The Herald Bulletin

Morning Update

Local Business

January 15, 2013

Emmett Dulaney: Are Facebook postings ‘public’?

Today’s question to ponder: How many people need to have access to something before it becomes classified as public?

Of all the forms of social media available, Facebook is a leader when it comes to the numbers game. If the more than 1 billion user accounts were to represent unique users, then it could be reasoned that close to one-sixth of the world’s population has a Facebook account. As a very minor point, it needs to be pointed out that not every user is a unique user since some accounts represent businesses and some individuals have multiple accounts. Given the size of the user base and the fact that more people access Facebook — and spend more time there when they do — than almost anything else, can information posted on Facebook be considered public?

The reason this issue is relevant has to do with a disagreement between the CEO of Netflix and the Securities and Exchange Commission (SEC). The SEC enforces something called “Regulation Fair Disclosure” that requires all publicly traded companies to publicly release any information about their company that could influence investors’ decisions. Not only must they make the information known, but they also have to do so in a way that discloses it to all investors at the same time. It is partially because of this regulation that press releases and press calls/conferences are so commonplace.

Last summer, though, the CEO of Netflix chose to announce on Facebook — not in a press release or at a press conference — that for the first time ever, the company exceeded 1 billion hours of video streaming in a month. That is a milestone number and one that could easily influence a buy or sell decision as reflected by a 13 percent rise in the stock’s price the day of the posting (July 5, 2012).

The SEC does not consider Facebook to be a public medium and has threatened to sue the company for violating the fair disclosure rule. The CEO had 245,000 subscribers to his account on Facebook at the time of the posting and his postings could be viewed by anyone who chose to look at them whether they were a subscriber or not. It can also be argued that there is not a one-to-one correlation between the number of hours of streamed video and the profitability of the company (they don’t, for example, make $1 for every hour of video), and thus the number released may not be thought of as being “material,” but the rise in stock price points otherwise.

Those details aside, the real question we started with remains: How many people need to have access to something before it becomes classified as public? Surely, 1 billion has to be nearing that number. The SEC could not have imagined the existence of Facebook or any form of social media when Regulation Fair Disclosure was drafted. Just as not every investor has access to Facebook, not every investor may be available for the other forms of information when they are used. Have we not now entered an age where the SEC and others should expect and accept information to move to, and utilize, these new channels?

Columns from the Falls School of Business at Anderson University appear Tuesdays in The Herald Bulletin. This week’s columnist, Emmett Dulaney, teaches marketing and entrepreneurship.


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