Facebook's Got a Reputation Problem

Hmmm. What do you do when you are about to launch one of the largest IPOs in history and it turns out most of your users dont think you are a business?

And that, in general, your management can not be trusted to do the right thing. Pretty much ever.

All this while you are trying to impress big, global institutional investors your 'revenue model' for future growth is a stairway to heaven. Yup, could be an issue.

Turns out that a lot of FB users think of it as a tool or a channel, not a business. Now given the toxic reputation global business currently 'enjoys,' this could be a good thing. After all, who wants to be associated with bankers and polluters, child labor abusers and such. But if you are hoping to convince the big boyz that you belong at the adult table, especially when presenting financial reports, you might eventually need to rethink the hooded sweatshirt and flip-flop thing. For starters.

Stacy Curtin reports in the Daily Ticker:

Nearly 850 million people use Facebook each month and roughly 480 million people use it every day. With a user rate like that and an upcoming $75 to $100 billion initial public offering, one might think Facebook is not only a highly visible company, but also one of Corporate America's most reputable.

But that's not really the case, according to the findings discovered by Harris Interactive. The company recently conducted its 13th annual Reputation Quotient Study, which measures companies' reputation with consumers. Well, it turns out that the public fails to recognize the social networking website as an actual corporation. Most people see Facebook rather as a tool, service or a channel for communication,
In performing the survey, Harris first asked 17,000 people to chose the companies that are most visible to them on a daily basis. The respondents were then asked to rate the top 60 most visible companies on wide rage of attributes, including emotional appeal, products and services, social responsibility, vision and leadership, workplace environment and financial performance.

Apple bumped Google for the number one spot as the most reputable company in America, followed by Coca-Cola, Amazon.com and Kraft Foods. (See: Apple Ranks #1 With Consumers as J&J Tumbles in Harris Poll: Big Banks Come in Last)

But Facebook did not even make its way onto the most visible list of companies for consumers to rank, which is surprising for a company that has a shocking number of users and plans to go public.

While Facebook did not make the list this year, unlike last year, Harris still rated the company on its reputation. Facebook received a reputation rating bordering between fair and good, falling short of very good and excellent. The company's reputation waned in 2012 because 25% of the general public holds a negative perception of the company on a wide-rage of issues, including trust and respect. Those feelings are in line with the countless privacy concerns facing the company.

In terms of Facebook's shortcomings, here's what the study found:

•People do not trust Facebook to do the right thing if faced with a problem.
•People do not believe Facebook maintains high ethical standards.
•People do not believe Facebook is sincere in its communications.
•People do not believe Facebook is transparent in its communications.
Why does reputation matter anyway?

"One of the reasons companies want to build reputation is so that they can over time build equity so that when a crisis comes along, when they need to influence a particular stakeholder they have build up some of that equity," says Fronk. "And right now Facebook has an equity gap."

As mentioned, Facebook is set to go public in the coming months. But it turns out that only 7% of the general public would purchase shares in the company. Seventeen percent said they definitely would not. And 0% of the general public would recommend the stock to someone else.

"When you are going to be a public corporation there is a burden on you, there is an expectation for you to communicate a little bit more," says Fronk. "What the public is looking for are companies who communicate sincerely, with a certain amount of transparency and honesty and on those measures right now Facebook also has a serious gap."