Facing the Music?

As Criticism of Facebook Grows,
Zuckerberg’s Nowhere to Be Seen

It’s ironic that the creator of a social network that ostensibly trades in the private lives of its clients is himself a highly private person. As hostility towards Facebook’s business model is on the rise, Mark Zuckerberg, the Harvard dropout boy wonder who founded it and became an overnight billionaire, has been less than visible these days.
For some, it’s all about poetic justice. While Zuckerberg fights accusations of having secretly profited from Facebook’s failed IPO, while thousands lost money with it, a tech site’s offering cash in exchange for unguarded pictures of him. His company’s also fighting European regulators over how it stores personal data, and, in the U.S., scrutiny for luring children under 13 onto its social network.
For the record, Facebook’s definitely not the only one being accused of unauthorized use of its members’ most intimate details. Google, another giant of the Internet age, faces similar charges by the European Union. And pretty much every other site, community board, job exchange and even smartphone apps are, in one way or another, guilty of making a so far illegal buck out of its users.
Facebook, though, for being arguably the most popular, and for depending exclusively of customer-generated content to attract advertisers, seems to be setting the (low) business practice standards for the industry. How successful efforts by regulators, consumer advocates, public officials and even some politicians will be, curbing its privacy-busting ways, remains to be seen.
But anything that may help prevent it from becoming the nightmarish, big-brother-like corporation some say it already is, may also establish a new consumer-driven regulatory framework for all other companies, whose main source of income comes from the use and availability of their users’ personal connections.
TWO-SIDED IPO
Even before its May 18 Initial Public Offering, the world’s biggest social network site was already suffering a backlash from its stunning popularity; it has an estimated 900-plus million customers at last count. The IPO fiasco, though, may have opened the gates for unwanted scrutiny, while highlighting again the reasons why Wall Street’s business practices resemble so much a rigged game.
It was supposed to be a stock sale for the ages. Facebook was riding an unprecedented wave of growth, despite a flimsy model, based on the authorized or not use of its members’ social connections. Expectation was high and executives at JP Morgan, Goldman Sachs, and Morgan Stanley all appeared publicly boosting the IPO’s potential to make millions for investors, in the days leading to it.
Instead, as soon as it hit the Big Board, its stock price started to plunge and even now hasn’t shown any sights that it may recover any time soon. Discontented investors, who lost a lot, are now suing Zuckerberg.
They claim that the IPO advisory banks may have illegally tipped off him and selected big clients that revenue estimates were being cut and to dump some shares, to recoup the projected losses, even before the stock was sold to smaller investors. Facebook stock prices have fallen pretty much every day since the offering.
Although financial analysts say that stock sale estimates are supposedly ‘realistic’ forecast for potential revenue, the majority of small investors don’t even know that such estimates exist, or that they’re so informally shared by only a privileged few. The perception that the system is rigged is reinforced by the company’s potential defense, that technically, it didn’t break any rule.
It’s now up to a U.S. District Court of Southern New York judge to rule on the lawsuit’s merit, and to the Securities and Exchange Commission to address the flagrant violation of public trust. Without a decisive action by the latter, though, even if the judge supports the claimants, there’s a chance that ultimately the financial banks’ lobbying will prevail and nothing will change.
While the exact amount of stock Zuckerberg sold remains unknown, some Wall Street insiders say it’s around a billion dollars. As it stands, he may have lost more than 25 percent of his wealth since selling off his shares, but that doesn’t mean he’s about to become destitute or lose his life savings any time soon, as some of Facebook’s smaller investors may already have.
ATTRACTING CHILDREN
There are other reasons for Zuckenberg to hide from the public view lately too, though. As his company’s reportedly seeking to ease younger children‘s access to its content, a bipartisan Congressional Privacy Caucus is behind an initiative to force Facebook to disclose exactly how it intends to cater to such demographics.
As children below 13 fall under stricter regulation around online privacy, any attempt by a largely-adult social network to increase its exposure to them may fall under enforceable rules of disclosure that Facebook is so reluctant to comply. At stake, it’s a huge, potentially untapped market for advertisers that may represent an enormous growth for Facebook.
According to some watchdog groups, as many as seven million children as young as 11 are already routinely accessing the network, and its slew of viral marketing and ad campaigns, in a clear violation of the Website’s own policies. It may take more than a consumer advocate study to force it from tapping into this valuable market.
