The Good, the Bad & the Ugly: Business Use of Social Networks


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How businesses are using social networks, examples of successes, crisis management, laws implicated and legal issues to consider in connection with business use of social media

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The Good, the Bad & the Ugly: Business Use of Social Networks

  1. 1. The Good, the Bad & the Ugly: Business Use of Social Networks July 9, 2010 Jamie Nafziger Nicole Haaning NALS REGION 5 CONFERENCE
  2. 2. The Good
  3. 3. The Good
  4. 4. Use of Social Networks <ul><li>47% of American adult Internet users use social networking sites, up from 8% in 2005 </li></ul><ul><li>(April 2010, PEW Internet and American Life Project) </li></ul><ul><li>73% of American teen Internet users use social networking sites </li></ul><ul><li>(April 2010, PEW Internet and American Life Project) </li></ul>Source: PEW Internet and American Life Project
  5. 5. Top 10 Companies by # of Users Who “Like” Them on Facebook <ul><li>Starbucks </li></ul><ul><li>Coca-Cola </li></ul><ul><li>YouTube </li></ul><ul><li>Skittles </li></ul><ul><li>Oreo </li></ul><ul><li>Nutella </li></ul><ul><li>Red Bull </li></ul><ul><li>Disney </li></ul><ul><li>Victoria’s Secret </li></ul><ul><li>Pringles </li></ul><ul><li>Fans </li></ul><ul><li>7.1M </li></ul><ul><li>5.5M </li></ul><ul><li>5M </li></ul><ul><li>4.4M </li></ul><ul><li>4.4M </li></ul><ul><li>3.9M </li></ul><ul><li>3.5M </li></ul><ul><li>3.5M </li></ul><ul><li>3.2M </li></ul><ul><li>3.1M </li></ul>Source: As of 5/17/10
  6. 6. Top 10 Companies by # of Twitter Followers <ul><li>NBA </li></ul><ul><li>Whole Foods Market </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li>Pet Holdings, Inc. – </li></ul><ul><li>Women’s Wear Daily </li></ul><ul><li> </li></ul><ul><li>NFL </li></ul><ul><li>Someecards </li></ul><ul><li>Jet Blue Airways </li></ul><ul><li>Followers </li></ul><ul><li>1.8M </li></ul><ul><li>1.8M </li></ul><ul><li>1.7M </li></ul><ul><li>1.6M </li></ul><ul><li>1.6M </li></ul><ul><li>1.6M </li></ul><ul><li>1.6M </li></ul><ul><li>1.6M </li></ul><ul><li>1.6M </li></ul><ul><li>1.6M </li></ul>Source: As of 5/17/10
  7. 7. Case Study of Business Use of Social Networks <ul><li>Customers like exclusive deals and sneak previews of company news </li></ul>
  8. 15. Which Network(s) to Use <ul><li>Among adult profile owners: </li></ul><ul><ul><li>73% have a profile on Facebook </li></ul></ul><ul><ul><li>48% have a profile on MySpace </li></ul></ul><ul><ul><li>19% use Twitter or another status updating site </li></ul></ul><ul><ul><li>14% have a profile on LinkedIn </li></ul></ul><ul><ul><li>52% of adult users have two or more profiles on different networks </li></ul></ul>
  9. 16. Facebook <ul><ul><li>484 million unique visitors in March 2010 </li></ul></ul><ul><ul><li>Recent Changes </li></ul></ul><ul><ul><ul><li>“ Likes” versus “Fans” </li></ul></ul></ul><ul><ul><ul><li>Open Graph architecture – Facebook extends itself further into the rest of the Internet with social plug-ins </li></ul></ul></ul><ul><ul><ul><li>Privacy complaints </li></ul></ul></ul><ul><ul><ul><li>Launching location-based functionality - McDonalds </li></ul></ul></ul>
  10. 17. Twitter <ul><li>Twitter launch of advertising – Promoted Tweets </li></ul><ul><li>47% of Fortune 100 have active Twitter account as of February 2010 </li></ul>
  11. 18. LinkedIn
  12. 19. LinkedIn continued
  13. 20. LinkedIn continued
  14. 21. iPhone Apps
  15. 22. iPhone Apps
  16. 23. YouTube
  17. 24. Foursquare <ul><ul><li>Partnerships with NY Times, Wall Street Journal and others </li></ul></ul>
  18. 25. The Bad
  19. 26. The Bad <ul><li>&quot;United Breaks Guitars&quot; posted July 6, 2009 </li></ul><ul><li>One million views in three days </li></ul><ul><li>8.7M views as of June 2010 </li></ul><ul><li>Launched Dave Carroll's singing career </li></ul><ul><li>Bad press for United Airlines </li></ul><ul><li>United Airlines criticized for not responding via social media and not responding quickly enough </li></ul>
  20. 27. Advantages of Business Use of Social Networks <ul><ul><li>Their customers are there </li></ul></ul><ul><ul><ul><li>47% of online adults use social networking sites, up from 37% in November 2008 </li></ul></ul></ul><ul><ul><ul><li>72% of online 18-29 year olds use social networking websites </li></ul></ul></ul><ul><ul><li>Likelihood of purchase better than with typical advertising if recommended by a friend </li></ul></ul><ul><ul><li>Relatively inexpensive to launch presence </li></ul></ul><ul><ul><li>Lots of buzz </li></ul></ul><ul><ul><li>Ability to quickly mitigate damage and avoid United Airlines-like bad buzz </li></ul></ul>
