As Facebook grows up, grand ambitions get reality check

SAN FRANCISCO, Wed Jun 5, 2013 — Facebook, which once seemed poised to take over the Internet, is showing its limitations: a host of newer services are gaining ground among trend-setting youth; a much-hyped smartphone app has received a tepid response; and grand ambitions such as taking on Google in the search business seem ever more fanciful.

In a volatile Internet industry where companies can rise and fall almost overnight, one might even say that the nine-year-old Facebook Inc. is suffering a mid-life crisis.

Yet even if the social network falls short of its goal of becoming an all-encompassing Web destination that consumers turn to for everything from messaging to shopping, experts say Facebook has likely achieved enough scale and ubiquity to assure its staying power.

“They’ve gotten so big that it’s one of those things you have to use,” said Dan Niles, chief investment officer of tech-focused hedge fund firm AlphaOne Capital Partners, which does not have a Facebook position. “You may not like the electricity company but I guarantee you you’re still getting electricity.”

Concerns that Facebook is losing its grip on consumers, underscored by a recent report from Pew Research that showed declining enthusiasm among some teens, have kept a lid on the company’s share price even as stock markets rallied. Facebook shares closed at $23.52 on Tuesday, near their six-month low and almost 40 percent below the company’s May 2012 IPO price.

Facebook in talks to buy Israel’s Waze for up to $1 billion: report

MENLO PARK, Calif., Fri May 10, 2013 — Facebook Inc. is in advanced talks to acquire Israeli mobile satellite navigation start-up Waze for $800 million to $1 billion, business daily Calcalist reported.

The deal, which would be Facebook’s largest acquisition, would give the social networking company a mapping service and allow it to better compete with Google Inc. and Apple Inc.
Maps and navigation services have become a key asset for technology companies as consumers increasingly adopt smartphones and other mobile devices.
Waze uses satellite signals from members’ smartphones to generate maps and traffic data, which it then shares with other users, offering real-time traffic info.
Due diligence between Waze and Facebook is underway after a term sheet was signed, Calcalist said, adding that talks began six months ago.
Officials at Waze and Facebook declined to comment on the report.
Facebook’s largest deal to date is the September acquisition of photo-sharing app, Instagram. Facebook agreed to buy the company for $1 billion in cash and stock, though the actual price it paid was $715 million due to declines in Facebook’s share price.
The four-year-old Waze, which has 47 million users, has raised $67 million in funding to date from firms including Kleiner Perkins Caufield & Byers, Blue Run Ventures and semiconductor company Qualcomm Inc.

Can social media profiles be trade secrets of your company?

Yuri Mikulka, chair, Intellectual Property Department, Stradling Yocca Carlson & Rauth

In the age of social media, it seems everything is transparent. In the case of social media contacts, which can be visible to the public through sites such as Facebook, LinkedIn and Twitter, there are questions as to whether that information can, nonetheless, be deemed a trade secret, and if so, who owns the trade secret.

“It was only a few years ago when businesses began incorporating social media in their marketing strategy,” says Yuri Mikulka, chair of the Intellectual Property Department at Stradling Yocca Carlson & Rauth. “Now, it’s recognized as one of the most powerful marketing and PR tools for companies, whether big or small. In fact, when positioned well, social media data can serve as an important asset of the company, especially for those relying on Web traffic and member lists to generate revenue.”

Smart Business spoke with Mikulka about ensuring social media information receives the highest possible protection and remains an asset even when employees leave.

What constitutes a trade secret?

Generally speaking, a trade secret is information that derives independent economic value, actual or potential, from not being generally known to, and not readily ascertainable through, proper means by the public. A company can enforce its exclusive right to possess and use such information as long as reasonable measures are employed to keep such information secret.

Can you protect your social media profiles as a viable trade secret?

This emerging area of law was preliminarily addressed in two recent court cases. Christou v. Beatport, LLC centered on ownership of a MySpace list used by a nightclub to promote its events. When an employee opened a competitive venture, the club sued him for misappropriating its MySpace profiles. The employee responded that MySpace is public and cannot constitute a trade secret. The Colorado federal court disagreed, noting that ‘Friend- ing’ a business or individual grants . . . access to some of one’s personal information, information about his or her interests and preferences, and perhaps most importantly for a business, contact information and a built-in means of contact . . . ’ and that this information is not necessarily public.

Another case in a California federal court, PhoneDog v. Kravitz, centered on a Twitter account maintained by an employee on behalf of the employer. The departing employee kept the account for his own use but changed its name and erased any reference to his former employer. The employer sued, seeking $340,000 in damages, allegedly based on an industry value of $2.50 per follower. The court rejected the employee’s argument that a Twitter follower list cannot constitute a trade secret.