The company’s already claimed ‘how difficult it is to enforce age restrictions on the Internet, especially when parents want their children to access online content and services,’ as it said in a statement. It vaguely promised to keep ‘kids safe in an evolving online environment,’ by investing in new technologies and all that, but without consumer pressure, it’s unlikely to act on its own.
OPAQUE PRACTICES
Personal privacy remains the single biggest sticky issue, when it comes to social networking, and Facebook as the industry leader, has been setting the example by which all others have followed: disclose as little as possible about how it gathers, stores and profits from its customers’ data, and invoke privileged business information in order to avoid transparency rules.
It also benefits from being a global presence by creating a multitude of ways of reaching and retaining its users, according the local legislation. That way, it quickly switches from one set of rules to another, under the excuse that it’s protecting its market. It also helps that most governments have few tools to protect its citizens’ privacy from multinational companies such as Facebook.
In Europe though, which has stricker rules than the U.S., it quickly ran into trouble with regulators. After a group of Austrian students sued it for its practices, the company had to deal with continent-wide scrutiny. To ward off their demands, it proposed a set of new self-enforceable rules for handling personal data, and submitted its users to a voting process.
Problem is, when the voting ended last week, only a negligible minority, 0.038 percent of users, had actually voted. By staging the largely-ignored process, Facebook thought it’d cleared a hurdle and deflected blame. It was ready to say that it did what it could to allay privacy concerns and if users didn’t care to address it, it was not its fault. But it wasn’t getting off the hook that easily.
The students collected almost 10 thousand signatures that, according to EU’s rules, can force Facebook to take the revisions to a worldwide vote. According to its own rules, the word of at least 30 percent of its customers would be binding, but whether 300 million people will take the time to participate in the process is anybody’s guess.
SUMMER OF ZUCK
Mark Zuckerberg’s troubles go beyond that too. His highly-guarded wedding ceremony last month, which raised questions related to its timing and how secretive he managed to keep the proceedings, while advocating more transparency from Facebook users, may have invited the current public backlash.
Now, Gizmodo, a popular technology site, is offering cash in exchange for unvarnished, but legal, pictures taken of 28-year old who’s coyly declared once that he ‘make things,’ as a definition of his professional skills. In a half-mocking, tongue-in-cheek story, Mat Honan lines up some of the perceived public woes Zuckerberg may have attracted by his publicity-averse personality.
‘Facebook’s share-everything CEO even went so far as to keep his recent wedding a secret from his own friends, presumably to avoid public scrutiny. For all his bluster about public sharing, Zuckerberg reveals very little of himself. That needs to change.’ How publishing pics of his will change such public perception is beyond easy assumptions.
Perhaps to avoid the risk of costly legal liabilities, or even to get into a ‘thing’ with a cranky billionaire, the site emphasizes that it’ll accept only pics taken through ‘legal and honorable means,’ between now and Labor Day. And it’ll pay 20 bucks for those it may choose to publish.
Underneath its patina of humor and self-conscious poking, the promotion does betray a slightly mean streak, by portraying Zuckerberg as nothing short of an ogre, hiding from public view, while plotting another raid on the private lives of Facebook users. But in the long run, it may actually be to his battered image’s advantage.
It’ll depend whether he’ll master the art of image manipulation in time, to turn the tide into his favor, as many a similar mogul has. If he incorporates the criticism to a certain self-deprecating brand of humor so dear to Richard Branson, for example, perhaps seeking the advice of other vilified celebrities, he may even succeed into becoming an apparently benign public figure.
Given all his worldwide foes, though, and his so far disastrous attempts at look like just the guy next door, who happened to have become wealthy beyond any expectation due to the sheer drive of his convictions, we somehow doubt it. It may still be a profitable but incredibly lonely and unfriendly summer for the founder of the world’s biggest network of ‘pseudo-friends.’

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One thought on “Facing the Music?

  1. Our newspaper had it differently with the children. Currently, under 18 are not allowed. I read that they want to accept children under 18 down to the age of 13. That doesn’t mean “under 13” though. I think everyone knows that already there are millions of children, some (if not many) under the age of 13 but pretending to be older. Children are not dumb. I remember what I was doing when I was but nine and ten, and it wasn’t necessarily pretty. But my mind was working…… overtime.

    Like

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