In the universe of social media, there's Facebook (NASDAQ:FB), and there are all the other platforms that only wish they were Facebook. Prominent among the wishers was Google Plus, Alphabet's (NASDAQ:GOOGL) (NASDAQ:GOOG) ambitious attempt. We all know it didn't work -- indeed, its irrelevance in the social media space is so total that MarketFoolery host Chris Hill thought that the company had killed it ages ago, because he couldn't imagine CFO Ruth Porat would let Alphabet keep wasting resources on such a losing bet.
In this segment, Hill and and senior analyst Jim Mueller discuss the security issues that actually led Alphabet to cut its losses and end the service, the cover-up of the breach, the company's history of information security problems, and more.
A full transcript follows the video.
This video was recorded on Oct. 9, 2018.
Chris Hill: We have to start with the story that broke yesterday afternoon after we had taped yesterday's Market Foolery, and that is Alphabet shutting down Google+. Honestly, I wasn't even aware that was still a thing. For those unfamiliar, and I'm assuming that most people, Google+ was Google's attempt at a social network. By the way, there have been multiple reports on this story from mainstream media outlets that are just out and out referring to this using some version of the word "failed." "Google+, the failed social network," you know?
Now, joking aside, they're shutting it down because there was a breach of some sort, a security breach.
Jim Mueller: Yeah, they messed up.
Hill: It happened six months ago.
Mueller: Well, no, it started as early as 2015. They just discovered it six months ago.
Hill: Oh, this is getting better all the time. I think there are a couple of threads I want to pull here. We'll get to the security one in a second. All joking aside, I'm a little surprised that Google+ was still around because of Ruth Porat, who's been the Chief Financial Officer at Alphabet for a couple of years now. She's done a phenomenal job. I just assume, anything that is running at Alphabet has gotten Ruth Porat's sign off. When I saw the news that Google+ was being shut down, before I knew anything about the security issue, I just thought, "Wow, I would have assumed that that thing was killed years ago."
Mueller: Yeah. Because Facebook, right?
Hill: Their attempt to compete with Facebook.
Mueller: And they were already behind when they started. The Wall Street Journal, had a great quote by Youssef Squali. "Google was trying to be more powerful than the Pope when they launched it." The Pope in this case being Facebook. But it shouldn't have taken several years for them to figure out that they're not going to catch up. So why keep it open?
Hill: My assumption is, they kept it open because, at least on some level, there was a business case somewhere. Maybe in and of itself, it was not a profitable entity, but it tied into other things that they were doing. Because they kept it going. I mean, it's been failing for a long time. They've kept it going. And now they're shutting it down because of the discovery of this breach, which they didn't reveal six months ago because they thought it would make them look bad.
Mueller: Well, you have to remember, that's when the Cambridge Analytica and Facebook story was still very much in the news and everyone was being ruled by Congress. Alphabet apparently didn't want to play in the same fields there. Even though now the story has come out, as it does, and it's not so much that there was a breach. It was that they didn't report it at the time. It's not the sin, it's the cover up that makes people even more upset. And I think people have a right. And even the reporting on this, they say they didn't have a lot of activity logs on the activity that these app designers were doing. They haven't talked to any of the app designers. They just looked at some and noticed their profiles, and they hadn't had any complaints, so they figured nothing probably happened, so we're good.
Hill: And in fact, maybe nothing nefarious was going on. But as you said, it's the cover up. On top of which, part of my reaction to this story is, you're supposed to be good at this, aren't you? Isn't Alphabet supposed to be good at security? Rightly or wrongly, I expect more from Alphabet when it comes to data security and being able to prevent any kind of a breach. I expect more from them than I do from Home Depot.
Mueller: I don't know why.
Hill: [laughs] I was going to say, just to pick one random retailer that in the last few years has --
Mueller: Or Target or somebody like that. But no, Google has this whole history of security problems. When Gmail was first launched, don't you remember the big hoopla? They were scanning people's emails to serve them ads better. People pushed back, and they said, "OK, students and businesses and government users of this, we won't do that." But they only just recently stopped doing that on everyone else on Gmail. Then, on the street view cars, with the cameras, for their Google Maps, the street view, you can go down and see what the business looks like, or your home. They were "inadvertently" picking up data from unsecured Wi-Fis, such as URLs or passwords, from people's homes. So, having high expectations of Google is nice, but hasn't been really born out.
I think it speaks more to the whole issue about big data. Facebook's Cambridge analytical story, Target's and Home Depot's and everyone else's breaches. Defense is hard because the offense always has the advantage. They're going to find those loopholes. They're going to find those holes. It's hard to imagine what all can be done with this stuff.
Hill: When Facebook recently had the departure of the executives from Instagram and the folks from WhatsApp, and that sort of thing, one of the things we were kicking around in the office was, "Boy, if you're doing acquisitions for another big tech company, that's probably a nice talking point. Hey, you should let us buy you instead of Facebook, because look at what happens with those people." In that same vein, I think if you're whoever is in charge of the burgeoning advertising business at Amazon, you have to like this news. It's one more talking point for potential advertisers, like, "Well, maybe cut down a little bit of your spend with Google and come on over to Amazon."
Mueller: Well, just like Facebook was dominant in social media back at the time, Google is the dominant player and dominant source. I mean, Google's a verb now. It's not just the name of the company.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Chris Hill owns shares of AMZN. Jim Mueller, CFA owns shares of Alphabet (A shares), Alphabet (C shares), and AMZN and has the following options: long January 2020 $1370 calls on AMZN and short January 2020 $1380 calls on AMZN. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), AMZN, and Facebook. The Motley Fool has the following options: short February 2019 $185 calls on HD and long January 2020 $110 calls on HD. The Motley Fool recommends HD. The Motley Fool has a disclosure policy.