These recent decisions seem to indicate that even if social media profiles are visible online, they can receive trade secret protection — as long as some portion remains inaccessible to the public and employee passwords and login are required to view the information. Nonetheless, because these decisions were issued during early stages of cases, keep an eye out for new cases in your jurisdiction on these issues.

How do you protect social media information as potential trade secrets?  

Here’s what your company can do:

• Put in place policies, procedures and employee agreements that outline and define acceptable and prohibited use of social media.

• Make it clear in writing that any work-related social media is company property.

• Have employees sign a social media policy. At least one court recognized the importance of the employee’s signature in determining whether the company owned social media contacts.

• Get employee buy-in to effectively enforce your policy by providing training and seeking participation to protect the company’s confidential information.

• Maintain employees’ login and password information to company-related social media, and change it when employees leave.

• Periodically monitor employee online activity because trade secrets lose protection when disclosed. If disclosure is inadvertently made, quickly take down the information.

• Consult an attorney to review your social media policy, agreement and practice.

• Periodically update your policy because law and technology are changing so fast.

Yuri Mikulka is chair of the Intellectual Property Department at Stradling Yocca Carlson & Rauth. Reach her at (949) 725-4000 [email protected]

Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth

Facebook slumps as mobile ad growth fails to impress

PALO ALTO, Calif., Thu Jan 31, 2013 — Shares of Facebook Inc. were set to open 7 percent lower on Thursday as a surge in fourth-quarter mobile advertising revenue failed to live up to Wall Street’s high expectations.

Three brokerages downgraded the stock of the No. 1 social network, which has struggled to develop a full-fledged mobile advertising business.

Facebook has long established itself as one of the most important websites, but investors have worried that until the company’s mobile advertising strategy takes off, revenue growth will remain shaky.

The company reported a better-than-expected fourth-quarter profit on Wednesday and said its mobile advertising revenue doubled to $306 million, suggesting it was making inroads into handheld devices such as smartphones and tablets.

Investors were looking for at least $350 million in mobile advertising revenue, Piper Jaffray analyst Gene Munster said in a note to clients.

“While the trajectory of mobile growth may not be as steep as some investors were hoping, the theme of mobile as the future of Facebook remains intact,” he said.

GM in talks with Facebook about return to paid ads

DETROIT, Wed Jan 16, 2013 — General Motors Co. and Facebook Inc. are discussing the return of the U.S. automaker as a paid advertiser about eight months after GM said it would stop running ads on the social networking website, a top GM executive said.

Alan Batey, GM’s interim marketing chief, said at the Detroit auto show that discussions with Facebook officials were ongoing though the Detroit company had nothing to announce about a return to Facebook as a paid advertiser.

“We’re still actively talking to them and looking at opportunities that come our way,” Batey told Reuters on Tuesday. “I wouldn’t tell you that there’s a Mexican standoff here. We just didn’t see the value” in the ads.

Three days before Facebook’s May 2012 IPO, GM said it was dropping paid ads on the website because they had little impact on consumers.

GM has previously said it spent about $40 million on its Facebook presence, but only $10 million of that was paid to Facebook for advertising. The rest covers the creation of content and the advertising and media agencies involved.

Sources said last summer that the two companies were discussing GM’s return and Facebook offered to provide GM with data showing the effectiveness of the website’s paid ads. However, Facebook at that time did not offer any concessions.

Batey declined to discuss the current talks or to provide a possible timing for GM’s return to Facebook, where it still has pages for which it pays no fees to market its car and trucks.

“I wouldn’t want to predict if there’s something, but I also wouldn’t be surprised if there were some things,” he said.

Also last May, GM said it would not advertise on CBS during the 2013 Super Bowl because the ad spots were overpriced. Batey said that decision remained in place.

Separately, Batey said he had nothing to announce on GM hiring a permanent chief marketing officer. GM’s former marketing chief Joel Ewanick was fired last August for not properly disclosing the full cost of a $559 million sponsorship deal with English soccer club Manchester United.

How to avoid the pitfalls of social media in the workplace

Karen C. Lefton, partner, Brouse McDowell

Social media has pervaded the workplace. With more than 1 billion people on Facebook and 140 million Twitter users generating 340 million tweets a day, companies see the potential of social networking and often rush to get on board without formulating a comprehensive policy.

“Take a step back and consider the implications of posting — whether officially in your business, unofficially by employees, or about your business by disgruntled customers or competitors. Develop a plan for protecting your interests on all those fronts,” says Karen C. Lefton, a partner at Brouse McDowell. “That means drafting, implementing and, where appropriate, disseminating your policy before you are the target of a nasty post.”

