Social Media Privacy Leaks Creates More Detractors Than Promoters For Facebook

In Fred Reichheld's Book, "The Ultimate Question," the author has spent the last ten years researching one simple question that can determine a company's future. The question is "how likely is it that you would recommend Company X to a friend or colleague?" Over the last six years, Facebook would not have scaled to half a billion users if the answer to that question was not a resounding "yes."

However of recent date, with the introduction of Facebook's Open Graph and various malware attacks (see most recent case in my post titled, "Social Media Worm That 'Likes' Facebook"), users are experiencing a lot of angst and frustration with a social network that initially they trusted more than any other.

Fred ReichheldFred ReichheldReichheld notes that there are three categories of customers that are associated with any brand, i.e., the Promoters, the Passives and the Detractors. Promoters are obviously the type of customer every brand would like to nurture as they are the most enthusiastic and become brand advocates and an actual extension of the company's sales force. In the case of Facebook, one of the reasons they scaled as quickly at they did is because these Promoters were happy with the network.

Unfortunately of recent date, Promoters are appearing less enchanted with the network, resulting in many becoming what Reichheld calls "Passives" or "fence-sitters." This group is identified by not having a lot of emotion tied to a brand and are usually willing to change brands when the next "shiny thing" comes along. However the lowest rung of the ladder and the one that is gathering followers is the Detractors. These are the customers that are the most volatile for any brand as not only are they willing to jump ship, they are the most vocal regarding their displeasure with a company and actually go out of their way to  convince friends and associates that they should feel the same.

So how is this theory playing out with Facebook?

On a scale of 0 to 10 if someone were to ask Facebook users "the ultimate question," I would conjecture that the majority of respondents would fall in the Passive to Detractor category range.

As much as Facebook assures its 500+ million strong, it is doing everything possible to protect user privacy, another outbreak of malfeasance just surfaced. This latest case is most disturbing because hackers are not at the source. Instead, its generated by the Facebook applications that users seek out, namely Zynga's online games, such as Farmville and Texas HoldEm Poker. In the past we trusted these apps - but this could all change as a result of what just occurred.

According to the Wall Street Journal, some Facebook applications have been leaking user information - specifically Facebook UIDs - to third party companies that include Internet research and advertising companies. While the data is not only exposing user's names, in some cases it's releasing their friend's names as well. WSJ's reporters Emily Steel and Geoffrey A. Fowler noted "the practice breaks Facebook's rules, and renews questions about its ability to keep identifiable information about its users' activities secure."

It's not known how long the breach has been in effect, but on October 17, a Facebook spokesman said it is taking steps to "dramatically limit" the exposure of users' personal information. On Facebook's blog this morning, Mike Vernal noted the following:

Vernal goes on further to say that the "press reports have exaggerated the implications of sharing UID." This might be true, but Facebook's UID can be very revealing, dependent on the user's privacy settings. According to a Mashable report, "knowing the ID of a Facebook user who shares information with 'everyone' can potentially give you access to his/her name, phone number, email, photos and other personal info." Which means - even if a user sets the strictest possible privacy settings on their accounts, the app may still have access to names of both the users and his/her friends.

In the case of Facebook's Open Graph, at least users are now aware that they can make a choice whether or not to participate. Knowing that hitting a LIKE button is going to identify a user's preference for a particular product, content topic or issue is the decision of the individual. This current app infraction is covert and is being conducted with out the knowledge or permission of the user.

And even though Facebook would like to sweep this under the carpet by indicating in "most cases, developers did not intend to pass this information along, but did so because of technical details" pertaining to how browsers work - is just not a sufficient explanation. It opens up room for doubt, that Facebook is slip-shod in allowing leaks like this to occur in the first place.

Based on the behavioral studies conducted by Reichheld and his team at Bain & Company, I would assume that Facebook's detractors are beginning to outnumber its' promoters at this point in time - and Mark Zuckerberg and his team may not even be aware that this shift is taking place.

Reichheld who is also the author of "The Loyalty Effect" sites an example in his book regarding the case of US Airways. For a while, the airlines dominated the Philadelphia market. The company's fares were high and the service was less than desirable- but the routes in and out of of Philadelphia were profitable - so the airlines concentrated on increasing revenues versus customer service. Then Southwest Airlines entered the market with lower fares and better service - and US Airways lost marketshare over night. At that point the only customers that the airline had were Passives and Detractors- and they were only hanging on because US Airways was the only game in town.

Presently Facebook is the only game in town. Other contenders like MySpace have fallen off the radar, and young upstarts like Diaspora haven't really taken hold just yet (see previous post "Try Gink, Diaspora or Sharepoint When Facebook Just Isn't Private Enough.") But less Facebook wants to go the way of US Airways, it better wake up to the fact that it cannot control the "social networking" space forever - particularly if and when the next shiny thing that comes along is able to supply the Passives and Detractors with a better mousetrap.

Your thoughts readers? Is the Facebook's Detractors outnumbering its Promoters? What group do you align yourself with?


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