Why would Facebook want to enroll children in a service built with little regard for adult safety/privacy/security? For the money.

June 7, 2012

A floundering Facebook is under increased pressure to shore up their revenue and flat per user minutes. So it was no surprise to see the Wall Street Journal report that Facebook is developing technology to allow children younger than 13 years old to use the social-networking service under parental supervision in spite of their abysmal track record in protecting older consumers.

Yet Facebook is already in deep trouble over their consistent encroachment on consumer privacy, the service is a hot bed for malware and scams, their advertising is not suitable for younger users.

The issues around Facebook’s interest in onboarding the under 13’s fall into three categories:

  • Facebook’s predatory privacy practices
  • Facebook’s financial woes
  • There is a need for a responsible social network where children, adults and commercial content can mix, but Facebook isn’t it

Facebook’s Predatory Privacy Practices

From its inception, Facebook has shown a deliberate disregard for consumer privacy, trust, or safety. This attitude was evidenced by founder Mark Zuckerberg’s early IM comments, and has continued ever since through the company’s privacy policy choices, and blatant deception and exploitation of users information.  Consider the following points:

  • Consumer’s feelings of betrayal run so high that 70% of Facebook users say they do not trust Facebook with their personal information.
  • The FTC found Facebook’s assault on consumer privacyso egregious that last fall (2011) they charged Facebook with deceiving consumers by failing to keep their privacy promises. The FTC complaint lists a number of instances in which Facebook allegedly made promises that it did not keep:
    • In December 2009, Facebook changed its website so certain information that users may have designated as private – such as their Friends List – was made public. They didn’t warn users that this change was coming, or get their approval in advance.
    • Facebook represented that third-party apps that users’ installed would have access only to user information that they needed to operate. In fact, the apps could access nearly all of users’ personal data – data the apps didn’t need.
    • Facebook told users they could restrict sharing of data to limited audiences – for example with “Friends Only.” In fact, selecting “Friends Only” did not prevent their information from being shared with third-party applications their friends used.
    • Facebook had a “Verified Apps” program & claimed it certified the security of participating apps. It didn’t.
    • Facebook promised users that it would not share their personal information with advertisers. It did.
    • Facebook claimed that when users deactivated or deleted their accounts, their photos and videos would be inaccessible. But Facebook allowed access to the content, even after users had deactivated or deleted their accounts.
    • Facebook claimed that it complied with the U.S.- EU Safe Harbor Framework that governs data transfer between the U.S. and the European Union. It didn’t.

The settlement bars Facebook from making any further deceptive privacy claims, requires that the company get consumers’ approval before it changes the way it shares their data, and requires that it obtain periodic assessments of its privacy practices by independent, third-party auditors for the next 20 years.

Facebook also failed from the beginning to build in strong security, monitoring or abuse tracking technologies, issues they’ve attempted to patch with varying degrees of seriousness or success as evidenced by the constant circulation of malware on the service, the breach of consumer’s information, consumers inability to reach a human for help when abuse occurs, and so on.

Facebook’s financial woes

It’s always about the money. With over 900 million users Facebook is still a force to be reckoned with, but their trajectory is looking a lot more like the climax before the cliff that MySpace faced.

Facebook’s financial problems have been building for some time but the company’s IPO brought financial scrutiny to the forefront and highlights their need to infuse new blood into the service – even if that means exposing children to a service that already poses clear risks to adults. Here’s a quick recap of the financial failings of Facebook:

  • Facebook stock is in a free fall, closing at $26.90 on June 4th when this article was written. That’s down more than $11 dollars, or 29% in the first 17 days of trading – and the stock continued to fall in after hour trading.  
  • The IPO valuation fiasco is far from over; Zuckerberg is now being sued for selling more than $1 billion shares just before stock prices plummeted. The suit says Facebook a “knew there was not enough advertising revenue to support a $38 stock valuation but hid that revenue information in order to push up the share price”.
  • In April, Facebook’s payments revenue went flat according to Business Insider. After growing a consistent 20% quarter over quarter, the first quarter of this year “revenue from payments and other fees [from games and partners] actually fell slightly, according to its latest filing with the Securities and Exchange Commission.”