  21. 28. Disadvantages of Business Use of Social Networks <ul><ul><li>Must commit to understanding “communities” on social networks </li></ul></ul><ul><ul><li>Must commit to keeping content very fresh to keep users engaged </li></ul></ul><ul><ul><li>Speed of communication and open access increases legal risks </li></ul></ul><ul><ul><li>Commentary not always positive – loss of control of message </li></ul></ul><ul><ul><li>Social networks not set-up with business in mind </li></ul></ul><ul><ul><ul><li>Facebook Page – Have at least two administrators per Page. Choose first administrator carefully because that person can never be removed. </li></ul></ul></ul>
  22. 29. The Ugly
  23. 30. The Ugly <ul><li>Two Domino's Pizza employees and a video camera </li></ul><ul><li>Employees dismissed and arrested </li></ul><ul><li>Domino's responded quickly on YouTube </li></ul><ul><li>Power of a few people to harm a brand </li></ul>
  24. 33. The Ugly
  25. 35. Key Legal Issues <ul><ul><li>Intellectual property issues </li></ul></ul><ul><ul><ul><li>Protecting trademarks on social networks </li></ul></ul></ul><ul><ul><ul><ul><li>Defensive registrations – register key trademarks as Twitter usernames and Facebook vanity URLs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Monitor Facebook, Twitter and other social networks for infringement and consider take-down requests, demand letters, or lawsuits </li></ul></ul></ul></ul><ul><ul><ul><li>Risk of copyright and trademark infringement raised by user-generated content </li></ul></ul></ul><ul><ul><ul><li>Rights of publicity –obtain signed written consents for use of individual’s picture on social networking site </li></ul></ul></ul><ul><ul><ul><li>Confidential information and trade secret disclosure </li></ul></ul></ul>
  26. 36. User-Generated Content: Legal Issues <ul><li>Tension – increased interaction with users and transparency v. increased risk </li></ul><ul><li>Comments, Photos, Videos </li></ul><ul><li>Company protected by Facebook’s terms of service? </li></ul><ul><li>Copyright – Digital Millennium Copyright Act </li></ul><ul><li>Communications Decency Act </li></ul><ul><ul><li>Defamation and other torts </li></ul></ul><ul><li> and Coca-Cola’s approach </li></ul>
  27. 37. Facebook Page <ul><li>Insert picture </li></ul><ul><li>Attachment C </li></ul>
  28. 38. Advertising Issues
  29. 39. Advertising Issues <ul><ul><li>Federal Trade Commission endorsement guidelines </li></ul></ul><ul><ul><li>Bloggers must disclose if paid or get a free product or service </li></ul></ul><ul><ul><li>Advertisers are liable for a “paid” blogger’s false statements </li></ul></ul><ul><ul><li>Advertisers have a duty to instruct “paid” blogger on appropriate notice he or she must give about payment and on the need for truthfulness and substantiation of claims </li></ul></ul><ul><ul><li>Advertisers must monitor the “paid” blogger’s compliance with endorsement rules </li></ul></ul><ul><ul><li>Bloggers are liable for false statements they make about advertiser’s products or services </li></ul></ul><ul><ul><li>If company employee posts anything positive online about employer’s products or services, fact of employment must be disclosed </li></ul></ul><ul><ul><li>If members of the public receive points or free products for passing along message to friends, they must disclose that fact to friends. </li></ul></ul>
  30. 40. Records Retention <ul><ul><li>Library of Congress maintaining copy of all Tweets </li></ul></ul><ul><ul><li>Impact of regulations </li></ul></ul><ul><ul><li>Companies that help keep records of social networking content </li></ul></ul>
  31. 41. Corporate Issues <ul><ul><li>Disclosure controls </li></ul></ul><ul><ul><li>Use of social networks by executive officers </li></ul></ul>
  32. 42. Privacy Issues <ul><ul><li>Senator Charles Schumer upset about Facebook’s approach to privacy – FTC investigation; Canadian privacy commissioner </li></ul></ul><ul><ul><li>Privacy icons for behavioral advertising </li></ul></ul><ul><ul><li>Department of Commerce hearings in May on privacy and the Internet </li></ul></ul><ul><ul><li>Boucher/Stearns Privacy bill released May 4 </li></ul></ul><ul><ul><li>Case law </li></ul></ul><ul><ul><ul><li>Increased employee privacy rights in private e-mail accounts on company equipment (Stengart case) </li></ul></ul></ul>
