We will read and discuss the following cases in class on 2/3. If you did NOT attend you are required to complete the discussion questions. If you are in class on 2/3, no written response is needed.
GOOGLE: Are App Developers On the Hook?
CYBER ATTACKS: Should Companies Admit They’ve Been Hacked?
Sunday, Feb. 24, 2013
Cyber attacks on American companies have become increasingly more common, but not all companies respond to security breaches the same way. Companies such as Facebook, Twitter and Apple, have voluntarily gone public with their security troubles. Alternatively, a number of companies have continued to deny cyber attacks, despite reports stating otherwise; including, Exxon Mobil, Coca-Cola, Baker Hughes, and others. The U.S. government has encouraged transparency on cyber attacks as part of a wider effort to protect American intellectual property. Advocates of disclosing breaches claim it will set a precedent for other companies to get more active in fighting cyber attacks. The majority of company lawyers advise not to disclose, pointing to potential shareholder lawsuits, embarrassment and fear of inciting future attacks. Health and insurance companies must disclose breaches of patient information, and publicly traded companies must when an incident effects earnings.
Question for discussion:
What policy should companies adopt when dealing with a cyber security breach?
Instagram and the Ethics of Privacy
Monday, Feb. 4, 2013
Founded in 2010, Instagram considers itself to be “a fun and quirky way to share your life with friends through a series of pictures.” By downloading the free Instagram mobile application (or app), users snap a photo with their mobile phone, then choose a filter to transform the image, and can share it on various sites such as Facebook and Twitter. The company views itself as more than just a photo-storage tool but a way “to experience moments in your friends’ lives through pictures as they happen. We imagine a world more connected through photos.”
In April 2012, the 13-employee company was acquired by social networking giant Facebook for approximately $1 billion. In less than three years, Instagram has become one of the fastest growing social media platforms as seen by its estimated 12 million daily users.1
Instagram was quick to respond that its intention was simply to improve advertising. Co-founder Kevin Systrom posted, “Our intention in updating the terms was to communicate that we’d like to experiment with innovative advertising that feels appropriate on Instagram. Instead it was interpreted by many that we were going to sell your photos to others without any compensation. This is not true and it is our mistake that this language is confusing. To be clear: it is not our intention to sell your photos.”3
While the initial backlash against Instagram has been quelled, there is still uneasiness among users regarding privacy issues. Instagram has to walk a fine line to keep its users happy and still turn a profit. On one hand, Instagram offers a free service to users, which up until this point has been free of advertisements, unlike other social media platforms like Facebook. In order to remain a viable company, Instagram has to bring in revenue somehow, and advertising seems the obvious choice.
We believe that it is not unreasonable for Instagram to try to make money using member photos for several reasons. Firstly, it would be foolish for Instagram to walk away from such a lucrative revenue opportunity. On January 17, 2013, it announced the following powerful statistics6 :
- 90 million Monthly Active Users
- 40 million Photos Per Day
- 8,500 Likes Per Second
- 1,000 Comments Per Second
With staggering numbers such as these, how could a zero-revenue company not optimize these opportunities? And let us not forget that Facebook purchased the company for $1 billion in cash and equity in April 2012. Facebook owes it to its shareholders to try to monetize Instagram considering how much it spent on this company in addition to Facebook’s subpar performance since going public last year.
Secondly, users pay absolutely nothing for using Instagram’s services; there is no price per photo uploaded, monthly/annual subscription required, or pricing scheme of any sort. Individuals and celebrities are not the only ones who derive personal benefit from Instagram, but businesses, too. Many small businesses like to use Instagram as a marketing tool because it is free and effective. For instance, some will upload pictures of new product arrivals to lure new and/or existing customers to come in and purchase. Not to mention, businesses like to have Instagram accounts because the service allows them to build their brand and customer loyalty through daily/weekly posts, thus, giving them the venue to engage and interact with customers in ways they could not do previously.
Questions for Discussion:
Trust during the Dot-com Boom
By Jessica Silliman
Reyna Allen had her pick of jobs upon graduation as a communication major from Santa Clara University. She and her friends were graduating at what seemed like the perfect time-at the height of the dot-com boom. But Reyna’s professors had warned her about possible problems in the rose-colored job market. Though the demand for workers far outweighed the supply, thus creating high salaries for those just starting out, many companies, her professors predicted, wouldn’t make it in the long term.
At one particular dot-com upstart in Silicon Valley, Reyna was pursuing an entry-level corporate communications position. But she had the sense during the interview process that the company wasn’t going to make it; the product they provided lacked innovation and the company wavered in its organization. Reyna saw them as just another boom-era company that may last awhile before going under. Despite what she thought, the company gave her an attractive job offer and aggressively pursued her once the offer was on the table: over the two-week period when she had to decide whether to take the offer or pass, they routinely sent her flowers and, after one week, upped the original offer.
After Reyna received the better job offer, she received a call from one of the major venture capitalist firms that was funding the dot-com. This top-tier VC firm said that they were giving the dot-com full funding for the fourth quarter. The company hoped that reassurance from the VC firm would help pull Reyna into the dot-com. This information changed Reyna’s mind. She figured that if they were continuing to get funding, then maybe the company could survive past the one-year mark.
Reyna took the job.
But after just a week in the office, she realized the other employees were incompetent. In the interview process Reyna was exposed only to the hiring team and didn’t get a chance to meet the other employees. But she quickly saw that they were inefficient and lacked motivation. Nobody ever seemed to be working.
Three weeks later, nearing the beginning of the fourth quarter, the company came within inches of not getting their next round of funding from venture capitalists.
Reyna felt betrayed by the venture capitalist firm that gave her initial hope. Though they had told her they would be giving the dot-com full funding, they, in actuality, only gave a small amount for the quarter in which they promised full funding, causing the company to inch closer to bankruptcy.
Just weeks later, the CEO of the dot-com suddenly moved to New York and the whole company shut down. Reyna was without a job after only two months with the organization. After just getting settled, Reyna had to learn a quick, hard lesson about the dot-com industry. She was back on the job market.
“In Silicon Valley, people say what they need to say,” said Reyna.
- Was Reyna treated fairly in the situation?
- Was the venture capitalist firm ethically wrong by lying about the amount o f funding?
- Is it Reyna’s fault for not looking into the company or is it the company’ s fault for misleading Reyna?