Facebook has faced many challenges about how personal data of its members is collected and used by this Goliath social media company. Recently, a federal judge reportedly indicated tentative approval of Facebook's offer to settle a class action claim arising from its use of individuals' names and likenesses in connection with Sponsored Stories, a service it rolled out in January of 2012.1 While the details of this settlement are not yet fully known, it appears that Facebook will pay $20 million to affected consumers plus additional monies in attorneys' fees.2 While $20 million sounds like an impressive number, reports estimate that Facebook made $1 million a day from the Sponsored Stories service over the last year.3 From that perspective, Facebook made the right business decision when it launched the Sponsored Stories service even though it undoubtedly knew that it was bound to face legal challenges.

Facebook privacy issues have also caught the attention of various watchdog agencies, as well as social media bloggers and commentators, all focusing on the vast amount of information that Facebook collects from individuals, how it uses that information, and the steps individuals can take to protect their privacy.4 Few, if any, have paid attention to how Facebook's data collection policies and other terms of use impact companies that allow their users to sign onto their site using their Facebook credentials. Research indicates that Internet users prefer not having to register in order to access the content on a particular site. According to a December 2012 study, 77 percent of Internet users prefer using a social media login option over registering for a site, and 88 percent admit to providing false information if they do elect to register directly.5 While there are many social media companies offering third-party registration services, including Google, Twitter and LinkedIn, Facebook has become the most frequently used social media login method.6

Using Facebook's tools with your company's website presents a number of complex, yet unexamined issues that in-house counsel should nevertheless contemplate. These issues include protecting your company from inadvertently making it possible for your competitors to target your customers or creating a competing product using data derived from your website, as well as considering the leverage Facebook has over your company if it elects to charge a fee in the future for this service. Part one of this article reviews the relevant Facebook history and how Facebook has created the perception among marketing personnel that Facebook is the key to e-commerce success.

Part two explores the serious implications that flow from having your company's website permit users to login using their Facebook credentials. To date, there has been no serious consideration of this issue. There are most likely two explanations behind this absence of meaningful legal evaluation. First, the use of a login tool is most likely seen as an e-commerce decision controlled by marketing personnel who, based on their perception that "everyone" is using this tool, do not even perceive that there is any legal issue involved. Second, even if in-house legal counsel were consulted, Facebook's terms of use are so complicated that it is extraordinarily difficult to identify the legal issues at play here. This is especially true because the relevant terms are for the most part contained within Facebook's Developer section. The term "Facebook Developer" suggests a person who is developing an application to interface with Facebook. Most in-house counsel will be surprised to learn that the simple act of inserting a few lines of code provided by Facebook to take advantage of a free service makes your company's website no different under Facebook's policies than an independently created Facebook app. By merely adopting the Facebook Login, your company's website becomes part of the Facebook Platform subject to all of Facebook's terms and conditions.

Part three focuses on the confusion arising from the fact that Facebook offers two methods for allowing a visitor to use his Facebook credentials to sign into a third-party website. One such method is identified by Facebook as the Social Plugin Login. The second method which is currently not branded (but was once known as Facebook Connect) is known simply as Facebook Login. For our purposes, we will refer to this second method as the Login Tool. When a company uses the Social Plugin Login method, it provides Facebook with access to data about visitors to its website, though precisely how much access is far from clear. In contrast, the Login Tool does not give Facebook access to data about visitors to your website once they are on your site.

While use of the Social Plugin Login presents far greater risks to a company than the Login Tool, companies should understand that the dangers from using even this scaled back tool are enormous and should be carefully considered.

A Brief History of Facebook, The Facebook Platform, Facebook Connect and Social Plugins

Facebook traces its roots back to 2003 when Facemash was launched at Harvard University.7 In May of 2007, Facebook introduced the Facebook Platform, which created a software environment that facilitated the creation of apps that could run on Facebook created by third parties.8 The Facebook Platform moved Facebook to a new level by allowing members to give virtual gifts and play games with other members.

