Friendly fraud my foot

Based on documents released last week it has become clear now that Facebook has been bamboozling kids and ignoring calls from parents and its own staff to change things.

At some point I have to stop being surprised. Really tho?

The conversation around market leaders in tech and entertainment actively optimizing around a circumstance to their own benefit is not foreign territory. Hell, it’s part of the general business model. I have no doubt that, for instance, Disney operates much like the mafia in Florida. For one, it is its own autonomous tax district after Florida made a string of concessions in the face of Disney’s pile of investment money. In much the same way NY state government Cuomo can’t seem to find any resources to fix the subway but magically pulled together a $2.8 billion incentive package to lure Amazon even though the latter had long ago decided on the move already anyway. It cannot be a surprise that a for-profit organization will seek to use its position, especially when it is a virtual monopolist, to benefit financially.

So what are we really talking about then if Facebook scams a few kids?

It’s not really about the kids.Having long hid behind a disclaimer that says no one under 13 is allowed on its platform, Facebook has shown little more concern for minors than Apple or Google has. You could argue that most of the insane credit card charges are just a symptom of consumers getting accustomed to a new entertainment landscape where (a) spending has become a lot easier and (b) few people, including kids, fully understand the ramifications of buying digital currencies.

But it’s what this new instance reveals about the firm’s overall approach to safeguarding its users. For one, the tone. The catch phrase around the occurrence of “friendly fraud” is, according to the document: “What is it, why it’s challenging, and why you shouldn’t try to block it.”

What Facebook is saying is: “Yes, we know that kids unknowingly spend thousands of their parents money because games like PetVille and are set up in such a way that to the average minor it is all an abstraction. We’ll even affectionately call them ‘whales,’ a term we borrowed from the casino business to describe the 13-year olds that spend four figures every month on virtual coins.”

Second, Facebook not only denied refund requests. It encouraged developers to offer free virtual items to children and parents who complained.

Hey sorry your kid mistakenly ordered $2,000 worth of muffins. Instead of your money back, would you like a free coffee?One employee suggested it was better than refunding money because “virtual goods bear no cost.” Sigh. Another suggestion was to recommend developers to not have the default purchase be the most expensive thing in the game. Kids have no understanding of money.

Publishers, on the other hand, do. But even when a top-tiered firm like Rovio expressed concern over the disproportionately high refund rates between 5% and 10%, which is 10-20x above the industry average, nothing really changed.

Third, apparently management even ignored a solution developed by one of its own teams and instead told it was focused on maximizing revenues. So even when it had the chance to correct what at that point could possibly still be interpreted as a flaw born from the company’s explosive growth, it choose not to.

Certainly consumers had to adjust to this new world, too. And we’ve seen it before. About a decade earlier when virtual worlds were all the rage, there were plenty of titles that faced immediate termination as parents complained about their brood buying thousands of dollars worth of in-game items. Having credit cards blacklist you is a kiss of death, and so there everyone embraced a policy of immediately refunding you.

What makes this different is that Facebook is not a developer but a platform and much, much larger. While I’m certain that it doesn’t want to get cut off by credit card companies, it has a lot more leverage because of its sheer size. Gaming was a big topic of conversation, before Facebook found its calling in politics. (But only the kind where its own politics are held outside and above the law.)

The optimist in me will insist that this and similar occurrences are to be expected from a firm that grew as quickly as Facebook did. As the company exploded in size, no one was going to ring the alarm bell on such predatory practices because no one wants to be a naysayer.

The pessimist in me sees it differently. Historically gamers are the canary in the coal mine when it comes to new consumer behavior, particularly around media, technology, and entertainment. Consequently, I regard Facebook’s response as pars pro totem for its general policies and unwillingness to err on the side of the consumer and optimize for revenue instead. Already facing a lot of heat for its inability to credibly manage the boundaries around its data practices. The regard with which to these underage gamers and the

What Facebook should have done is immediately reverse the payments.
It didn’t.

What Facebook should have done is immediately change its policies.
It did, but not until four years later.

I realize, of course, how naive I sound when I say that as your success grows a moment comes when you become so large and so powerful that you have to make the conscious decision to look out for your consumers. This is making big tech look like a bunch of robber barons.

Yuck.

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