Sunday, October 18, 2009

Why Willie Sutton Would Not Survive Long With Web 2.0

A couple weeks ago I wrote a piece called What Bankers and Willie Sutton Have in Common. If you recall that post you'll remember who Willie Sutton was...a famous bank robber whose career spanned decades.

The point of that post was not to discuss bank robbery. The point was to make the reader aware of the obvious...people are using social media at an increasing rate and banks should consider whether it makes sense for them.

Like I said, the point of THAT post was not to talk about bank robbery. But that was then and this is now. So today, let's talk about bank robbery.

On October 18, 2009, Seth Liss of the Sun Sentinel newspaper wrote an article called "Social Media the New Crime-Fighter." This article discussed how social media is currently being used by private citizens as well as law enforcement to track down criminals. Through YouTube, Facebook and Twitter, people are creating their own version of America's Most Wanted, the popular syndicated television program.

This got me to thinking...again. If law enforcement can post photos and videos on Twitpic, YouTube, etc., shouldn't banks use the same technology in the event of a robbery? While some thought needs to be given to how it is publicized and where it is published, social media can be an effective way to speed up the discovery process in the case of a bank robbery...or any crime, for that matter.

Now, I say some thought needs to be given to the manner of disclosure because no banker would want to general public to get the impression that the bank is Robbery Central and subsequently, unsafe. However, handled properly social media can be an effective tool to closing bank robbery cases and simultaneously act as a preventive tool since no one wants their friends to spot them with women's hosiery over their head (not that there's anything wrong with that!).

I must admit that I haven't given this too much thought and I would probably want to consult a security expert (any out there?) to provide some pros and cons in terms of disclosure. But at a very basic level it seems like something that could work and become incorporated into a bank's overall social media strategy as well as its risk management strategy. Tie a decent bounty to tips leading to an arrest and in this economy you'll have some pretty good success.

Wednesday, October 14, 2009

Social Media, User Generated Content and Liability

Social media platforms and applications are dependent upon communal participation. Members of the community share everything from names, professions and scholastic and corporate affiliations to names and photos of family and friends as well as up-to-the-minute updates on current events. Little is too personal on social media, and the greater the extent of the sharing the greater the personal reward for all involved.

As in the non-Internet world, people often do and say things that are not always appropriate - whether intentional or not. Examples include a personal opinion, a piece of confidential information about oneself, one's company or an acquaintance. Through social media, such communication can take the form of a written comment, photos, videos or other form of communication. The result of these communications can result in claims of defamation, incorrect statements of fact, harassment, etc.

Unfortunately for social media operators such as banks that decides to host their own social media sites (e.g., Bank of America, American Express, etc.) and not utilize a commercially available site such as Facebook, there can be a potential legal risk. Fortunately for social media operators operating in the U.S., there exists some form of protection to the extent that certain procedures are maintained.


Section 230 of the Communications Decency Act of 1996 is a landmark piece of Internet legislation. Section 230(c)(1) of the CDA provides immunity from liability to providers and users of an "interactive computer service" that publishes information provided by others (e.g., user-generated content). Courts generally apply the following three-prong test to determine whether a defendant is subject to the protections afforded by Section 230.

1. The defendant must be a "provider or user" of an "interactive computer service;"

2. The cause of action asserted by the plaintiff must treat the defendant as a "publisher or speaker" of the harmful information at issue; and,

3. The information must be "provided by another information content provider," (i.e., the defendant must not be the information content provider of the harmful information at issue).

This section of the CDA was enacted to enhance free speech by making it unnecessary for Internet service providers and other service providers to unduly restrict customers' actions for fear of being found legally liable for customers' conduct. This law effectively protects social media operators since it covers computer services that involve user-generated content

As a result of its effective protections, Section 230 is considered quite controversial because courts have interpreted Section 230 as providing complete immunity to Internet service providers and other service providers with regard to torts committed by their users. Critics of Section 230 are primarily concerned with its effectiveness at leaving victims with no hope of relief in instances where the true tortfeasors cannot be identified or are judgment proof.

Courts have upheld Section 230 in a variety of factual contexts and on numerous legal theories, including posting of:

• Defamatory information;
• Opinions;
• Private information;
• False information;
• Pornographic information;
• Harassing commentary; and,
• Discriminatory and/or illegal advertising.

Section 230, however, is not absolute protection. For example, plaintiffs have successfully argued in a handful of cases that an "interactive computer service" was not entitled to Section 230 immunity because the person or entity in question was an "information content provider" with respect to the information at issue, thereby failing the third test noted above. Notwithstanding certain plaintiff successes, generally the social media operator is protected against liability for postings made by others so long as the operator does not contribute in whole or in part, in the creation or development of the content and provides a mechanism for detecting objectionable content.

