Events of the past couple of months have shown that Facebook's “social advertising” program raises fundamental questions about social networking and the growth of Internet advertising.
Three questions immediately arise:
How much personal information are users willing to trade in exchange for free content or access to services such as social networking sites?
How aware are users of the amount and type of information being gathered, and do they care?
How can a social media site generate revenue from users without alienating them?
BurrellesLuce traced the evolution of the story in more than 80 major outlets between November 1 - December 10, 2007, cataloguing key developments and analyzing the tone of the coverage.
November 1 – 20: New Ad Service Introduced
With a year-over-year growth rate of 129% and innovative reputation, Facebook received a great deal of favorable coverage by the end of October 2007. The company sold a 1.6% stake to Microsoft for a reported $240 million, giving the three-year-old enterprise an estimated valuation of $15 billion.
The market awaited the November 6 launch of Facebook's social ad strategy. Facebook's 23-year-old founder and CEO Mark Zuckerberg described it as “a completely new way of advertising.” “Beacon,” the core element of the three-part program, quickly emerged as the program's most controversial feature.
According to the company's release, Beacon's social ads would “allow users to share information from other websites for distribution to their friends,” by combining “social actions” with the advertising message of an affiliated company. The Facebook user's network of contacts would receive an advertising message each time the user made a purchase or other transaction from a participating advertiser. The default was set to “opt-out,” meaning the user's entire friend network would get the message unless the user clicked on a command directing the program to do otherwise.
At launch, Anick Jesdann of the Associated Press wrote that the key to Beacon's success would be in the way Facebook explained the program to users. While the responses to the concept itself were largely favorable, some negative reactions began to appear in the blogosphere over the next few days.
An analysis of the coverage in the two weeks immediately following Beacon's debut revealed that about 35% of the coverage was completely or somewhat positive, 40% was neutral, and roughly 25% of the stories were either completely or somewhat negative.
November 21 through December 10: Backlash Intensifies
A number of individuals and organizations lodged their objections. On November 20, advocacy organization MoveOn formed a “protest group” that eventually recruited over 70,000 members. They asked Facebook to convert to a system that required users to give their permission proactively before the information could be shared.
Facebook responded by saying that MoveOn misrepresented how Beacon works, pointing out that information was “shared with a small section of a user's trusted network of friends, not publicly on the Web or with all Facebook users,” and that users were given multiple options to choose not to share the information.
Nonetheless, bowing to the pressure, Facebook announced on November 29 that it was changing the Beacon default to an “opt-in” setting, which means that a user must explicitly approve his or her participation in Beacon after each purchase. However, there was still no universal opt-out. Then, less then a week later on December 5, a posting appeared on the company's site announcing the creation of a privacy control allowing users to turn Beacon off completely. Mr. Zuckerman apologized for the mistakes made in building the feature and for “taking too long to decide on the right solution.”
An analysis of the coverage from November 21 to December10 showed that completely or somewhat negative coverage had more than doubled, to 60%t. The percentage of neutral stories was halved, to 21%, and completely or somewhat positive coverage had fallen almost a third to about 20%.
Despite Beacon's Rough Reception, Facebook Continues Strong Growth
According to Nielsen Online figures, Facebook saw continued growth through November, adding two million visitors during the month – double the traffic a year ago.
While several of the participating advertisers are reportedly reluctant to discuss their association with the Beacon program, some have not abandoned the program entirely, as they believe in the potential of the underlying concept (PC World via washingtonpost.com, 12/12/07).
While Mr. Zuckerberg has scored some points with analysts for addressing the issue directly, questions remain about the system's data collection and user profiling capabilities and the degree of member awareness of Facebook's user tracking features.