Smart Business spoke with Lefton about what companies should consider now with social media.

What can companies do to protect themselves against disparaging statements made by customers or competitors? 

Anyone who posts defamatory statements about your business may be subject to a defamation action. There must be a false statement of fact, published to at least one other person, with the requisite degree of fault — negligence or actual malice — resulting in damages. It is important to recognize that ‘opinion’ is protected. This is especially significant in the social media context, where reviews are pervasive and even encouraged on companies’ websites. When you do this, you invite potentially negative comments, but not ones that would be actionable in defamation.

Does that mean reviews are exempt from defamation lawsuits?

Reviews are usually excluded because opinions are protected speech. A false statement of fact is essential to a successful defamation claim. However, if someone says, ‘There was a cockroach in my oatmeal,’ that is demonstrably a statement of fact. If it is false, the restaurant where the oatmeal was served would have a potential defamation claim.

Whom would you sue? 

The poster. Internet Service Providers generally have immunity for the posts on their sites, but the poster does not. Historically, defamed entities were reluctant to take action against an individual poster because the cost far exceeded the payoff. However, many homeowners’ insurance policies cover individuals for actions in defamation, which may provide some recompense for defamatory posts.

What if the harmful statements are made by your own employees? Can you fire them? 

Be very cautious. Section 7 of the National Labor Relations Act protects employees who engage in concerted activity, so employees who post disparaging comments about wages and working conditions — including bad things about the boss or the business — are usually protected. This applies as much to employees in nonunion settings as to those in unionized workplaces.

An employer may be found to have violated the act not only by disciplining a worker for what he posts but for merely having a policy that could be interpreted as chilling an employee’s Section 7 rights. Your policy governing employees’ use of social media must be very carefully drafted.

Are there pitfalls if employees post as part of their job, sanctioned by the company? 

Absolutely. According to the Society of Human Resource Management, 68 percent of businesses require employees to use social media as part of their job. Of those, 73 percent give no training in how to use it appropriately.

Every company with a social media presence should have a policy governing its official website and social media accounts, including identifying those employees authorized to speak on behalf of the company and training them to ensure that private information — whether about employees, business plans or anything else — does not leak out. This is a growing problem because communication on social media is so quick and casual that it often does not get the same attention as a printed marketing piece. It should get more, as it will last virtually forever.

How can you avoid social media pitfalls?

Get expert help drafting your policies. Implement them. Follow them.

Karen C. Lefton is a partner at Brouse McDowell. Reach her at (330) 535-5711, ext. 341 [email protected]

For information on Brouse McDowell’s Labor and Employment Group, visit

For a complete bio of Karen C. Lefton, visit

Insights Legal Affairs is brought to you by Brouse McDowell

Facebook offering e-retailers sales tracking tool

SAN FRANCISCO, Fri Nov 16, 2012 – Facebook Inc. wants more credit for making online cash registers ring.

Facebook will begin rolling out on Friday a new tool which will allow online retailers to track purchases by members of the social network who have viewed their ads.

The tool is the latest of the new advertising features Facebook is offering to convince marketers that steering advertising dollars to the company will deliver a payoff.

Facebook, with roughly 1 billion users, has faced a tough reception on Wall Street amid concerns about its slowing revenue growth.

“Measuring ad effectiveness and outcomes is absolutely crucial to all types of businesses and marketers,” said David Baser, a product manager for Facebook’s ads business who said the “conversion measurement” tool has been a top customer request for a long time.

The sales information that advertisers receive is anonymous, said Baser. “You would see the number of people who bought shoes,” he said, using the example of an online shoe retailer. But marketers would not be able to get information that could identify the people, he added.

Facebook reaches one billion monthly active users

SAN FRANCISCO, Thu Oct 4, 2012 – Social media company Facebook Inc said on Thursday it reached the 1 billion active monthly users threshold last month, and is up by 45 million users since June.

Facebook has faced a rough debut since its May initial public offering. Investors and analysts have fretted about a sharp slowdown in its revenue growth. Shares of Facebook remain well below the $38 debut price.

Facebook, based in Menlo Park, California, hit the 1 billion milestone on September 14 at 12:45 p.m. Pacific time, the company said on its website. It added that it had 600 million mobile users, according to a fact sheet posted on its website.

In an interview on NBC’s “Today” show broadcast on Thursday, Chief Executive Mark Zuckerberg was asked by co-anchor Matt Lauer about how, with 1 billion users, the company wasn’t “killing it,” making money.

“I think it depends on your definition of ‘killing it.’ I mean we are making billions of dollars,” Zuckerberg said. Facebook reported that revenue increased by 32 percent to $1.18 billion in the second quarter.

