Social Media Definitions for Regulated Businesses

How to Define Social Media

A Social Media Definition: Why Defining Social Media is Important to Regulated Industries

Recently, we’ve seen several major fiascoes unfold on social media. Pepsi’s tone deaf “Live for Now” commercial turned into a marketing nightmare.  United Airlines’ mishandling of a customer and the ensuing viral video on social media resulted in $1 billion dollar loss on the company’s value in less than 24 hours and a massive hit to United’s brand value.

Because of the powerful network effects of social media, the impact and perception of a company’s actions on social media can alter the course of that company’s trajectory within a matter of moments – affecting stock price, company value and the hard-earned customer perception of a brand and business.

Social media no longer has just a small or ancillary impact on a localized or social media audience alone.

Yet, too many companies are still underestimating the power of social media and the network effect of these platforms.

Too often, social media is held in a silo within an organization – held at arms’ length and defined and treated as a distinct marketing “channel”, and classified similarly to other communication channels such as TV and print.

However, the missing link here is that social media amplifies other channels and other channels amplify social media – and all the while, real people add their own thoughts and comments to the communication.

The result is a living, breathing, uncontrolled evolution of the company’s original marketing message.

The network effect of social media is even more amplified today. Traditional media organizations including TV, print and radio now further amplify social media stories. The result greatly expands the original audience with greater sustainability in the news cycle.

Why Create a Social Media Definition?

Unfortunately, the fact is that, in spite of a lot of progress, most companies are still struggling to find the right balance of managing risk while capitalizing on opportunities in social media.

A challenge for most mid-market and larger companies is to recognize the relationship of their marketing activities to social media and the potential impact of those marketing activities. And the first step to recognizing that relationship is to create and adopt a company-wide social media definition that captures the the broad, interactive and consumer driven nature of social media.

Creating a robust social media definition is a fundamental step in the process of managing marketing activities and their potential impact in social media.

When regulated industries engage in social media, they are necessarily scrutinized and guided by any number of internal and external policies, regulations and other compliance requirements imposed upon them. A basic question regulated companies need to ask themselves is how to classify certain types of marketing or other activities under the umbrella of “social media.”. If an activity is classified as “social media”, it must then necessarily fall under any applicable internal or external social media policies and regulations.

For example, social media activities in the financial services industry are under external regulatory oversight by the FFIEC, the SEC, and FINRA (to name just a few agencies that regulate the financial industry). In addition, internal policies and guidelines regarding customer complaints, employee participation and technology adoption may impact an enterprise or line of business as they make decisions to enter or engage in social media.

As such, a social media definition could trigger other actions such as strategic assessment, ensuring compliance with those policies and regulations, additional business and other risk assessments, archiving and other documentation, technology evaluations and other processes.

So, one of the most important steps in determining whether those actions should be triggered is to create a social media definition that a company can agree to and adopt broadly.

Social Media Definition in a Complex Landscape

So is there a standard social media definition?

The simple answer to that question is no. Definitions for social media vary widely across companies, industries, regulatory agencies that oversee social media activities and even social networks themselves (did you know that Facebook no longer considers itself a “social network” but a “social utility”?).

Engaging in social media involves the use of social networks and technologies, profiles, presences, platforms and/or other tools, and new or existing third-party service providers. Additionally, new capabilities on existing properties or a combination of new and/or existing tools, technologies and platforms may also be classified in part or whole as “social media”.

To comply with internal and external policies and requirements established by various regulatory bodies and internal policies, regulated businesses and associated legal, risk and compliance partners are generally required to conduct assessments of these emerging and developing technologies, tools, capabilities, platforms, presences, etc.

These assessments must determine the impact and alignment of a company’s participation and/or use of social media with other business objectives and strategies. Additionally, as business requirements change and social networks continue to evolve, assessments and strategic alignment must continue to be monitored at each stage, from initial research to the adoption (or not) of a social platform through to retirement of a profile or technology.

Regulatory Social Media Definitions

The following are excerpts of definitions from some of the various bodies and organizations upon which the financial services industry relies when determining actions and responses in social media.

FFIEC Social Media Definition

Per the Federal Financial Institutions Examination Council (FFIEC) December 2013 final Guidance document “Social Media: Consumer Compliance Risk Management Guidance”, social media is defined as “a form of interactive online communication in which users can generate and share content through text, images, audio, and/or video”.