  33. 43. Protecting Your Privacy on Facebook <ul><li>2005: Facebook would not share any information a user uploaded with anyone other than those who were in one of the groups the user identified in the privacy settings </li></ul><ul><li>2006: Facebook institutes default settings that limit information displayed in a profile to the user’s school, local area, and other community limitations that Facebook tells the user about </li></ul><ul><li>2007: User’s name, school name, and profile picture automatically visible across Facebook unless the user modified her privacy settings. Members of a user’s network could always access this information. </li></ul><ul><li>November 2007: Facebook launches the Beacon advertising service, which broadcasts users’ activities on partner sites to their Facebook friends. sued and Facebook settled in September 2009, agreeing to donate $9.5 million to an online-privacy nonprofit. </li></ul><ul><li>February 2009: Facebook announces policy change to allow it to retain in perpetuity user-generated content—even after the user deleted it. A public uproar causes Facebook to rescind the changes and institute a new site-governance policy. </li></ul><ul><li>November 2009: Facebook sets certain privacy default settings so that the information becomes available to everyone on the Internet, is indexed in search engines, and is exportable by other visitors to Facebook. Users could adjust their default privacy settings to limit access to this information. </li></ul><ul><li>December 2009: Facebook removes user privacy control over certain categories of information (name, profile photo, list of friends, pages the user is a fan of, gender, geographic region, and networks the user belongs to). This information is automatically public and cannot be made private. </li></ul><ul><li>April 2010: Facebook announces that certain “connections” (e.g., a user indicating he “likes” a web page or is a fan of a celebrity on Facebook) are always publicly available and may not be made private. The privacy policy warns against making connections that the user will not want to have publicly known. </li></ul>
  34. 44. Protecting Your Privacy on Facebook <ul><li>Guide to Facebook privacy settings that is “reasonably cautious, but not obsessively paranoid.” </li></ul><ul><li>Facebook’s online privacy guide . </li></ul><ul><li>Installing apps increases risk of privacy breaches </li></ul><ul><li>Bottom line: assume what you post on Facebook may be publicly available </li></ul>
  35. 45. Use of Social Networks by Employees <ul><ul><li>Will all employees be empowered to represent the company or a select few? </li></ul></ul><ul><ul><li>Disclosure of confidential information / trade secrets </li></ul></ul><ul><ul><li>Lawful participation in lawful activities / conduct </li></ul></ul><ul><ul><li>Knowledge of protected status (e.g., Google searches of applicants) </li></ul></ul><ul><ul><li>Fair Credit Reporting Act (e.g., rules for applicant / employee background checks) </li></ul></ul><ul><ul><li>Harassment / discrimination (impact on work environment) </li></ul></ul><ul><ul><li>Protected speech: First Amendment; National Labor Relations Act </li></ul></ul>
  36. 46. Other Employment Issues <ul><ul><li>Violation of company policy (e.g., use of company equipment / during company time) </li></ul></ul><ul><ul><li>Consistency in content and application of policy </li></ul></ul>
  37. 47. Recommendations <ul><ul><li>Protect the brand – proactively register usernames on key social networks for your most important brands </li></ul></ul><ul><ul><li>Monitor the social networks for infringement and other bad acts </li></ul></ul><ul><ul><li>Draft a social networking policy for employees </li></ul></ul><ul><ul><li>Be easy to find. Be clear about permissible employee use of brands </li></ul></ul><ul><ul><li>Training – If you allow employee use of social networks, train them on false advertising, endorsement rules, and making statements about your goods or services and those of competitors </li></ul></ul><ul><ul><li>Enforce social networking policy with employees </li></ul></ul><ul><ul><li>Laws outside the United States – Check with international counsel if interacting with fans from outside the U.S. </li></ul></ul><ul><ul><li>Draft terms of use and privacy policy for company Facebook Page </li></ul></ul><ul><ul><li>Consider obtaining insurance </li></ul></ul>
  38. 48. Questions? Jamie N. Nafziger Dorsey & Whitney LLP 612-343-7922 [email_address] Twitter: @JamieNafziger Nicole Haaning Dorsey & Whitney LLP 612-492-6635 [email_address]