Category: legal

Transferring risk to the customer

The business model of many web startups transfers unacceptable risks to their users.

AirBnB is one of the poster children for the “collaborative consumption” model of internet businesses where people can put their spare resources, in this case rooms, out into the marketplace.

Like most web based businesses though the customer service is poor and the proprietors try to push responsibility for the platform’s use back onto the site’s users.

A good example of this is an article this week in the New York Times where AirBnB hosts risk fines and eviction for breaching their leases or local accommodation laws.

When Nigel Warren rented out his New York apartment while he was out of town, he returned to find he was facing eviction and up to $40,000 in fines. Fortunately he avoided both but AirBnB did little to help him except to point him in the direction of the terms and conditions which required him to obey all local laws.

The New York Times asked AirBnB for comment and received corporate platitudes about how their service helps struggling home owners but no real response to the risks of falling foul to local government, landlords, building owners or insurance problems by sub-letting their residences.

Failing the customer service test is not just AirBnB’s problem, Vlad Gurovich was scammed by a buyer on eBay and now he finds PayPal is chasing him for outstanding money.

This is a pretty typical problem for PayPal and eBay customers – as Vlad has found, the various seller protections often prove to be useless when dispute resolution favours scammersand PayPal’s philosophy of shutting down accounts unilaterally and without appeal exposes sellers to substantial risks.

Interestingly, PayPal’s president David Marcus claimed earlier this year that he was trying to change this culture within the company. It seems that’s not going well.

PayPal, eBay and AirBnB are alone in this of Soviet customer support model – Amazon, Google and most web2.0 businesses have this culture.

In many ways it’s understandable as dealing with customers is hard. In the view of the modern business world, cutting deals is glamorous while looking after customers is a grubby, low level task that should be outsourced whenever possible.

Pushing the risks onto users also makes sense from a business perspective, that makes the billion dollar valuations of these services look even better.

For the founders of these services, none of this is a problem. By the time the true costs and risks are understood, the founders have made their exit and the greater fools who bought the businesses have to deal with the mess.

While the greater fools can afford to carry the costs, the real concern is for users who may found themselves out of money and out of a place to live.

That’s why the founders of these businesses need to be called to account for their ethical lapses.

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Beware the business trolls

Trolls are as likely to hide in a business’ accounts receivable file as they are on a Facebook page

“A psychopath will enter everyone’s lives at one time. When yours arrives, your job is to get them out of your life as quickly as possible.”

That little gem was handed down to me before the internet gave everyone a global megaphone to entertain themselves with. Today it’s likely a dozen psychopaths a week could enter your life through the web or social media.

One of the manifestations of this ability for anyone to post to the web regardless of merit or sanity has given rise to the phenomenon of “trolling”, of which there has been much recent media attention.

At its most basic, trolling is about getting attention. The troll hopes to get a reaction from something outrageous they’ve said or done. In that respect they aren’t too different to radio talk back hosts or SmartCompany editors.

Business has its own types of trolls: the ‘squeaky wheel’ who hopes that by making a complete pain of themselves you’ll succumb to their unreasonable demands; the perennial tyre kicker who wastes your sales staff’s time; or the late payer who enjoys toying with you and your accounts people but has no intention of ever paying the bill.

The effects of these business trolls can be just as debilitating as an online troll, with the added bonus that they distract you and your employees from getting work done.

Sometimes the business owner makes the mistake of taking things personally. This often happens when a bad debtor upsets us so much we make it our life mission to get what we deserve to be paid.

Hundreds of hours and thousands of dollars later we surrender and accept we were never really going to get that relatively trivial sum.

The worst of all the business trolls is the recreational debtor. These business psychopaths take delight in ringing up debts they have no intention of paying and then treating your attempts to get the money back as a type of game where they will thoroughly mess with your mind.

These are the people to get out of your life as quickly as possible. It could be writing off the debt, giving them the refund or just kicking them out of the store.

So beware of the business trolls, they are as likely to appear in your outstandings file as on your Facebook page.

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Amazon and the Soviet customer service model

We all value our collections of CDs, books and photos, but what happens when we completely lose the digital equivalents?

We all value our collections of CDs, books and photos, but what happens when we completely lose the digital equivalents?

The story of Linn, a Norwegian lady who had her account terminated by Amazon, demonstrates the dangers of being locked into one Internet company’s empire. Get cut off and you lose everything related to them.

A little understood part of the cloud computing and app world is that you, the customer or user – which isn’t necessarily the same thing – don’t really own anything. The money you spend on ebooks, mobile apps or web storage are for licenses to use the services, not the products themselves.

Should the supplier decide they no longer want to provide you with their service, then you lose your account and everything with it.

This is what happened to Linn when Amazon’s algorithm decided her account was in some way breaching their terms and conditions.

We have found your account is directly related to another which has been previously closed for abuse of our policies. As such, your Amazon.co.uk account has been closed and any open orders have been cancelled.

Per our Conditions of Use which state in part: Amazon.co.uk and its affiliates reserve the right to refuse service, terminate accounts, remove or edit content, or cancel orders at their sole discretion.

“At their sole discretion” is the key point here. This is a standard term in most online contracts and reflects the legal realities of the physical world where a shopping mall manager or bar owner can ask you to leave their property without having to tell you why.

When you use a virtual service, which includes e-books and cloud computing software, you are on someone’s virtual property and they can ask you to leave any time they feel.

Of course those rights are subject to any contract you might have with that e-book seller, cloud computing service or shopping centre but you have to be in a position to enforce them – not an easy task when you’re in Norway and their lawyers are in Connecticut.

Even if you want to enforce the agreement you believe these services have entered into, the grossly biased contracts attempt to put all obligations on users or customers while freeing the vendor of the distraction of being responsible for anything.

