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Social networkers see small print

Social media has come of age and the businesses which underpin it are coming to the hard realisation that, sooner or later, they will need to turn a profit.

Facebook was the first platform to monetise its brand through its recent, troubled initial public offering (IPO). As with the dot com bubble of the late-1990s, overinflated valuations are making investors nervous. The reality is starting to set in that potential alone is not a robust foundation for a successful business fit for whatever next iteration of the social web is around the corner.

The scramble is now on to find other assets available to platforms beyond a huge user-base to justify the price tags that swing from their masthead.

Social networks have no shortage of content. However, the majority of that content doesn’t belong to the platform on which it is posted – yet. Herein lies the problem for any business relying on user-generated content to generate value; they allow users to upload and display resonant content which has a tendency to go more viral, and faster, than traditional advertising. Surely, if you give your users the ability to “use your stuff”, then they should reciprocate?

The scramble is on to find other assets available to platforms beyond a huge user-base

This is an emergent tension at the heart of the social media economy – licensing versus ownership. The intellectual property rights in content posted on to social networks (usually copyright) usually belongs to whoever creates it. Social networks need permission to display it on their platform.

That permission is obtained through the terms of use that users agree to, generally containing a clause granting the network a licence to post user-content to other users, allowing other users to share it and for a number of other more commercial uses. So far, so good – if you post something on a network, you should not have a problem with letting the network in question disseminate it.

Some networks, however, went further. In 2009, Facebook’s terms of use were stealthily amended, allowing it to use user-content perpetually, for whatever purpose it saw fit, including advertising and promotion. The resultant uproar was typical of Facebook’s relationship with its users: one step forward and two steps back. Facebook reverted to its original terms – when users delete their account, the licence to use their content automatically expires.

Pinterest, the image-sharing site launched with similar terms of use in 2010, was next – and subsequently went further, claiming a licence to sell any content posted to the site to third parties. This didn’t mean that users would lose or transfer copyright in what they posted; but they did lose the ability to control how the platform used their content. In March 2012, the site performed a similar volte-face to Facebook after a critical article in Scientific American resulted in user exodus, claiming that “selling content was never their intention”.

Users are now very much aware of the potential value of their content and, so when photo-sharing service Instagram recently announced, not long after being purchased by Facebook, a change to its terms of service, which many users feared would allow it to sell user content, the uproar made headline news. Although this had not been the intention, it led to a very public climb-down, and a US lawsuit.

All this means that more savvy users of social networks will spend more time reading the small print and some may desert platforms as they become more overtly commercial. For some, the trade-off of use of their content beyond their initial expectations may simply be a step too far.

The real challenge for social-media businesses is striking the right balance between being “cool” and being financially viable.

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