Within a year of this launch, there were more than 400,000 registered Facebook developers.9 The proliferation of developers, as well as the exponential growth in the number of spam applications, clearly required Facebook to develop standards that would seek to ensure that Facebook users had only positive interactions with the any part of the Facebook Platform.

Facebook first introduced a social media login tool branded as Facebook Connect in December 2008.10 Google had already introduced a similar service based on a person's Gmail account info. In April of 2010, around the same time that Facebook surpassed Google as the most popular social media login11, Facebook announced it was discontinuing the Facebook Connect program in favor of its new Open Graph initiative.12 The Open Graph initiative created platforms within Facebook that allowed for the introduction of the "Like" button and other "Social Plugins."13 Social Plugins refer generally to a service used by third-party websites to integrate a person's experience on that website with their experience on Facebook.14

The "Like" button was perceived by some as a transformative moment for e-commerce. One major clothing manufacturer, an early adopter of the "Like" button, proclaimed the creation of a "new social shopping experience."15 Within a year, according to some experts on web traffic and e-commerce, more than 2.5 million websites were using the "Like" button.16

Facebook did an excellent job creating a buzz about the magic of its "Like" button, as well as its Social Plugins generally. The second most popular Social Plugin was the Facebook Login plugin.17 This Social Plugin was touted by Facebook as an easy way to make virtually any site more profitable. For instance, consider:

  • People who signed in with Facebook at The Huffington Post reportedly viewed 22 percent more pages and spent 8 minutes longer than the average reader.18
  • Users coming to the NH's website from Facebook reportedly spend 85 percent more time on the site, read 90 percent more articles and watch 85 percent more videos than a non-connected user.19

Indeed, some statistics suggested that merely using the Facebook Login would make the same user more likely to buy a product or spend more time on the site. For instance, the same article that touted the success of The Huffington Post and the NHS, reported that "ShoeDazzle also lets people login to its site using Facebook, and Facebook-connected users were 50 percent more likely to make repeat purchases every month than average shoppers."20

The buzz about Facebook's Social Plugins continues even in the aftermath of Facebook's disappointing public stock offering. On July 31, 2012, Janrain reported that a remarkable 48 percent of U.S. Internet users use their Facebook login to access other social media sites.21 And Janrain also reported, yet again, that encouraging people to use the Facebook Login option would make them more likely to "engage" with the content of your website. Other research indicates that the failure to provide a social media login option could have disastrous consequences on a company's web presence. Purportedly, more than 50 percent of visitors to a website not offering some form of social media login are likely to leave the website rather than take the time to complete that website's own direct registration process.22

The wide proliferation of these statistics has made adoption of the Facebook Login tool highly desirable among those who operate consumer focused websites. In this writer's experience, any suggestion that legal concerns might impact the implementation of this tool is quickly brushed aside with statements about exaggerated legal risks and the justification that "everyone" would not be doing this if there were such a high risk.

Part two of this article—exploring the implications of permitting your company's website users to login using their Facebook credentials—will appear on Law360 on Jan. 16, 2013.

Footnotes

[1] See Facebook Will Pay Disgruntled Advertising For $ 10, Internet News Magazine, (Dec. 14, 2012), http://internetnewsmagazine.net/it-news/facebook-will-pay-disgruntled-advertising-for-10.htm. (last visited January 7, 2013).

[2] Id.

[3] Alex Fitzpatrick, $20 Million Facebook Privacy Settlement Rejected by Court, Mashable.com, (Aug. 19, 2012), http://mashable.com/2012/08/19/facebook-settlement-rejected/ . (last visited January 7, 2013).