The real problem though is the lack of notice and fairness – this blog’s previously looked at how PayPal, Facebook and Google will shut down business sites without any warning or due process.

It’s one thing to get thrown out of a shopping mall but it’s another matter when your car and week’s groceries are still in there.

Even more worrying in Linn’s case is how ebooks and music purchased with Digital Rights Management (DRM) controls can be erased by companies like Amazon. Which is like walking home from the shopping mall you’ve been banned from to find the manager has called by to confiscate the toaster and TV you bought last week.

What’s particularly notable in all of these stories though is the Soviet customer service model, the Amazon”Executive Customer Relations” representative Linn dealt with refused to tell her what she’d done wrong or what rules she broke.

The only thing “Michael Murphy” would tell her was she was effectively banned for being linked to a blocked account and stated;

“Please know that any attempt to open a new account will meet with the same action.”

No notice, no appeal, no rights. The computer says no and the bureaucrat cannot help you further.

Trust lies at the core of all business and this is even more true when buying services like e-books and cloud computing products. If you can’t trust a vendor to provide a service, or to act openly and honest with you when a problem occurs, then it’s unlikely you’ll use that service.

A lack of trust is what web 2.0 companies like Amazon and eBay risk with hostile, Soviet style customer service. This is the weak point of the entire online business model.

For individuals and businesses it’s important to understand that those e-book, cloud storage or social media services may appear to be a bargain, but there are risks lurking in the fine print.

The new Soviets might be doing well at the moment, but their days are numbered just as the USSR’s were.

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Facebook’s war on nipples continues

If you want to play on Facebook, you have to play by Facebook’s rules. Particular when it comes to nipples.

Mike Stevens, a cartoonist with the New Yorker magazine, found himself the latest victim of Facebook’s War On Nipples when his cartoon depicting Adam and Eve caused the magazine’s Facebook page to be shut down.

This is the latest shot in Facebook’s War On Nipples. Two years ago a Sydney jeweller found her page shut down for using a naked doll as a model and breast feeding mothers waged a long campaign against the site taking down pictures of babies being fed.

If you live outside the US, it’s amusing to observe Americans’ bipolar attitude towards women’s breasts — on one hand they are celebrated though Pamela Anderson, breast enhancement and Hooters while the merest flash of nipple sends the nation into purient overdrive.

So Mark Zuckerberg’s ban on female nipples is understandable in that context as is the reaction to that ban by people who don’t see much wrong with breast feeding mums or harmless cartoons.

What we should remember though is Facebook have the right to run their site whatever way they like — if Mark Zuckerberg decides he doesn’t like plaid shirts or broccoli he’s within his rights to ban pictures those as well.

This is the risk if you’re basing marketing strategies around social media services. If you want to play on Facebook, you have to play by Facebook rules.

So take your nipples elsewhere.

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Chasing away the astroturfers

Recent court and industry regulator rulings are good news for honest businesses using social media.

Yesterday we heard the collective gnashing of teeth as social media experts, lawyers and business owners complained about the Australian Advertising Standards Board’s ruling that companies are responsible for comments on their Facebook pages.

The ASB ruling (PDF file) was a response to complaints that comments on Diageo’s Smirnoff Vodka page breached various industry codes of conducts and encouraged under age drinking.

While the board found the complaints weren’t justified – something that most of the hysterical commentators overlooked – the ruling contained one paragraph that upset the social media experts and delighted the lawyers.

The Board considered that the Facebook site of an advertiser is a marketing communication tool over which the advertiser has a reasonable degree of control and could be considered to draw the attention of a segment of the public to a product in a manner calculated to promote or oppose directly or indirectly that product. The Board determined that the provisions of the Code apply to an advertiser’s Facebook page. As a Facebook page can be used to engage with customers, the Board further considered that the Code applies to the content generated by the advertisers as well as material or comments posted by users or friends.

The key phrase in that paragraph is “over which the advertiser has a reasonable degree of control”. Obviously someone posting on Twitter, their blog or someone else’s website is beyond the control of the advertiser.

With Facebook comments, the onus is on businesses to make sure there is nothing illegal appearing on their streams and any misconceptions or false statements are answered.

In many ways, this is common sense. Do you, as a manager or business owner, want your brands tarnished by idiots posting offensive or illegal content? Sensible businesses have already been dealing with this by deleting the really obnoxious stuff and politely replying to the more outrageous claims by Facebook friends.

What’s more important with both the ASB ruling and the Allergy Pathways case the ruling relies upon make it clear that ‘astroturfing’ on social media sites won’t be tolerated.

Astroturfing is the PR practice of creating fake groups that appear to support a cause or product. A group paid for by an interested party appears to grow naturally out of community interest or concern – a fake grassroots group so to speak and hence the word ‘Astroturf’ which is a brand of artificial grass.

Organisations like property developers and mining companies have been setting up Facebook pages and websites that appear to be community groups supporting their projects and many smaller business have been inducing friends, relatives or contractors to post false testimonials. In the run up to major elections in 2012 and 13 we’re seeing many of these fake groups setup to push various political agendas.

For a few consulting groups, astroturfing has become a nice line of business and those of us on the fringe of the social media community have been watching the development of ‘online advocacy services’ with interest.

While no-one has claimed Allergy Pathways or Diageo were posting fake testimonials on their own Facebook pages, the rulings in both cases are a warning that the courts and regulators are prepared to deal with those getting clever with social media.

For honest businesses this ruling is a non-issue, it’s timely reminder though that web and social media site are not ‘set and forget’ but need to be regularly checked, valid customer comments replied to and inappropriate content removed.

The ASB ruling reaffirms what sensible social media experts have been advising all along, and that’s good news for them and their clients.

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