Facebook pushed the boundaries of ad targeting when the online hangout presumed users would want the site to mine their Internet activity.
And its retreat this week _ with the decision to make sure users agree first _ underscores the risks social-networking sites face in helping businesses employ their wealth of user data to tailor and target advertising messages.
Dozens of commercial Web sites are embedding Facebook’s free tool called Beacon to pick up data on users’ activity and send alerts to their Facebook friends’ ”news feeds.”
The program now works like this: After you buy a movie ticket at online vendor Fandango, if you agree to share that information, your friends at Facebook may read about it in their news feeds. They can click on one link to reach Fandango, or on another to learn more about the movie you’re about to see.
Until Thursday, Facebook gave users at least two opportunities to stop its partners from using their names to make referrals, but the opportunities were easy to miss. Thousands of Facebook users rebelled after they inadvertently revealed to friends movies they were seeing and even holiday gifts they were buying.
”People over time need to come to appreciate that behavioral targeting reduces annoyance and clutter, when done properly,” said Chuck Richard, lead analyst at market research firm Outsell Inc. ”I don’t think this is the way to do it, to spring it on people.”
Now, information on what users buy and do elsewhere on the Internet isn’t sent to Facebook unless users actively agree. The change could mean fewer opportunities for marketers, but it also reduces the risk of people fleeing Facebook and diminishing its $15 billion value.
”It’s a really positive step,” said Jessica Parks, 24, a Charleston, S.C., office manager who has used Facebook about four years. ”When you join any social network, you are sacrificing a bit of your privacy, but at the same time we have certain expectations.”
The notice, which appears in a corner of the Web browser following an online activity or transaction at a partner site using Beacon, still disappears if the user doesn’t immediately respond. But instead of presuming consent, Beacon gives the user the choice again later _ in the Fandango example, the next time the user buys a ticket.
Facebook still isn’t giving users the ability to reject all future sharing with Beacon _ that option is only available on a site-by-site basis. The company is counting on users to keep trying it and getting more comfortable over time.
”Because there are so many different types of external third-party sites, you should be able to see how each of those things improve your experience,” said Chamath Palihapitiya, Facebook’s vice president for product marketing and operations. ”They may be buying something they want to share, (or) writing a review, or blog entry. All these things are so different.”
Peter Phillips, Fandango’s vice president for product development, said many users seem to like it and have bought tickets after seeing their friends’ feeds.
”It’s peer-to-peer advertising, … not unlike user reviews and recommendations,” Phillips said. ”Nothing’s stronger than word of mouth from people you trust.”
Other sites that have participated include Overstock.com Inc., Sony Corp. and Conde Nast Publications’ CondeNet online unit. Friends could know when you review or save a recipe at CondeNet’s food-oriented site Epicurious, or join a club at its site for teens, Flip.
Sarah Chubb, CondeNet’s president, said the company is aware of the risks and has been ”very conservative.” Instead of an ad to buy a magazine subscription, she said, you might be lured through your news feed to take a quiz at the Web site for Teen Vogue. She’s counting on visitors to the site to then want to buy magazines.
During a launch event in early November, Chief Executive Mark Zuckerberg said he thought users would welcome marketing endorsements in news feeds over regular ads because they’d be integrated with conversations users are already having.
He was wrong.
”They should err on the side of prudence,” Parks said. ”They should be wary of it, lest people who’ve been loyal to them for a long time leave.”
Facebook’s main rival, News Corp.’s MySpace, also has been letting advertisers target ads _ to what users post on profiles and whom they list as friends. MySpace, however, isn’t mining users’ online activity and hasn’t seen the same type of backlash.
Richard, the Outsell analyst, described Facebook’s approach as one of ”rough and refine” _ get features out quickly and change them later if necessary, rather than waste time on risk analysis and planning.
Palihapitiya said Facebook knows it risks user complaints ”trying to create experiences that oftentimes have never existed before” _ but it feels comfortable doing so as long as it provides opportunities for feedback.
”What this shouldn’t mean is we should slow down,” he said. ”The only way we’re going to meet user expectations is to continue innovating quickly.”