A new Reuters/Ipsos poll shows that 4 out of 5 Facebook users have never bought a product or service as a result of ads or comments on the site, highlighting Facebook’s inability to successfully market to users.

  • The amount of time users spend on Facebook has also gone flat according to ComScore, a fact also highlighted by the Reuters/Ipsos poll which found that 34% of Facebook users surveyed were spending less time on the website than six months ago, whereas only 20% were spending more.


  • Advertisers are bailing. A nasty reality check came from General Motors just days before the company’s IPO as GM pulled their ad campaigns saying “their paid ads had little effect on customers” according to the Wall Street Journal.  

And an article on HuffingtonPost.com  reports that “more than 50 percent of Facebook users say they never click on Facebook’s sponsored ads, according to a recent Associated Press-CNBC poll. In addition, only 12% of respondents say they feel comfortable making purchases over Facebook, begging the question of how the social network can be effectively monetized.”

It’s easy to see why investors are angry, lawsuits have been filed and the government is investigating the debacle.

When 54% of consumers distrust the safety of making purchases through Facebook, and 70% of consumers say they do not trust Facebook with their personal information, and reports that consumer distrust in Facebook deepened as a result of issues around the IPO the company are surfacing, Facebook is looking more tarnished than ever.

As Nicholas Thompson wrote in The New Yorker, “Facebook, more than most other companies, needs to worry deeply about its public perception. It needs to be seen as trustworthy and, above all, cool. Mismanaging an I.P.O. isn’t cool, neither is misleading shareholders. Government investigations of you aren’t cool either.” And ´ The reputation of Facebook’s management team has also been deeply tarnished, particularly by the accusations that it wasn’t entirely open to investors about declining growth in its advertising business.”

There is a need for a responsible social network where children, adults and commercial content can mix, but Facebook isn’t it

Facebook has identified a real gap. There is a legitimate need for a social networking platform where kids can interact with adult family members and other trusted older individuals as well as commercial entities.

This need is evidenced by the 5.6 million underage youth still using Facebook today with or without their parent’s permission for lack of a more appropriate solution.

This 5.6 million underage user number is noteworthy for two reasons:

A)      It shows a significant number of children are using the site.

B)      More importantly it represents a 25.3% reduction of underage users over the past year when Consumer Reports found 7.5 million underage users on the site.  One could reasonably assume that the dramatic drop in underage use of Facebook is precisely because Consumer Reports published their data and that alarmed parents stepped in to block their use.

That 25.3% reduction strikes at the very heart of two of Facebook and their advocates’ key tenants; 1) since so many underage kids are already using Facebook, it would be safer for them if Facebook opened up the service for underage users and gave parents some access and controls to manage their use, and 2) parents want their children to be able to use Facebook.

To be clear, of the 5.6 million children still on the service, many have parents who helped them get onto Facebook. According to Dr. Danah Boyd, one of the researchers studying the issue of parents helping children get on the site, the reason parents told her they allowed their children on Facebook was because parents “want their kids to have access to public life and, today, what public life means is participating even in commercial social media sites.”

Boyd added that the parents helping their kids with access “are not saying get on the sites and then walk away. These are parents who have their computers in the living room, are having conversations with their kids, they often helping them create their accounts to talk to grandma.”

Note that Boyd’s findings don’t say parents want their children on Facebook. The findings say parents want their child to have access to public life. Given the dearth of alternative options, they allow their kids on Facebook with considerable supervision.  Why with considerable supervision? Because the site has inherent safety issues for users of all ages, and the safety issues would be greater for kids.

To date, Facebook has chosen not to cater to children under 13 because to do so requires complying with the Children’s Online Privacy Protection Act (COPPA) which Facebook advocate Larry Magid suggests “can be difficult and expensive” – yet hundreds of companies who take children’s privacy seriously comply with the policies today.

It is more than a little suspicious that Facebook made public their consideration to open their service to children just after they doubled their lobbying budget and just before the upcoming review of COPPA requirements – where the company will have the opportunity to press for weaker COPPA regulations.

Would it be safer for kids using the site to have additional protections such as Facebook suggests implementing?  Yes. But that’s the wrong question.  It is also safer to give kids cigarettes that have filters than to let kids sneak cigarettes without filters.

