite their low rankings, social media companies continue to flourish. Facebook has grown its user base continuously since its founding 17 years ago. It now claims 1.2 billion daily active users. Revenue keeps growing at a double-digit clip and it's highly profitable.
Trouble For Facebook
This is true despite Facebook's reputation being rattled and tarnished many times. In April, for example, a hacking forum offered up personal data on more than 500 million Facebook users.
User growth at Snapchat in the second quarter jumped 23% to 293 million as revenue more than doubled. TikTok, owned by China-based ByteDance, reportedly has about 1 billion users.
And Twitter has had its ups and downs but still had 206 million active daily users in its second quarter, up 11%.
Stock-wise, Facebook, Twitter and Snap are top performers with IBD Composite and Relative Strength ratings at 83 or above as of Aug. 11. Pinterest, meanwhile, ranks considerably lower in both metrics.
Data Privacy And The Privacy Paradox
As to why social media remains in widespread use despite the low level of trust, Richard Bird, chief customer information officer at Ping Identity (PING), used the example of the privacy paradox to explain. Ping is an enterprise level software company that enables user authentication and single sign-on to securely connect to the cloud.
The privacy paradox describes online behavior that reveals discrepancies between users attitude and their actual behavior. While users claim to be very concerned about their privacy, they nevertheless undertake very little to protect their personal data, he says.
"Everybody wants privacy, yet consumers give it away even though they know that information about them is routinely accumulated and monetized," Bird said. "They might feel like they are getting more value in return but do not understand the scale of risk."
But the risks are serious and real.
Hackers swipe user data from social networks or from banks and credit card companies. Ultimately, they can distribute that information across the internet. Scammers create phony profiles on social media and, through various tricks, get into the wallets of unaware consumers.
Social Media Companies: Demographics Play A Key Role
In the TechnoMetrica survey, opinions about trust in social media companies varied widely, depending on age, political affiliation, income and other categories.
Facebook, for example, received an overall score of 46.2. But Democrats gave Facebook a score of 60.3, and Republicans gave it a 36. Meanwhile, Republicans gave Twitter a 33, but Democrats gave it a 60.
The last presidential election offers insight on the disparity. Facebook, Twitter and the other social media companies became targets of President Trump and other right-leaning politicians. The right accused social media companies of censorship and bias.
Democrats did jump on Facebook and Twitter as well. They accused the networks of not doing enough to remove specious or blatantly false reports from users. The social media companies ultimately did yank reams of controversial content from their sites, as did YouTube, thus pleasing Democrats.
Adding fuel to the fire, Facebook and Twitter banned Trump from their platforms. And TikTok became a target of Trump, who wanted to boot it out of the U.S.
Further, senior executives of Facebook, Twitter, Amazon and Google have had to testify before Congress several times over the past few years, about scandals involving personal information or to face allegations of monopolistic practices.
Social Media Companies Thumped By Politics
The social media companies do make some efforts to control the damage, said TechnoMetrica's Mayur.
"Every now and then Facebook will tap dance in an effort to please everybody, but it's not clear how all these things will play out without knowing what Congress will do," he said.
Along with political leanings, another big discrepancy in the poll showed up in age groups. The scores of all the social media companies climbed higher for people 44 and under.
"Our generation is not as active on some of these platforms as the younger generation is," Mayur said. "And kids under 18 are not on Facebook."
Yang Cheng, assistant professor of communications at North Carolina State University, likens maintaining trust to equity that grows over time.
"Trust is significantly related to other business outcomes," said Cheng, who specializes in social media and public relations. "Even if a company's product is priced higher then a competitor, consumers will pay the higher price if they trust the brand."
Higher Trust Equals Higher Usage
Cheng was co-author of a study that surveyed 661 social media users about Facebook. Among things it uncovered was the higher the trust level, the higher the usage.
And "Cultivating trust is very important, so companies should engage in activities which promote that," she said.
Facebook, Snap and Twitter declined a request to respond to the survey results.
However, Twitter did point to a blog post headlined "Our continued work to keep Twitter secure."
"We have been, and will continue to be, focused on empowering the public conversation. To do this, we must protect the security and privacy of the people who use our service," it said.
Among other social media companies, Facebook also has blog posts on its site of how it protects a user's data privacy, as does Snapchat.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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