How PayPal fumbled in the Wikileaks controversy
A unique feature of the web is that it was designed by idealists and capitalists alike. A hacker sensibility fights for an open, democratic structure, while profit-minded businesses helped shape it into a thriving industry. The more successful companies, like Google and Facebook, understand both ethics equally.
But idealism and commerce often clash as well, and woe to the company that is caught in the crossfire. This week, PayPal is such a company. The eBay online-payments subsidiary suspended the account that Wikileaks used to handle donations, citing a violation of terms that prohibit “activities that encourage, promote, facilitate or instruct others to engage in illegal activity.”
The business logic seemed clear enough: Avoid the wrath of the U.S. State Department and steer the company away from the Wikileaks controversy. But it quickly backfired. Not everyone agreed Wikileaks was engaging in illegal activity, and many hackers and other idealists not only boycotted PayPal, they hit the company with denial of services attacks.
In a web conference in Paris, a PayPal executive was booed by the audience when he tried to explain why it shut down Wikileaks’ account. It later emerged that all it took was a letter from the State Department claiming Wikileaks was illegal. The PayPal executive, VP of Platform Osama Bedier, told the audience, “One of the signs that you’re a successful payments company is that hackers start to target you, this case isn’t anything different.”
That may be true as far as it goes, which isn’t very far. Again, web companies thrive when idealism and profits are in harmony, not when they are opposed. PayPal miscalculated how strongly many of its customers feel about the issue, and caving in under pressure that was no weightier than a letter doesn’t look very good.
Which is unfortunate for PayPal, because it is more vulnerable to the controversy than other companies. Many online shoppers are threatening to boycott Amazon along with PayPal, but Amazon has long been accepted by the mainstream consumer, which has never been quite comfortable with PayPal.
Similarly, other online-payments companies, like MasterCard, suffered denial of service attacks. But unlike MasterCard, PayPal has a reputation as a buggy, sometimes unreliable payments processor. Complaints about the company – about its customer service and its penchant for shutting down accounts for little reason – won’t be helped any by any disruption caused by the denial of service attacks.
Perhaps PayPal does believe Wikileaks deserves to be shut down, but if so it misread how divided its customer base would be on the issue. Taking a stand for free speech might have brought a different set of problems, but it would have been truer to the spirit that built the web.