The real question is how do we fill the existing gap that compels kids to get onto a service that was never designed to protect them?

We need a service that has all the safety, privacy and security protections of the best children’s sites that also allows access to the broader public, news, events, and even appropriate advertising.  That service could easily interface with aspects of Facebook, yet leverage reputations, content filtering and monitoring, and human moderators to provide an environment that Facebook does not have, nor has shown any interest in creating.

This service is imminently buildable with technologies available today, but Facebook’s track record shows they are not the company to entrust with building the online service capable and willing to protect our children’s online safety, privacy and security.

Facebook’s proposal is all about their financial needs, not the needs of children.



80% of Americans Will Purchase a Gift Card this Holiday Season; Know the Risks

December 6, 2011

A record number of gift card purchases are expected this holiday season according to an NRF survey conducted by BIGresearch which estimates 80.2% of American’s will purchase at least one gift card[i].

The research also indicates that holiday shoppers will spend average of $155.43 on gift cards, a 6.7% rise from $145.61 last year. If these numbers hold true, total spending on gift cards this holiday season will reach $27.8 billion dollars, a 12% increase over the $24.78 billion spent in 2010.

Unfortunately, the convenience of giving gift cards isn’t reflected in the actual use of the cards.

Why gift cards can be risky

Studies show that consumers lose billions of dollars from gift cards each year as cards are forgotten, misplaced, portions are taken as user fees, or the stores behind the cards go bankrupt.

Last year, (2010) the financial services research firm, The Tower Group, estimated consumers lost about $2.5 billion from gift cards. This loss stems from a number of issues:

  • According to a Consumer Reports poll, 27% of people who received gift cards last holiday season have yet to use them (Oct. 2011 data). Respondents were most likely to say this was because they did not have time (51%) or because they forgot about the gift card (41%)sub>[ii]. Lost or damaged cards are also responsible for a slice of the money lost from unused cards.
  • In spite of the 2010 Credit CARD Act that put stiffer laws into effect in August of 2010 intended to protect consumers from high usage fees, short expiration dates, and other practices. However, gift card issuers can still charge hefty fees to buy the cards (expect a fee ranging from $3-7 dollars per card).
  • Card issuers may also charge a fee for every month of inactivity; Visa gift cards for example lose $2.50 a month after 12 months of inactivity[iii].
  • Another loophole not covered in the Credit Card Act is that card issuers do not have to reimburse the value of the cards if they go bankrupt[iv]. To make matters worse, stores do not have to inform you that they have filed for bankruptcy when selling their gift cards – allowing them to collect substantial sums they will never have to repay and even after a company has gone bankrupt, gift card resale sites may still be selling cards to unsuspecting consumers[v].
  • Thieves may have tampered with the gift card before you even purchased it. Using a handheld scanner, thieves read the card’s code, and, when combined with the information on the front of the card, it gives the thieves all they need to redeem the card before you do. On cards without a fixed value they simply call the 800 number to see if it has been loaded with a dollar amount, and if so for how much.  Consumer reports recommends that to reduce the chances that thieves will drain the card, don’t use gift cards hanging on a rack, ask for one that is behind the counter, and if the card is preloaded,  ask the cashier to scan the card to see that the value is intact[vi].
  •  designed to make redeeming the full value of gift cards difficult or impossible.

When giving a gift card, think safety

The Consumers Union has lobbied petitioned the Federal Trade Commission on behalf of consumers asking the commission to go further in their protection of consumers holding gift cards particularly when companies are facing bankruptcy so that funds are set aside to cover the value of these cards. They also recommend that the FTC establish a registry of businesses who have filed for bankruptcy so that consumers have an easier way to gauge the risk of a gift-card purchase. Until these proposals become law, you still have to largely take your own precautions:

  1. Consumer reports says you can reduce the chances that thieves have compromised a gift card, by following a couple of simple steps: 1) don’t use gift cards hanging on a rack, ask for one that is behind the counter, and 2) if the card is preloaded, ask the cashier to scan the card to see that the value is still intact[vii].
  2. If purchasing gift cards online, always look at the site’s refund policy and keep your receipts in case of trouble and you need documentation.
  3. Check the solvency of the card issuer; this is particularly important for restaurants and smaller businesses, but bankruptcies have hit companies of all sizes.
  4. Look for the gotcha’s – excessive fees, penalties for not using the card within a specified time period, etc.

