Facebook Gets Unfriended by UK Politicians and New Zealand Companies

By | Oct 12, 2012

Mark Zuckerberg might as well walk around with a bullseye on his back. There are few technology companies so well-known and yet so despised as his Facebook--accused of everything from spying on user data, selling it to the highest bidder, and now dodging taxes in the UK and breaching contacts in New Zealand. The social site has certainly faced its share of challenges after a sub-par IPO debut, but is it really "disingenuous and immoral?"

Pay the Taxman

An article at Forbes talks about the social platform's recent British troubles, which stem from an accusation that they're dodging taxes in the United Kingdom. Although they paid 238,000 pounds to the British government, Labour MP John Mann says "they benefit enormously from the country's Internet infrastructure but do nothing to fund it." And while 238,000 isn't exactly "nothing," it does look like a drop in the bucket compared with the 175 million pounds of revenue the company generates in Britain each year. But here's the catch: Most of that is funneled through Ireland.

Under European Union (EU) rules, there's nothing wrong with how Facebook does its business. A company only needs to have an office in one of the 27 EU countries and pay taxes only in that country, but can service the entire "single market" bloc. Despite all the hoopla about avoiding taxes, it appears Facebook is not only playing by the rules, but playing it smart.

Trouble Down South

The company is also coming under fire for allegedly breaking a contract with New Zealand tech firm Profile Technology, according to a recent CNET article. In its complaint documents, Profile claims they developed a social-specific service called The Profile Engine in 2007 and in 2008 made a deal with Facebook to index the public portions of user profiles. It built social networking features into the engine, for example the ability to direct message Facebook account holders who appeared in search results.

The company claims they indexed 420 million profiles and started making a tidy profit--until in 2010. Zuckerberg's company shut off access for Profile, denied having any sort of agreement, cut off any Facebook access, and embarked on what the legal complaint calls a "campaign of destruction," which included efforts to paint the search engine as "unsafe" or "spam." And the social site's response? "We believe the lawsuit is without merit and will defend ourselves vigorously."

Tough to Tell

Who's playing fast and loose. In the UK, it looks like Facebook really is playing by the book but makes an easy target for politicians who want to talk about the downtrodden taxpayer and how big companies avoid helping the British economy. And while it's not impossible that the social site got in bed with Profile and then kicked them out into a cold winter night, the suit seems almost ludicrously evil--an exaggeration designed more to distract than inform.

Instead of warning midsize IT off of Facebook, these stories act as a warning with Facebook, for once, in the role of the one unfairly treated. Clever IT pros find ways to pay less tax--legally--and pull the pin on deals that don't work out, but as the examples above demonstrate, public perception is easily skewed. The social site gets dragged through virtual mud on a regular basis, often with good reason, but here may have actually had it flung in their face unfairly. IT pros must be ready for the same: The new technology market is much more savvy, much more social, and much more stinging in its criticism.

This post was written as part of the IBM for Midsize Business program, which provides midsize businesses with the tools, expertise and solutions they need to become engines of a smarter planet. Like us on Facebook. Follow us on Twitter.

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