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According to undisclosed documents reported by Reveal, Facebook is engaged in practices that encourage kids and parents to spend money on free games. And the company has often denied attempts by parents to recover hundreds or even thousands of dollars until credit card companies "reclaim" Facebook money.
The 135 pages of documents include internal memos to Facebook, secret strategies and emails to employees, which show how the social media company is engaged in what we've nicknamed internally. " friendly fraud "to maximize revenue. These discoveries are explosive because they tell a different story about the so-called "whales" or the low percentage of gamers who spend a lot of money on games.
This suggests that, rather than wanting to spend a lot, many whales were accidental or unintentional, as children did not realize that virtual money purchases were related to their parents' credit cards. When these parents tried to recover the money from the so-called integrated purchases, they had problems and had to seek the help of credit card companies, the Bureau of Business Ethics or courts.
The story details the case of a 12-year-old boy who spent close to $ 1,000 in the Ninja Saga game. This case gave rise to a lawsuit in 2012. The deadline for the violations covered the years 2010 to 2014, but the documents relating to these cases had not been made public until now. Although the cases are old, they have covered a critical period of unprecedented growth when Facebook has established its dominance in the social media market.
Reveal said that US District Court Judge Beth Freeman had ordered the documents not to be sealed on Jan. 14, after Reveal of the Center for Investigative Reporting had claimed the publication last year, saying that the public had the right to know how Facebook targeted children. This is another problem for Facebook, which faces a tight control of user privacy and false information.
In a statement, the company told Reveal, "We regularly review our own practices, and in 2016 we agreed to update our terms and provide dedicated redemption resources for purchases made by minors. on Facebook".
And in a statement made Friday by Facebook at the Guardian, Facebook said: "Last year, the Center for Investigation Reportage contacted us and we voluntarily disclosed documents relating to a 2012 case concerning our reimbursement policies for Integrated Purchases – Believing was erroneously made by their underage children We have now released additional documents as per court instructions Facebook is working with parents and experts to provide tools for families browsing on Facebook and the Web. As part of this work, we regularly review our own practices and, in 2016, we agreed to update our terms and provide specific resources for refund requests related to purchases made by minors on Facebook. "
The free games have a long history, since they started in Asia with Nexon, who realized that many players did not have the money to buy games, but a small percentage of these players were willing to do it if they wanted it. get better abilities in a game or could show to their friends. It was important in the free games that gaming companies do not incur expenses, as opposed to the usual $ 40 or $ 60 price for retail games – a business model that prevailed in Western countries. This is because the unlimited expense and unlimited earnings of a small but dedicated whale base – as little as 2% of the total number of players – could cover the costs of the game for all those who play for free.
When Facebook was launched in 2004, he experimented with models. In 2007, Zynga launched Texas Hold '' Em Poker and followed with YoVille in 2008. In 2009, FarmVille was created, generating 20 million daily users in October 2009. Through these early games, players could sign up for free and socialize with friends. The games were viral, but as free titles, it was essential to spend whales.
Reveal's story suggests that Facebook's own reports showed that underage users – who were not allowed to go to the platform initially – did not realize that their parents' credit cards were connected to their Facebook accounts, according to the documents. Employees have warned of the problem, but Facebook has taken action. One team suggested how to reduce the problem, but the company did not implement it and "told developers that the social media giant was focusing on revenue maximization," Reveal said.
A 15-year-old spent $ 6,500 in two weeks playing on Facebook. According to the article, an employee, Tara Stewart, tried to alert her colleagues about the problem and offered a way to simply pay money back to parents when it was clear that the Children used their credit card without permission (it's unclear how Facebook could have easily known when using a parent's account). Stewart said the problem was particularly serious in some games, including "Petville (Zynga), Happy Aquarium (Crowdstar), Wild Ones (Playdom), Barn Buddy and all Ninja games" (like Ninja Saga).
Reveal said: "An internal Facebook survey of users revealed that many parents did not even realize Facebook was storing their credit card information, according to an unsealed document. And parents also did not know that their children could use their credit card without re-entering a pbadword or other form of verification. "
Above: The Playdom Indians
Image Credit: Playdom
Stewart said that when kids had to reenter the first six digits of the credit card number of a game before they could spend money, the number of claims and refunds was reduced. This forced the minor to prove that he was in possession of a card.
Facebook did not approve the fix. The data showed that between October 12, 2010 and January 12, 2011, the children had spent $ 3.6 million, the documents said. (The Facebook turnover for all of 2011 was $ 3.7 billion). And Facebook discovered that 9% of children's money was recovered by credit card companies. The average chargeback rate is 0.5%, according to the nonprofit merchant risk board, revealed Reveal.
A Rovio employee told Facebook that the developer was aware of the high repayment rates of his game Angry Birds. An badysis of Facebook found that in 93% of cases, the repayments were due to the fact that the credit card holders did not realize that the game had debited their account. The parent knew that the child was playing Angry Birds, but did not think he would be allowed to buy anything without prior permission, as was the case for games on iOS, wrote a Facebook employee. The average age of those who played Angry Birds in these cases was five years.
Part of the concern with ending these situations was that it would also hurt intentional income. Presumably, this meant that the "friction" of setting up a barrier, such as a new card authorization, would prevent people who actually intended to make another purchase. Facebook said in a note that "friendly fraud" was OK. That is, game developers had to let the kids go on without their parents' permission to maximize revenue. If people complain, they simply have to get free virtual items because they cost nothing for Facebook.
So far, Facebook has successfully fought to seal most lawsuits, saying it would hurt its business. In 2016, Facebook settled the complaint and agreed to dedicate resources to the reimbursement of requests made by American minors for in-app purchases.
Facebook now offers the opportunity to challenge purchases and process refunds at the time of purchase and via its Facebook payments support center. In the Games section, Facebook has an option to select the purchase by a person under 18 years of age.
Facebook has requested that documents containing information that can be used to defraud the company remain under seal. In addition, the Facebook Parents Portal provides Facebook resources for parents, and its dispute resolution guidelines are publicly available.
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