The 28-year-old CEO talked about the growth potential from mobile users. “There’s 5 billion people in the world who have phones, so we should be able to serve many more people and grow the user base there,” he said.

John Allen: Social media raises new questions for hiring companies

John Allen, President and COO, G&A Partners

A frenzy arose recently when the Associated Press reported some hiring companies were asking potential job candidates for their Facebook passwords. While the practice is not nearly as widespread as the news story originally suggested, the idea of such an invasion of privacy hit a strong nerve and sparked a national discussion. Maryland was quick to pass legislation prohibiting employers from asking to access an applicant’s social media profiles, and other states have proposed similar legislation.

So where should the line be drawn? If asking job applicants for Facebook passwords is taboo, can you Google them? If sending friend requests is too forward, can you connect with applicants via LinkedIn?

There are no correct answers because there are no concrete rules, but before you take to the Net to investigate your next new hire, ask yourself a few questions.

What’s to gain?

What do you want to learn by investigating a job applicant online? Federal Equal Employment Opportunity Commission laws dictate that companies make hiring decisions based on job-related information only. While a basic Google search is unlikely to provide much job-related data, it could easily divulge information that puts an applicant in a protected class — their race, color, religion, sex, national origin, age, disability or genetics. Certainly, some of the same information would be disclosed during an interview, but what if after reviewing one candidate’s lackluster resume, you decide interviewing him or her would be a waste of time?

However, out of curiosity, you Google the applicant anyway and learn she’s an African-American woman in her late 50s. Now there is the potential taint of discrimination attached to your decision not to interview her.

Can you handle the truth?

What will you do with the information you discover? Remember the famous courtroom scene in the movie “A Few Good Men” in which Jack Nicholson’s character screams, “You can’t handle the truth!” Can you handle the truth? Are you ready for what you might learn about a job applicant online?

What if through connecting with your top candidate on a social networking site, you come across a fundraising campaign for his child with muscular dystrophy? You might assume if you hire him, your company’s health insurance premiums would increase or that he would be unable to fully commit to the job with a special needs child at home.

What if you discover the young go-getter you are about to hire as an executive assistant has been moonlighting at a questionable nightclub? You can’t unlearn facts once you’ve learned them, so can you trust yourself to make a completely unbiased hiring decision?

Can you be certain that what you find is a current and accurate representation of the candidate?

Protection concerns

If your parents were right and you’re judged by the company you keep, for better or worse a company is also judged by the people it employs. In this age of rampant online recklessness, it’s understandable that employers would want to protect their company’s reputation from the damage even just one employee’s careless indiscretion could cause.

Remember the Domino’s Pizza incident when two employees posted a video of themselves sabotaging a submarine sandwich? Personal posts could be a red flag that the candidate you are about to hire doesn’t always display the best judgment.

But how can you be sure those party pics you found tagging your star candidate were posted with her knowledge or are not from 10 years ago when she was still a college coed?

Social media offers companies an alluring platform to connect with their audiences, whether that’s customers, employees or even prospective employees. But company representatives need to use discretion if they intend to access social media or any online tools in the hiring process. Some well-intended prying could be deemed discriminatory or lead you to pass up a potential star.

Poor judgment, whether it is on the part of an individual or part of a company practice, will always carry negative consequences.

John Allen is president and COO of G&A Partners, a Texas-based human resources and administrative services company that manages human resources, benefits, payroll, accounting and risk management for growing businesses. For more information about the company, visit

Knight accepts Nasdaq’s $62-million Facebook payback plan

NEW YORK, Thu Aug 30, 2012 – After initially criticizing Nasdaq OMX Group for its response to Facebook’s botched initial public offering, trading firm Knight Capital Group Inc said it accepted the exchange’s latest plan to pay back brokers a portion of their losses.

Knight’s support comes after Nasdaq increased the payback fund to $62 million in cash from an earlier $40 million made up mostly of trading rebates, the market-making firm said in a letter to the U.S. Securities and Exchange Commission, dated Aug. 29.

Knight, which facilitates trades for other firms, had called Nasdaq’s earlier plan “inadequate,” and said it was considering legal action over the May 18 IPO.

“Although we would have preferred that the accommodation pool cover all losses sustained by Nasdaq members, we do support Nasdaq’s proposal to increase the accommodation pool from $40 million to $62 million,” Knight said in the letter obtained by Reuters.

Knight and other retail market-making firms and brokers together lost more than $500 million in the IPO.

Some firms, like UBS AG, which disclosed it lost more than $350 million, and Citigroup’s Automated Trading Desk, which is said to have lost up to $35 million, have rejected the plan, saying Nasdaq should be responsible for all of the losses, because it acted in a for-profit manner in the IPO.