Can Terms of Service be a Competitive Advantage?

Social media has seen two big terms of service uproars in the past two weeks. 

First was the Facebook flap in which The Consumerist highlighted changes to Facebook's TOS that implied that Facebook owned your photos and other content forever, even if you leave the site.

Then came the Extortion 2.0 article in the East Bay Express documenting allegations that Yelp's black box algorithms are a cover for allowing businesses to pay to hide negative reviews.  Put another way, the article alleges that Yelp's TOS does not make it clear to its users if ad sponsorship is a factor in the site's review ordering algorithm, or might even cause the removal of negative reviews.

Facebook took the subsequent backlash - in the form of blog posts and groups on Facebook itself - seriously enough that they decided to revert back to their original terms of service.  Yelp CEO Jeremy Stoppelman took the East Bay Express allegations seriously enough that he personally challenged aspects of the story via a blog post.

I found the prompt responses from both of these companies interesting.  Traditionally, it's seemed that the Web 2.0 / Social Media crowd cares about these sorts of issues, but nobody else does.  Fred Wilson wrote the following in this August, 2007 blog post:

.....most of Facebook's traditional users (like my two daughters) don't care that their data is locked up in Facebook. I'll show them my Facebook running in Netvibes when they wake up this morning and they'll say "that's nice dad but why would you want to do that?".

I don't see a Facebook rebellion happening anytime soon. The Techcrunch 50,000 might leave when they realize that they can do most, if not everything, that they do in Facebook on the web on a platform they control. But that won't make a dent in Facebook's core audience.

Could this be changing?  Could it be that the more savvy users of the web become, the more they care about what happens to the content they post?

My employer, RateItAll, has long tried to use user friendly Terms of Service as a competitive advantage.  Way back on 2006, I wrote this rant highlighting the reasons that I thought UGC sites had to start sharing revenue.  While there are some notable social media sites that do share revenue - Blogger , Squidoo , HubPages, RateItAll, Mahalo - for the most part, the giants in the space have gotten away with not giving away much via their respective TOSes.  The Yelp backlash is particularly educational for us, as we offer similar promotion opportunities for local businesses, albeit free, via our RateItAll.com/Promote product.

When I see a company as big and as stubborn as Facebook blink in the face of complaints about its TOS, I wonder if regular users are starting to pay attention to this stuff.  If this is the case, it's just another example of the opinions of early adopters offering an early glimpse of the mainstream.

For more on the Yelp flap, see PC World, The Register, The Wall Street Journal, and The Daily Californian.

For more on the Facebook flap, see Between the Lines and Webware.