[4] See, e.g. Gerald Ferguson, Facebook Opens the Door to Giving Your Personal Information to an Affiliated Ad Agency, Data Privacy Monitor.com, (Nov. 26, 20120), http://www.dataprivacymonitor.com/social-media/facebook-opens-door-to-giving-your-personalinformation-to-an-affiliated-adagency/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DataPrivacyMonitor+28Data+Privacy+Monitor%29&goback=.gde_89700_member_190190611 . (last visited January 7, 2013); Rainey Reitman, A Deep Dive into Facebook and Datalogix: What's Actually Getting Shared and How You Can Opt Out, Electronic Frontier Foundation, (Sept. 25, 2012), https://www.eff.org/deeplinks/2012/09/deep-dive-facebook-and-datalogix-whats-actually-gettingshared-and-how-you-can-opt . (last visited January 7, 2013).

[5] Kelsey Goings & Paul Abel, Consumer Perception of Online Registration and Social Login, Janrain Inc., 4, 10, http://janrain.com/resources/industry-research/consumer-perceptions-of-online-registrationand-social-login/thank-you/ . (last visited January 3, 2013).

[6] Facebook Eclipses Google For Social Sign In, MarketingCharts.com, (April 18, 2011), http://www.marketingcharts.com/wp/direct/facebook-eclipses-google-for-social-sign-in-17106/ (In early 2010 Facebook surpassed Google as the most popular social media login). (last visited January 3, 2013).

[7] Facebook, Wikipedia, http://en.wikipedia.org/wiki/Facebook (Last Visited January 3, 2013).

[8] Facebook Platform, http://en.wikipedia.org/wiki/Facebook_platform (Last visited January 3, 2013).

[9] Id.

[10] Id.

[11] See MarketingCharts.com, supra n. 6.

[12] Ben Parr, Facebook To Kill Facebook Connect, Mashable.com, (April 21, 2010), http://mashable.com/2010/04/21/facebook-kills-facebook-connect . (last visited January 3, 2013).

[13] Bret Taylor, The Next Evolution of Facebook Platform, Facebook Developer's Blog, (April 21, 2010), https://developers.facebook.com/blog/post/377/ . (last visited January 3, 2013).

[14] Facebook Platform, Wikipedia,

http://en.wikipedia.org/wiki/Facebook_Platform#Social_plugins . (last visited January 3, 2013).

[15] Laura Sweet, Levi's Integrates Facebook's Like Button On Their Own Site, If it's hip it's here, (April21, 2010), http://ifitshipitshere.blogspot.com/2010/04/levis-integrates-facebooks-like-button.html . (last visited January 3, 2013).

[16] Danny Sullivan, Has Facebook Become The Key To Unlocking The Web? Search Engine Land (May 4, 2011, 9:00 AM), http://searchengineland.com/has-facebook-become-the-master-key-to-unlocking-theweb-75139 . (last visited January 3, 2013).

[17] Facebook's Social Plugins Challenge Google, Seewhy.com, (July 7, 2010), http://seewhy.com/blog/2010/07/07/facebooks-social-plugins-challenge-google/. (last visited January 4, 2013).

[18] Danny Sullivan, By The Numbers: How Facebook Says Likes & Social Plugins Help Websites, Search Engine Land (May 22, 2011, 8:30 AM), http://searchengineland.com/by-the-numbers-how-facebooksays-likes-social-plugins-help-websites-76061 . (last visited January 3, 2013).

[19] Id.

[20] Id.

[21] Consumers Constantly Logged Into Facebook: Social Giant Still Preferred Social Login Throughout The Web, Brafton.com (July 31, 2012), http://www.brafton.com/news/consumers-constantly-loggedinto-facebook-social-giant-still-preferred-social-login-throughout-the-web . (last visited January 3, 2013).

[22] Barry Buyers, New Account Registration Vs. Social Sign-On, wolf21 Internet Marketing, (May 11, 2011), http://www.wolf21.com/blog/account-registration-social-signon/ . (last visited January 3, 2013).

Previously published in Law360, New York (January 15, 2013).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.