Facebook Revelations Highlight Dangers of Social Media for Commerce

Ara Trembly
Insurance Experts' Forum, January 21, 2010

When a blaring headline on AOL’s news site trumpeted the revelation—from a former Facebook employee—that the social networking site was retaining all the data and tracking the online actions of subscribers, I guess we were supposed to be surprised.

When the same piece also revealed that Facebook employees could access all that information with a special passkey-style access code, it seems we should have been shocked. I have to admit, however, that while I found the news interesting, I was not at all incredulous. Facebook seems to have issued some kind of denial (although which part is being denied is not clear), but I really wonder why they bothered.

Social media sites make their money in a number of ways, and some of those probably include collecting information on subscribers’ actions in order to more effectively market products to those subscribers. In fact, at one point Facebook tried to tell us that they, in fact, own all the information we put on their servers—until outrage from subscribers made them do a hasty 180. At this point in history, though, no one is really sure how the whole social media thing will shake out in terms of subscriber privacy or lack thereof. One thing we can accurately forecast, however, is that the sites will do all they can to maximize their revenues—and that will inevitably mean “creative” use of the data on their servers.

Facebook users (and users of Twitter, MySpace and other sites) seem to want to have their cake and eat it, too. It amazes me how much personal information subscribers are willing to share online, only to be shocked that people seem to me accessing and using that information. It’s akin to telling your deepest secrets to the biggest blabbermouth you know, who also happens to be a reporter for a national news network. The bottom line is that if you are putting your information out there, there is always the risk that someone will see it and do something with it, whether or not they have your permission. This is a fact of Internet life for all of us. Get used to it.

When insurers, brokers and other entities seek to leverage such sites for business purposes, however, the same facts of life are in operation. Insurance buyers may well assume that they can securely transmit information to the insurance company via the insurer’s Facebook link, but that assumption is dubious at best. So when some form of breach occurs, it really isn’t clear whether the insurer or the social media site will bear the legal responsibility. And insurance, which often involves personal and sensitive information, is only the tip of the iceberg.

The social media milieu represents an exciting new channel for commerce, and none of us can be blamed for being interested in more business and a fatter bottom line. At the same time, however, the legal, moral and ethical boundaries for this milieu are still being formed. We all know that some eggs must be broken to make that beautiful omelet, but we need to take care that the eggs don’t come from our own baskets.

To put it another way, the world of social media is more like the wild American West of the 1870s than most of us realize. Eventually, rules and regulations may make this environment safer, but at this moment, jumping blindly into deep waters could prove costly. Web 2.0 looks very enticing, and insurers should be looking into it and even testing the waters, but I’m inclined to save my larger investments for a more mature environment that has been shaped in part by the mistakes of others.

Ara C. Trembly ( is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.

Readers are encouraged to respond to Ara using the “Add Your Comments” box below. He can also be reached at

The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.

Comments (5)

BTW Looks like the Jan 21, 2010 date on this article is in error as I got the e-mail notice of the article on Dec 23, 2010.

The Web is a Wild West and the challenge is now to add pathways and protection particularly for youth. We need more virtue in our virtual highways to protect privacy, give trusted advice, and better allow for corrections. Would we put our youth or adults out on our roads and highways without driver's ed, traffic lights and signs, etc?

Can companies create new insurance markets that combine identity protection, preservation of value in e-media, and reputation repair? Could such a service have saved the life of the Rutgers student defamed on Facebook?

Posted by: CHRIS K | December 27, 2010 3:35 PM

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Our company just sent out a memo of the new Social Networking policy yesterday! It was very thorough including verbiage regarding the type of language you were not to use- obscenities, profanity, or vulgarity, not posting pics or info of any client, customer or other employee without written permission.
But you also can't complain or gripe about anyone either.
I knew it was coming since this type of site is blocked at work but now it is being regulated pretty intensely - protecting themselves and us!

Posted by: Debra D | January 22, 2010 4:12 PM

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Not to mention that once someone touches your Facebook site and leaves information, there may now become an element conderning your care, custody and control that may not be insurable under many cyber liability contracts.

There have been cases wherein arguements were made that because a plaintiff was moved to come to your site and due to an interaction between them and another visitor to the site, either bodily harm or a defamation occurred. You may now be liable merely for playing "host".

Posted by: ctbarnes | January 22, 2010 2:50 PM

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I couldn't agree more with you Ara. As a b-b or even b-c space- large FS companies block their employees from accessing these sites from work and encourage them not to idenitfy themselves as employees to avoid any "issues" when they do engage on their own time. It's definitely a space to enter into cautiously.

Posted by: Karen_XRX | January 22, 2010 12:31 PM

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Ara: Great commentary as usual.

I have often wondered about these same issues as respects to business use of Facebook and similar.

I use Facebook to keep in touch with my friends and family and have found it valuable for that. I very rarely become a fan of any business or post information that I would not want out there in public.

In a few years I know that we will start hearing much more about mistakes persons and business have made in this arena.

Posted by: Michael T | January 22, 2010 11:18 AM

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