Included here are excerpts of that Guidance which refers to the FFIEC definition statement on social media:

Social media has been defined in a number of ways. For purposes of the Guidance, social media is a form of interactive online communication in which users can generate and share content through text, images, audio, and/or video. Social media can take many forms, including, but not limited to, micro-blogging sites (e.g., Facebook, Google Plus, MySpace, and Twitter); forums, blogs, customer review web sites and bulletin boards (e.g., Yelp); photo and video sites (e.g., Flickr and YouTube); sites that enable professional networking (e.g., LinkedIn); virtual worlds (e.g., Second Life); and social games (e.g., FarmVille and CityVille). Social media can be distinguished from other online media in that the communication tends to be more interactive. For purposes of this Guidance, messages sent via email or text message, standing alone, do not constitute social media, although such communications may be subject to a number of laws and regulations discussed in this Guidance. Social media is a dynamic and constantly evolving technology and thus any definition for this technology is meant to be illustrative and not exhaustive. In addition to the examples of social media mentioned above, other forms of social media may emerge in the future that financial institutions should also consider.

Financial institutions may use social media in a variety of ways, including marketing, providing incentives, facilitating applications for new accounts, inviting feedback from the public, and engaging with existing and potential customers, for example, by receiving and responding to complaints, or providing loan pricing. Since this form of customer interaction tends to be both informal and dynamic, and may occur in a less secure environment, it can present some unique challenges to financial institutions.

For purposes of this final Guidance, traditional emails and text messages, standing alone, are not social media. However, messages sent through social media channels are social media.

Additionally, the FFIEC Guidance states that one of the components of a risk management program should include a risk management process for selecting and managing third-party relationships in connection with social media.

SEC Social Media Definition

The Securities and Exchange Commission (SEC) classifies social media in several different ways. The following excerpts are from the endnotes of the SEC Investment Management Guidance Update issued in March 2014, No 2014-04:

[Endnote 1]

For purposes of this guidance, “publication” refers to any form of real-time broadcast through social media or the Internet whether by hyperlinking, posting, livestreaming, tweeting, or forwarding or any similar public dissemination and, does not relate to advertisements on non-Internet or non-social media sites, such as paper, television or radio. Social media allows for instantaneous updating of posted commentary and concurrent viewing of all of the comment history; in contrast, paper, television and radio are static media that reflect public commentary at a particular point in time and are limited media that would typically not reproduce all of the available public commentary simultaneously (often due to cost, space and other considerations).

[Endnote 2]

As used herein, “independent social media sites” refers specifically to third-party social media sites that predominantly host user opinions, beliefs, findings or experiences about service providers, including investment advisory representatives or investment advisers (e.g., Angie’s List). An investment adviser’s or IAR’s own social media profile or account that is used for business purposes is not an “independent social media site.”

Creating a Company-wide Social Media definition

To determine whether a website, application or other technology is in fact “social media”, it’s helpful to first understand the various types of social media technologies that exist.

Social media comprises internal and external interactive web sites, applications and other technologies through which individuals, businesses, and communities generate, share, create, consume, discuss, and modify user generated content through text, images, audio and/or video.

Social media operates with a many-to-many model of information sharing, as opposed to traditional media, which relies on a one-to-many, one-way approach. Social media takes on many different forms, including blogs and microblogs (Twitter), content communities (YouTube), customer review sites, social networking sites (Facebook and LinkedIn), collaborative projects (Wikipedia), virtual game worlds (World of Warcraft), and virtual social worlds (Second Life).

Messages including email and text sent via social media are also considered social media.

Classifying Social Media by Type

We’ve grouped social media into the following definitions:

  • Social Media Platforms

Social media platforms include social networks, communities, blogs, wikis, games, virtual worlds, mobile apps, reviews/ratings sites

  • Social Media Capabilities

Social media capabilities include new uses of existing platforms, components or profiles. Capabilities include new features on existing platforms such as Twitter Chats, Facebook Reviews or Facebook Messaging. Each of these features is a separate capability from the main platform.

  •  Social Media Components

Social media components include specific tools, widgets, plugins and feeds that may extend the functionality of a social network. An example of a social media component is Social Login. This feature is offered by several social networks to enable a user to login to a separate website via their social network login credentials.

  • Social Media Profiles

Social media profiles include pages, profiles, handles, groups, boards. Examples are a Twitter handle such as @allpryme or a Facebook business Page.

Collectively, these 4 categories of social media: Platforms, Capabilities, Components and Profiles can be individually or collectively referred to as Social Media “Properties”.

Social Media Properties may be utilized on desktop, tablet, mobile or other types of devices.

A social media definition is the starting point of determining whether a website, application or other technology is classified as social media. This then triggers other steps within a company’s business processes.

How has your company defined social media?