Not all gift cards are equal if you try turning gift cards into cash

There are now several websites like Plasticjungle, Giftcardrescue, and Cardpool that allow you to exchange your gift cards for cash for a percentage of their value – they also resell these cards at a discount.  What you’ll find however is that just because the dollar amounts on gift cards are equal, doesn’t mean the cards have equal value. These websites usually pay more for cards from huge chains like Home Depot or Wal-Mart where there is a large consumer interest in the resold cards, and less for cards from more niche businesses.  Because the value of a card can vary, be sure to look at several card exchange sites to get the best deal; you may get 95% of the card’s value, or you may only be offered 50%.

At the end of the day, a nice holiday card with cash inside is a far safer form of giving.


Consumer Reports Study; Young Adults, Cars, and Phones a Deadly Mix

March 23, 2011

April’s Consumer Reports’ Magazine shows the results of a new nationwide survey on distracted driving and the results are once again sobering.

The study, conducted by the Consumer Reports National Research Center, found that “almost two-thirds of the survey respondents had seen drivers in other vehicles texting on a cell phone or other mobile device, just in the previous 30 days. Almost all—94 percent—had observed motorists talking on a handheld phone. In the same period, more than half had seen a dangerous situation that was related to a distracted driver.”

To be clear, the term ‘distracted driving’ includes any behavior that make the driver take their focus off of the road, not just those that aren’t cell phone related, but the use of cell phones while driving has dramatically increased the number of distracted driving accidents. In 2009, the most recent year with available data, cell phones were involved in 18% of the 5,474 deaths, and people killed in fatal accidents involved the use of a cell phone according to the Department of Transportation.

Teens are the worst offenders, but adults set poor example

Among survey respondents under 30 years old, 63% reported using a handheld phone while driving within the previous 30 days and almost 33% had texted while driving. This compares to 41% and 9% respectively, of respondents who are 30 or older.

Just how distracting interacting with cell phones can be has been documented in several studies; in addition to the Department of Transportation’s data, a study in the American Journal of Public Health found the increase in texting while driving is estimated to have caused more than 16,000 additional road fatalities between 2001- 2007. And a report released by National Organizations for Youth Safety (NOYS) and The Allstate Foundation in 2009 found that despite the recognition of the danger, 83% of teenagers admit that they talk on a cell phone while driving and 68% admit to texting while driving.

The Consumer Reports’ study also found that though 90% of their total survey respondents felt that texting while driving is very dangerous, and nearly 50% considered using a handheld phone very dangerous, almost a quarter of all respondents reported that it hasn’t led them to reduce or stop such behavior.

Increasing awareness and changing behaviors

Sobering as the report’s finding of nearly 25% of users not changing behavior, the flip side is that 78% of respondents said they had reduced or stopped behaviors related to distracted driving. This list shows what factors were most influential.

Additionally, when researchers asked teens to share ideas about what could be done to reduce distracted driving they received some clear feedback:

  • “Make it safe and acceptable to pull over to do such tasks.”
  • “Stiffer penalties, parents applying consequences for minors, and more education/awareness programs.”
  • “Adults don’t discipline like it’s a problem; parents are blind to it. They tell us do not drink and drive, but don’t say do not use the phone.”
  • “I think that apps … that prohibit a user from receiving or sending text messages while traveling over 10 mph are very helpful and should be more widely used.”
  • “Parents should let us kids have a Bluetooth headset so we wouldn’t be tempted to use our phones and take a hand off the steering wheel.”
  • “I know that my friend texts a lot while she’s driving, but whenever I’m in her car, I make her give me the phone and tell me what she wants me to write. …Peer pressure is such a powerful force when you have it in your corner.”

In addition to using technology to help reduce cell phone related distractions, I recommend that you spend time with any teens you parent or work with on the Arbella Insurance Group Charitable Foundation’s Distractology 101 Learning Challenge site. Their learning challenge is a real wake-up notice to users as they discover how much focus they lose when attempting to multi-task behind the wheel.

See more of my blogs on distracted driving:

Additional resources:

Together we can reshape attitudes and risky behaviors of cell phone users in cars.