Facebook’s ‘Friendly Fraud’ — report reveals social media knowingly scammed children as Zuckerberg publishes WSJ column

9to5 Staff | Jan 25 2019 - 12:47 am PT

Bad news and Facebook seem be in perfect harmony over the past months, and the latest report might shine the social media in its worst light yet. Information from RevealNews uncovers how Facebook privately used phrases such as “Friendly Fraud” in internal memos in reference to children spending money on games without their parents permission.

Perhaps more troubling is how the report alleges the company pushed developers into allowing games to entice children to spend money without parental guidance in an effort to “maximize revenue”.

Facebook further discussed internally how to respond to chargebacks and complaints from parents over unauthorized in-game purchases. The social media determined digital rewards such as “flaming swords or extra lives” would be the best option, as “virtual goods bear no cost”.

RevealNews continues,

And for those customers who turned to their credit cards for help, Facebook was devising another strategy. It would design a program that automatically disputed customer’s chargeback requests, without even bothering to review the merits of those requests, according to another unsealed document.

The memo, which circulated through Facebook corporate, was titled “Friendly Fraud — what it is, why it’s challenging, and why you shouldn’t try to block it”. The discussions were sparked after popular games on the platform, such as Angry Birds, saw extremely high chargeback rates in the 5-10% range.

Generally, a maximumly allowed chargeback rate would fall in the 1% range, with chargeback rates above 2% being indicative of a fraudulent or deceptive business.

The report continues to detail that after Facebook launched an internal probe on Angry Birds, it found that 93% of the time there were chargebacks, the credit card holder was unaware the game was tied to their financial account.

“In nearly all cases the parent knew their child was playing Angry Birds, but didn’t think the child would be allowed to buy anything without their password or authorization first (Like in iOS),” a Facebook employee wrote.

The average age of those playing Angry Birds was 5 years old, according to Facebook’s analysis. Then the employee wrote what is a common theme throughout the unsealed documents, “If we were to build risk models to reduce it, we would most likely block good TPV.” “TPV” is total purchase value, also called revenue.

If Facebook tried to stop children and their parents from unwittingly spending money, it would hurt the company’s revenue..

Just yesterday, Facebook announced it will be shutting down its once hyped ‘Moments’ photo sharing app this coming February. Prior to that, the company has dealt with numerous data and privacy ailments.

Late last night, however, CEO Mark Zuckerberg took to the Wall Street Journal in a defense of Facebook’s more larger and looming issues.

Specifically, Zuckerberg reminded users that the company does not sell user data, and in order to maintain a free service, ads are required. Zuckerberg’s piece, entitled The Facts About Facebook, personally sounds like typical corporate defenses under the guise of a humble op-ed by the company’s founder. If you’re interested, you can read the entire column from the Wall Street Journal here.

An excerpt from Zuckerberg’s column,

Ultimately, I believe the most important principles around data are transparency, choice and control. We need to be clear about the ways we’re using information, and people need to have clear choices about how their information is used. We believe regulation that codifies these principles across the internet would be good for everyone.

It’s important to get this right, because there are clear benefits to this business model. Billions of people get a free service to stay connected to those they care about and to express themselves. And small businesses—which create most of the jobs and economic growth around the world—get access to tools that help them thrive.

How do you feel about yet about yet another massive Facebook headline? Tell us if you even still use the social media in the comments section down below!