As such, in order for social media operators to obtain the maximum protection under Section 230 of the CDA, the operator should strictly adhere to the following:

• Do not alter any contribution of user-generated content. To the extent that user-generated content is repackaged - no matter how insignificantly, the social media operator potentially voids one of the three tests and risks exposure. Competent legal counsel should opine on the risk to the social media operator to the extent that any user-generated content is repackaged or reformatted.

• Maintain the ability for users to alert the operator of questionable content. Users should at all times be provided with the ability to report user-generated content that violates the terms of use or is generally considered offensive or specifically offensive. Additionally, users should be provided with the ability to promptly delete user-generated content that is directly posted to their profiles or personal space within the social media platform.

• Maintain formal policies and procedures for addressing complaints of questionable content. The policies should include both external terms of use policies and internal policies and procedures for the timely management of complaints. Periodic audits and compliance with recommended corrective actions should be performed and well documented to serve as support in the event of legal action.

• The Terms of Use should explicitly state that the user is fully responsible and liable for any legal action attributed to their user generated content and the TOU should include indemnification language that contractually indemnifies the social media operator as a result of user-generated content. Any subsequent changes to the TOU should require the user to accept the changes prior to permitting the user access to the social media platform.

I am not an attorney and this information should not be taken as legal advice. However, it should be something to think about and explore further to the extent that your bank will host its own site.

Today it is very possible for community banks to launch their own social networks. If that decision makes sense, an appropriate risk assessment should be conducted that includes within it questions related to legal liability. Legal counsel should be well versed in these emerging risks in order to provide strong advice.

As I state over and over in this blog, these risks should not deter the use of social media. However, the risks should be considered and appropriate internal controls, policies and procedures put into place to allow everyone to sleep at night.

Sunday, October 11, 2009

Libel, Schmibel...I'll Call You What I Want

I have lived in L.A. my whole life. I attended a college that bordered Sunset Blvd and I have a wife and daughter that are "in the business," as well as countless friends who have made a sick living behind the scenes of many of your favorite TV shows. But I've never really followed "the trade." I just never thought there was much to learn from it - from a banking point of view.

Well, I was wrong.

On October 11, 2009, Amar Toor wrote a piece at that got me thinking. Amar was describing the danger that social media poses when tweets and other social media conversations erupt into character defamation lawsuits. Amar gave several examples involving Courtney Love, Demi Moore, Perez Hilton and others. The point Amar was making was that the widespread and viral nature of the unregulated social media industry can result in a battle between free speech and defamation that could create legal headaches.

That's the part that got me thinking. As banks continue to adopt social media as a communication channel, bankers need to ensure that their employees are well versed in terms of what can, cannot and should not be said. To further complicate matters, many banks have a social media presence without knowing it in the form of employee blogs, Facebook and MySpace pages, etc. In these cases, the employees may not understand the potential risks associated with their activities and that statements made by them may be attributed as comments of the company they work for.

But even "officially" sanctioned community managers may create legal firestorms. For example, take a tweet that asks a banker at Bank Y what he thinks about Bank X. If the Bank Y employee is not factual, Bank X may take a negative comment as derogatory and detrimental to Bank X's brand. The result could be wasted dollars and energy over a simple statement.

Does this mean banks should not encourage the use of social media. Absolutely not! Even if a Bank forbid it, chances are it would still occur at some level. Instead, every bank, whether active or not in social media, should develop a social media policy.

The policy should address not only the regulatory requirements but should also address how employees can characterize their competition. For example, an employee may receive a tweet regarding Bank Y's assessment of the financial condition/capital adequacy of Bank X. The banker should refer out the question to the FDIC site for that bank's financial condition rather that provide an opinion - particularly if the opinion is not positive.

It's too easy to think of social media as merely a marketing/outreach tool and forget its regulatory/legal implications. Good policy and training are the keys to protecting a bank from legal troubles. Also, be sure to read my post on Pain Free Social Media Policy Development.

Saturday, October 10, 2009

What Bankers and Willie Sutton Have in Common in 2009

If you've been a banker for any extent of time chances are you've heard his name - or at least his quote. Willie Sutton was a career bank robber who held up over 100 banks from the 1920s to the 1950s (final arrest in 1952). As the story goes, after being arrested Willie was asked why he did it..."because that's where the money is."

So what does Willie Sutton have to do with social media?

On September 21, 2009, comScore Media Matrix released its rankings of the top 50 U.S. Web properties for August 2009. According to comScore, Facebook came in at 5th place with 92.2 million unique visitors - a five percent increase from July 2009. Twitter came in at 46th place with 20.8 million unique visitors.

So, let me ask it again...what does Willie Sutton have to do with social media? If Willie were alive today, he'd probably say, "because that's where the money is."

