It's been less than a month since Mark Zuckerberg unveiled a new ad system, partly powered by Beacon, that allows companies to use Facebook's social graph to develop ads that are highly targeted to users. Om Malik at GigaOM wrote a very detailed account of the launch putting the question -- is Facebook Beacon a privacy nightmare?
The way Beacon works is by aggregating (I remember when aggregation used to be a good word) data from 44 web destination or partner sites -- among them the NYTimes (NYT), Sony Online, Blockbuster (BBI), Bluefly.com, TripAdvisor, Travel Ticker, TypePad, viagogo, Vox, Yelp, WeddingChannel.com and Zappos.com. It then mashes up the data on users as gathered there with its own database.
Then, whether you'd like your friends to see it or not, Facebook collects that information about your preferences to then sell it to advertisers. In other words, they store that information about you even when you opt-out. That is what had privacy advocates up in arms. It took some pressure from groups like MoveOn for Facebook to announce it may revamp Beacon and change its policy of sharing users' Web buying and activities.
Apparently Zuckerberg & Co. had this brilliant idea that people could be used to provide testimonials and referrals to brands -- gone would be the days of asking your customers to participate, they can work to opt-out, if so inclined. The question is not if marketers are your friends, rather are your friends marketing to you? Can a viral campaign be engineered? This is every marketer's wet dream, and a dream it remains.
It Was Bound to Happen
With click through rates as low as 0.04%, the ads on Facebook were not going to make the online advertising hall of fame any time soon (avg. rate is 0.2%). The pressure to justify the $15 billion valuation of the company after the $240 million spend for the 1.6% stake by Microsoft (MSFT) is being felt. The irony of things is that when Zuckerberg's privacy was violated recently, Facebook unleashed a massive legal attack. Exactly, what privacy issues?
This is a wake up call for the investors' community and for advertisers -- many of them blue-chip companies like Coca-Cola (KO), Sony Pictures (SNE) and Verizon (VZ) -- your brand may be tainted by association. The most valuable asset in todays' brands is "trust". Although it is an intangible, it weighs more in brands valuations than hard assets. The perception that information manipulation may violate someone's privacy leads to loss of trust. I see this as a problem for "brand you" as well.
Tell me how eager you'd be to date someone who shared your private information with all their friends. Do you really expect that he will unless you tell him he shouldn't? When put to the test, Facebook Beacon failed and it seems the public was not trusted enough to handle the truth. For this reason, Coca-cola has since taken a "wait and see" approach to the Beacon issue. Overstock.com has also since quit Beacon.
Facebook has since announced that it dimmed the Beacon spotlight. The changes are too weak and the damage may already be done. And in case you were wondering, those helpful email messages from Facebook about your friends' activities are just eyeball bait to get you to the site and generate impressions. What we have here is still mass media being pushed at people, not conversation.
Let me spell it out for you: if you push a recommendation unknowingly (you are being broadcast), or are being compensated to give it, is not the same as sharing a review because you are passionate about a product or service and they exceeded your expectations. I think we can do better than that. The true holy grail is one that will manage to help market and sell products and services and at the same time respect that the people it seeks to engage can think for themselves.
[hat tip to Tony Hung]
- Jeremiah Owyang wrote a pretty comprehensive post on hyper targeting, social ads and the rise of the "fan-sumer". I would be very curious to see what Jeremiah has cooking as a follow up given the recent developments after he published his story.
- Shel Holtz has a balanced review of Firebrand: TV commercial as entertainment. Has anyone forwarded Firebrand's ads to a friend?
- Aaron Brazell shared this how to block Beacon on Twitter today. UPDATE: Aaron also says The Only Answer to Facebook Beacon is a Deleted Account and Companies Using Beacon will Undoubtedly be Sued.
- How Mark Zuckerberg Turned Facebook Into the Web's Hottest Platform, Wired magazine.