In gaming parlance, the biggest spenders are known as “whales.” In casinos, the profile of a whale was a multimillionaire high-stakes gambler with leisure time and money to burn. In the video-game world, they’re the people who spend hundreds or thousands of dollars on Candy Crush lives or Fortnite outfits. In most cases, landing a whale is difficult, because developers want to motivate users to spend money without being, well, predatory. But Facebook, apparently, does not have such scruples. For them, the whales are often kids equipped with their unwitting parent’s credit card. And Congress wants answers.
Newly unsealed internal communications from the company, drafted between 2010 and 2014, show that Facebook was more interested in revenue growth than honest business practices. The documents were reported on by Reveal last week. The company apparently had little issue with what’s known as “friendly fraud,” which in this case is when a child uses their parent’s credit card without the parent’s knowledge.
In a letter to CEO Mark Zuckerberg from Senators Richard Blumenthal and Edward Markey, both Democrats, the pair sought additional information on Facebook’s practices. “Together, these findings point to a problematic culture of putting profits ahead of your users’ financial wellbeing and raise serious concerns regarding the company’s willingness to engage responsibly in its interactions with children,” the letter states.
Facebook games, much like mobile games on smartphones, are mainly free to play with “optional” micro-transactions. Like punishingly difficult arcade cabinets of yore, they are engineered to get users to spend money. On Android and iOS, however, users are required to verify additional transactions by, for instance, typing in their password again. On Facebook, there was no additional verification. A parent would supply their credit card info once, Facebook would store it, and then children playing games could make charges on it without any renewed approval. In addition, another document stated that only half of Facebook customers were getting receipts for transactions. One internal Facebook analysis found that 93 percent of the time, users spending money on Angry Birds did not realize they were actually spending money.
That’s how kids would rack up thousands of dollars in charges. The internal comms show that Facebook had identified problematic games, and even developed a system to prevent unintended spending but did not implement it. The revenue from the games was decided to be more valuable than user comfort. A memo to game developers stated, “Friendly Fraud — what it is, why it’s challenging, and why you shouldn’t try to block it.”
Blumenthal and Markey want to know when Facebook employees and Zuckerberg learned about the issue, whether Facebook’s policies regarding the matter have changed, whether the company will commit to refunding users, and whether the company has heard from the Federal Trade Commission regarding the matter.
In an attempt to get money back, customers would increasingly resort to charge-backs, calling on their credit card companies to recover the money from Facebook. According to Reveal, credit card companies say “a charge-back rate of 1 percent is considered high” and the FTC said a 2 percent rate was a sign of a “deceptive business.” More than 9 percent of the money Facebook made from kids playing games was being subject to charge-backs.