That's right. The money. Banks, and businesses in general, need to consider how to best utilize social media to develop their businesses - from customer service to reputation risk management to sales and marketing. And by doing all these things well, banks will find a route to new found treasure.

But, of course, social media is NOT the same as Web or email marketing. Social media is much more complicated and brings with it a whole new set of nuances that set it apart from traditional online marketing. In a nutshell, the nuances involve honest, transparent and ongoing conversations with the "community." This post does not cover those nuances in detail but is intended to get bankers thinking about the potential for the use of social media; to get bankers to think about where to find the money (without having to hold up a competitor!). I recommend the ebook Community Banker's Guide to Social Network Marketing for a detailed description of the nuances.

I recently read a post by Richard Pentin where he stated that the honeymoon over social media is over. While I respect Mr. Pentin's view, from the banking industries point of view, he could not be further from the truth. As a banker it hurts me to say that we tend to be far behind the innovation curve. So while the rest of the world has been neck deep in social media over the past two years, bankers are just now starting to get their arms around it. As such, from a banker's perspective, the honeymoon is just beginning. And with bankers' current and potential customers increasing jumping onto Facebook and Twitter and other social platforms at increasing rates, bankers need to figure out how to continue to meet the demands of the evolving consumer as well as how to use those evolving technologies to secure additional business.

What is another reason bankers consider social media? Well, to quote another controversial historical figure, former President Bill Clinton, "It's The Economy Stupid." As the economy continues to struggle, consumers have become more critical of the banking industry. With TARP, AIG, Lehman Bros., et al, bankers have taken a hit from a reputational perspective. Social media can assist in healing those wounds through the honest and transparent approach required by social media.

I could go on and on but I really think that the next step requires a thorough reading of the Community Banker's Guide to Social Network Marketing. Then we can come back and fill in the gaps.

Thursday, October 1, 2009

This Isn't Your Son's Social Media

A few weeks ago I received an email from Dave Hamel, the Managing Director at ESW Partners, a Chicago-based advertising firm. Dave expressed surprise at how little banks are engaged in social media. Dave stated how important it is for banks to consider social media. He went on and further stated that "as a 56-year old bank customer, I also use social media. So they are missing me as well."

Later in the week I shared the conversation with a friend of mine who works for a former-brokerage-firm-turned-bank. This friend of mine stated that investment if social media is not a good use of money because social media is a kid's domain and kids don't have money. Unfortunately I did not have the time or the energy that night to get into an involved conversion/debate about the inaccuracy of his statement. I have to say that this guy IS a smart fellow whose intellect is highly regarded. So how could he make such a faux pas? Or did he?

If you visit Wikipedia for a definition of faux pas you learn that a faux pas is a violation of accepted social rules. The question this brought up was "is it socially acceptable to consider social media a kid's domain despite the contradictory research?" And is the faux pas on my part for believing that this isn't your son's (or daughter's) social media?

Fortunately, answering that question is beyond the scope of this post. However, I thought I would address the issue by providing some research. Given the expanding nature of social media, many many firms are conducting research on social media usage and demographics. I will put one source here. However, I encourage you to list other useful sources of research in the comments sections. I use Quantcast data for this post.


Looking at Quantcast data for October 2, 2009, as illustrated below, only a small cut of users are kids. Total Twitter users between the ages of 3 to 17 amount to a mere 10% of users. The next age group, the 18 to 34 year olds, amount to a more significant 43% of Twitter users. However, those 35 years old and older come in at 47% of all users!


Now let's look at Facebook. While the numbers are not as strong from the "old guy" (gal) perspective, they still show that a significant percentage (33%) of 35+ year olds use Facebook. That is one-third of all users and more than the 3 to 17 year old group!


Now if you really want to skew things, let's look at LinkedIn. Anyone familiar with this social media platform knows that it obviously favors the 35+ year olds based upon its focus on professionals. No faux pas here. The 35+ year old group represents 76% of users. That is tremendous.


But no analysis would be complete without including MySpace (at least until it dies a natural death). Clearly, compared to the other sites reviewed, MySpace is most representive of the incorrectly held believe that social media is a kids space. Perhaps the reason for this is because MySpace was an early MAJOR entrant in social media. Of course, if you follow MySpace you realize that without some major changes this platform will become a small niche platform or fall off the scene altogether. However, despite its emphasis on youth (28% 3 to 17 year olds and 46% 18 to 34 year olds) the platform has a decent percentage of older users at 26% of total users.

Of course I left out many other platforms. But my point was not to provide a comprehensive survey of the space. The point was to illustrate that social media use is not dominated by the young. Older consumers with the need for checking, savings, mortgages, investments and other grown up financial products and services are very well represented on social media platforms. Therefore, if you are dismissing social media as a kid's game you are risking not only losing the game but a significant amount of business to your competitor that realizes that the faux pas is not on him but on you.