Facebook's 5 Worst Judgment Calls

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BOSTON (TheStreet) -- With more than 400 million users, Facebook is a global phenomenon. But its rise to the top of the social networking scene has been far from smooth. Anyone seeing David Fincher's The Social Network this weekend will get a sense of that. Here's a look at five of the biggest mistakes and flubs in the site's short life.

BREACHING PRIVACY

From its earliest days, privacy concerns have dogged Facebook. That reputation could hurt in the long run if users defect or government regulators in the U.S. or Europe) make good on threats to step in.

Only the most naïve don't anticipate that information posted, or searched for, on the Internet is likely to be viewed, parsed, analyzed and horse-traded. Facebook, however, has made it an art form.

Loose privacy standards are the core of its revenue generation. Far more than its meager advertising base, the company profits from the granular data mining allowed for by its platform. Its frequent rejiggering of privacy settings means a temporary open window for the grabbing of whatever's been posted by otherwise locked-down users.

The site's Terms of Service agreement essentially says any user content -- be it a thesis paper, wedding photos or even your profile picture -- can be considered their property and usable in any way they see fit.

The site's short-lived Beacon advertising platform was intended to send messages about what your "friends" were buying online. That even actual friends might want some purchases to be private somehow eluded the Social Network geniuses.

More recent outcry revolves around the "like button," a traditional feature users click on to express appreciation for posts or a variety of people, places and things. Recent changes have repurposed it as a privacy-setting bypass, and each click goes public. Along with its Open Graph software, Facebook can get its mitts on other sites you visit, populating them with pushed content and the activity of your "friends" who have also visited.

KEEPING ZUCKERBERG AS ITS PUBLIC FACE

Keeping wunderkind Mark Zuckerberg as the public face of the company does far more harm than good.

 

Zuckerberg comes across as highly unlikable and certainly not someone who can stoke enthusiasm for, or instill confidence in, his company and its policies.

You may not like or fully appreciate Microsoft's (Stock Quote: MSFT) Bill Gates, Apple's (Stock Quote: AAPL) Steve Jobs or Amazon's (Stock Quote: AMZN) Jeff Bezos but, given the chance, few would pass up a dinner invitation from these "faces" of their companies. Zuckerberg? He would be a tougher sell.

His past actions and statements have proven that he can be misogynistic, petty and vindictive. He exudes all the charm of a callow Vulcan with Asperger's syndrome, and his flop-sweated meltdown answering privacy questions from a crowd at the D8: All Things Digital Conference in June illustrates perfectly why he's not the right guy to stick in front of a microphone.


Even his philanthropic efforts come across as smarmy. Zuckerberg recently announced a foundation, funded with $100 million in Facebook stock, that will support Newark's school system.

A noble cause and generous contribution, but one that seems calculated and self-serving. Zuckerberg has parlayed his donation into a media tour, making the formal announcement on the Oprah Winfrey Show, the go-to forum for celebrity fawning and image polish. The timing of all this? Immediately before a movie with an unflattering portrayal hits theaters. Only the dopiest FarmVille addict couldn't see the shallow PR strategy at work.

PICKING PARTNERS

This month, Apple unveiled Ping, a social media layer to iTunes. The plan was for Ping and Facebook to work together.

But, apparently after 18 months of hush-hush negotiations, any proposed deal fell apart. Steve Jobs has pinned the breakdown on "onerous terms that we could not agree to."

Facebook is now denying Ping access to the usually free and open API (application programming interface) that would let it crack into the "friends" network.

We suspect that, from the Facebook point of view, Apple needed them more than they needed it.

They are wrong.

Play nice with Apple and Facebook could have set the stage for future forays into multimedia, increasing marketing potential and building its brand. It could have used Apple to bolster its weak mobile strategy.

While turning down a simple arrangement with one of the world's largest companies, Facebook remains unrepentantly in bed with Zynga, the sleazy game company (even its founder admitted to an anything-for-a-buck mentality) that has foisted FarmVille and Mafia Wars on the world. Facebook's new virtual currency is assuredly yet another byproduct of the symbiotic relationship.

The games are popular, but their ceaseless spamming, "pay-to-play" pushes, cheesy look and overall privacy negligence don't do much to inspire any thought of Facebook as an innovative or market-leading company.

Moral of the story: You are judged by the company you keep.

CENSORING SEARCH

Running a site such as Facebook can be a no-win situation when it comes to charges of censorship. Should the site be an open forum for any given viewpoint? Or, as some have demanded, does it have a responsibility to crack down on pro-bulimia groups and neo-Nazi rhetoric?

Aside from these hot-button issues, Facebook has continually alienated users by (either intentionally or accidentally) blocking content and search terms.

The built-in search box has come under attack for coming up blank for certain keywords. Supporters of controversial Congressman and presidential candidate Ron Paul were told it was a "bug" that blocked his name from being accurately found. The word "privacy" itself, when searched for, also came up nil. There have also been documented instances of Facebook blocking attempts to link to certain editorial content, including articles critical of -- surprise -- Facebook.

GIVING AWAY THE COMPANY

If a lawsuit proves to have merit, Zuckerberg may have given away 84% of the company and its revenues back in its formative days.

Paul Ceglia, owner of a wood pellet business in upstate New York, claims in his suit that he and Zuckerberg entered into a contract in 2003 for Web development work on what would become Facebook. In exchange for the work, Ceglia would be given an ownership stake, he claims.

Facebook, as expected, denies the claim or the validity of any such contract. Nevertheless, a judge's injunction has put a moratorium on any effort by the company to dump assets.

If the case -- unlikely as it may be -- goes against Facebook, its biggest blunder of all could relegate it to the dustbin of Friendster, Hi-5 and Wal-Mart's (Stock Quote: WMT) failed The Hub experiment.

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