I don't use Facebook. Neither does Warren Buffett, but phonies have used his name on Facebook. Earlier this month, an imposter created "my" profile on Facebook. In order to get the fake removed, Facebook required an uploaded scan of a government issued I.D. that shows a photo and birth date (for example, a driver's license or passport). Facebook suggests one black out the most sensitive information and claims it will delete this scanned information from its servers once identity has been verified.
In other words, after an impostor faked my identity, I was the one who had to put myself further at risk by providing a verifiable scanned government I.D. to prove I had the right to complain about the fraud enabled by Facebook.
The Antisocial Network
There was no mechanism to email a human, who could have easily verified my identity without the need for me to upload a scan of a government issued I.D. (after blacking out the document number). There was also no way to even submit the report using the "Reports" link without the upload.
Christopher Soghoian, a privacy advocate at the Center for Applied Cybersecurity Research at Indiana University told the Wall Street Journal: "People do not like Facebook. They do not trust Facebook. Facebook gets people to give up information under the claim that it's private and then it's made public. And your only option is to shut down your account."
I now completely agree with Mr. Soghoian. I don't like Facebook, and I don't trust Facebook. You don't even need an account to be punked by Facebook. When you've been impersonated, Facebook asks for private information and claims it will delete it from its servers, but given that it has failed to protect private information in the past, why should anyone trust this claim? Yet I had no choice but to supply the information in order to get cooperation from Facebook to take down the fraudulent profile.
The Facebook Team responded three days later reporting it had removed the profile. If you expect niceties such as "sorry for the inconvenience," forget it. That might be fine if you are imposing on Facebook, but when Facebook's protocol has imposed on you, something more is required, if Facebook ever wants to be taken seriously as a valuable business.
Investors Should Take Note of Phony "Users"
Mark Zuckerberg said that Facebook is "free" and always will be. But it isn't true for all of its users. Facebook claims "750 million active users," and some, the "whales," must eventually provide profitable business.
Facebook requires revenues, and it requires an eventual demonstration of ongoing profits to keep investors happy. That means it needs users to buy goods and services so that Facebook gets a cut of the action. It's an indirect cost imposed on the Facebook users that support the network. If Facebook loses those willing buyers, it loses the whole ballgame.
Eventually investors will want to know the number of profiles of people in the demographic sectors that are most likely to buy goods and services. If one had a mind for mischief, then one could mislead investors by, intentionally or otherwise, allowing phony profiles of whales. In my case, Facebook did just that. Investors should ask if this is a habit.
What is Facebook's strategy? Where is its audited balance sheet? Which users provide the most revenue? Of target demographic profiles, how many are fakes? How many authentic users does Facebook actually have? Does Facebook know how many user profiles are genuine, and if so, how does it know?
Based on my experience, Facebook doesn't know who is real and who isn't real. Many people may not even be aware there is an impostor profile of them on Facebook, and if they are aware, they may resent the hoops they have to jump through to get it removed. I know I was tempted to shrug and let it go, but I didn't.
Investors should take that into account when evaluating Facebook's "users" and the potential for revenues they represent.
The "Social Network" Broke the Social Contract
If you eat in a cafeteria that asks you to dispose of your trash and put away your tray after you eat, you cooperate, because you are holding up your end of the social contract. You clean up for the next person, whom you've never met. You trust that others understand and honor this social contract, too. You trust that someone who has never met you will have the courtesy to clean the table before you arrive for your next meal. It doesn't make you superior. It just means you understand the utility of honoring the social contract. On your next visit, you won't have to carry your tray to a table covered with trash. But if others break this social contract, you'll find another place to eat where the people are smart enough to cooperate with the social contract, because it is a nicer place to hang out.
Facebook may think it's too cool to honor the web's social contract. It may believe its image says "we are the Borg," but to me it says "we are the slobs," and we're not interested in running a business. Facebook's attitude is futile, and I won't be assimilated.
Users who believe they're getting something free may tolerate it, but people who spend money, actual customers, will find a better place to hang out as soon as an alternative becomes available. As I mentioned in an earlier commentary, "The Biggest Headache for Groupon and Facebook," bright young people are doing interesting things on the web that may one day challenge Facebook on features alone. If newcomers are trustworthy and courteous, Facebook will lose its revenue generators.
Facebook will have a hard time keeping its inflated stock market valuation -- currently roughly $84 billion for its privately traded shares -- once investors face up to its flawed business model. For my part, I can say that if you ever see a profile of "me" on Facebook, it will be another impostor.
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