Friday, 13 May 2011

Facebook's PR disaster

The news yesterday that Facebook hired Burson-Marsteller – one of my former employers and one of the world’s biggest PR companies - to place negative stories about Google in the American press is a genuine PR disaster. 

With the growth of the internet, and particularly social media, we have seen a welcome increase in transparency from major global businesses in all sectors. No longer can multi-national companies get away with saying one thing and doing another; from environmental policies to executive pay every company should expect the truth will out eventually. Therefore, with all companies I have ever advised – whether a UK based manufacturer or a major business operating in the Middle East - I have always counseled them to be utterly 100 per cent transparent. 

Despite this, the news that one business was briefing against another was not a huge surprise. Some may think the ‘dark arts’ are only put to good use in the political world but this is simply not true. What did surprise me was the ham-fisted way Burson-Marsteller went about smearing Google.  Since the admission, Burson Marsteller has terminated its contract with Facebook. If I worked for Burson I would be worrying how many companies would be terminating their contracts with us.

The story goes that Burson-Marsteller approached a well known blogger, who blogs about security, urging him to investigate Google’s privacy policy, and they would help him get the piece published on influential sites such as The Huffington Post and The Washington Post. He refused and – as is common in the days of transparency – posted the e-mails on his site. These were picked up by other bloggers who soon joined the dots to conclude it was a smear operation on behalf of Facebook.

Increasingly businesses are turning to smaller PR and communications agencies to do their bidding for them. This latest PR disaster for a PR company goes to show why. With the speed the world moves in today’s digital age, companies who use tactics such as this to smear others will always fail. Meanwhile, will this damage Facebook? Probably not, as they currently hold a dominant position with a product that is a monoploy in some markets. It would take many millions to decide to stop using Facebook for this row to have an impact. That doesn’t mean they can be complacent.

Microsoft and Nokia once had what appeared to be unassailable positions in the market before being overtaken by younger, more nimble competitors. Facebook will face competition one day soon so should avoid any more PR disasters like this which may hasten their decline.    

1 comment:

  1. The way that this story has broken - and the fright that other Burson-Marstellar clients will get from this... definitely going to be some contracts cancelled to protect those companies reputations from being trashed by BM fallout - shows why the market, especially in the Internet age, is a better regulator against bad conduct than any amount of legislation or government regulations.

    The speed with which markets will punish such transgressions are so much faster than the regulatory state. In fact, the markets are reacting even before a politician can say "grand jury" or "early day motion"! Moreover, markets punish transgressors more severely than do governments. If I recall correctly, there is a great article from the Institute of Econonic Affairs' journal "Economic Affairs" from the 1980s that showed that when an aircraft manufacturer is found to be at fault in an aircrash investigation, around 10% is permanently wiped off their share price. Contrast this to the few hundred thousand pound fines that government agencies like the Civil Aviation Authority could levy... where do you think aircraft manufacturers placed most of their compliance efforts? Satisfying market demands or satisfying regulators?

    In the internet age, the need to protect reputation will, as Ed notes, see even faster responses (and dissociations) to bad news stories - and it will the market not the state that will deal the most serious punishments.... unless, of course, businesses succeed in passing legislation and regulations that protect them from the rigours of market competition.


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