Mark Zuckerberg and Sheryl Sandberg have a new message for regulators: Limiting Facebook's data collection will destroy a 'lifeline' for small businesses during the pandemic (FB)

Mark Zuckerberg Sheryl Sandberg

Mark Zuckerberg is warning that restricting Facebook's ad targeting will hurt small businesses.
The Facebook CEO and other senior execs say the social network was a "lifeline" for many companies during the pandemic.
During a call with analysts on Thursday, they argued that heavy-handed regulation on Facebook risks negative "macro-economic" effects.
The remarks highlight how the company is using the pandemic to defend itself amid mounting political and regulatory scrutiny.
Facebook has rolled out extensive new products in response to coronavirus, including new ways for businesses to connect with customers and new tools for users to talk to one another.

Facebook has previously warned that attempts to curtail its power would be a gift to China, which is building giant tech companies that don't share the same democratic values it does. Now Facebook has a new reason it says regulators should leave it alone: What's bad for Facebook is bad for small businesses.

The Silicon Valley-headquartered social networking firm is facing unprecedented political and regulatory pressure — from antitrust concerns that culminated in a historic hearing on Wednesday to advertiser concerns around content moderation, and perennial calls for greater privacy protections for users.

The company is now putting fresh emphasis on its positive impact on the economy during the coronavirus crisis, arguing that its advertising tools present a "lifeline" to small businesses and that attempts to restrict its ad tools could have "macro-economic" effects.

On Thursday, Facebook reported its second quarter financial results for 2020. It was a resounding success across the board, handily beating Wall Street's expectations on everything from revenues to user numbers, sending its stock climbing 8%.

The company's senior executives used a subsequent call with analysts to reinforce Facebook's economic importance — offering a look at how Facebook is using the pandemic to bolster its political defenses.

First, CEO Mark Zuckerberg warned that regulation around online advertising could impact the entire economy. Here's what he said (emphasis added):

"That's why I am often troubled by the calls to go after internet advertising, especially during a time of such economic turmoil like we face today with Covid. It's true that making it more difficult to target ads would affect the revenue of companies like Facebook. But the much bigger cost of such a move would be to reduce the effectiveness of the ads and opportunities for small businesses to grow. This would reduce opportunities for small businesses so much that it would probably be felt at a macro-economic level. Is that really what policymakers want in the middle of a pandemic and recession? The right path, I believe, is regulation that keeps people's data safe while allowing the benefits of this kind of personalized and relevant advertising."

It's a line that was echoed by COO Sheryl Sandberg, who described Facebook as a "lifeline for businesses" during COVID-19:

"Along with our free tools, personalized advertising is a lifeline for businesses – especially small businesses who can't afford broad campaigns aimed at mass audiences. For just a few dollars, now more than 9 million advertisers use our platforms to reach audiences interested in their products – and we enable this in a way that protects people's privacy and produces measurable results. In today's economy when businesses are struggling and customers aren't physically walking into their stores or restaurants, this is more important than ever.

Facebook has poured considerable resources into its coronavirus response efforts — building new tools like Shops to help businesses build online profiles during pandemic lockdowns around the world, as well as major grant programs to small businesses.

The company has seen business continue to grow by double-digit percentages, despite the economic crisis that has devastated so many other sectors of the economy. Facebook's revenues grew by 11% year-over-year in Q2 of 2020, up to $18.69 billion. And user numbers for Facebook similarly grew by 12% year-over-year, as people flocked to its online services to communicate with friends and family they couldn't meet with physically.

CFO Dave Wehner took a similar tack in his comments — also singling out changes Apple is making to protect users privacy in the upcoming iOS 14 as similarly troubling. "Our view is that Facebook and targeted ads are a lifeline for small businesses, especially in a time of COVID," he said. "And we are concerned that aggressive platform policies will cut at that lifeline at a time when it is so essential for small business growth and recovery."

In this telling, Apple and privacy advocates aren't just out to get Facebook, then, but a risk to the health of the high street and mom-and-pop businesses — a line of argument that matches Facebook's interests with those of the broader economy.

It remains to be seen if regulators buy it.

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