The State of Facebook

Greg Lindon and Dare Obasanjo are continuing the conversation about Facebook Beacon. One thing is for sure: bloggers are not quiet people! They are also frequently intelligent people that know what they are talking about. That's especially the case with Dare Obasanjo. Dare thinks that the updates to Beacon are still not sufficient. So what is the state of the discussion and what needs to be done? Does Facebook need Beacon in order to validate their $15 billion valuation? I'll first address the state of Beacon and then cover what the intrinsic value of Facebook really is and why they are valued so highly. What is Beacon? Beacon is a Facebook service that notifies your friends of your activities on other sites across the internet. It's as simple as that. Why the controversy? When Facebook first launched the service there were a number of issues with the Facebook Beacon service. The first being that users didn't have the ability to choose whether or not they wanted to be part of the program. Instead, users were automatically enrolled and Facebook was notified if any user made a purchase at a participating site. A Beacon alert was displayed on the participating site when a given action was taken (as illustrated in the picture on the right). Many argued that the notification was not obvious enough and could easily go unseen, especially since it disappeared after a short period of time. If you didn't see the alert and didn't log into Facebook within a given period of time (I believe 24 or 48 hours), the purchase would automatically show up in your friends' newsfeeds without you approving it. Thanksfully, this no longer occurs. You must explicitly approve the story prior to it being displayed. Another issue reason for the controversy was that users did not have the ability to completely opt-out of the program. The bottom line is that some people simply do not want their friends to see what other sites they are visiting or what products they are purchasing. Last week, this issue was resolved and now users can completely opt-out of Beacon and no longer have to be concerned about their friends finding out. This leads me to the final controversial item surrounding Beacon: information is being sent to Facebook whether or not a user is enrolled in the program. This information is event sent if a user is not a member of Facebook. As some have suggested, this may in fact be a violation of many of the partners' privacy policies. When you rent a movie from the Blockbuster or Netflix site, do you want Facebook to know about it? While they may not store that information, they now have access to it. What Should be Done? Over the past weeks, Facebook faced what some may call a PR disaster. Their company received a ton of negative press in the media and finally after almost a week, they decided to respond. The answer was to enable users to completely opt-out of Beacon. From a business standpoint I don't think this was the best decision on their part but it is a good thing that they responded so strongly. The real issue at hand now is what Dare has sufficiently asked: So who is to blame here? Facebook for designing a system that assumes that 3rd parties publishing private user data to them without the user's consent is OK as the default or Facebook affiliates who care so little of their customer's privacy that they give it away to Facebook in return for "viral" references to their services (aka spam)? Facebook still has access to your information on a number of partner sites whether you like or not. Even if you terminate your Facebook membership, they still have access to your data. Facebook's Chief Privacy Officer has stated that they do not store this information but it is still being transferred to them and that is the real issue. So what should they do? Should Facebook get rid of Beacon completely? From a business standpoint, Facebook should definitely try to keep this service alive even though I'm not sure that they haven't already removed a lot of the value that it previously provided. From a technical standpoint, Facebook Beacon may be in violation of federal law and that is something they should obviously avoid. While I don't have the perfect answer, I believe that Facebook should not have access to any data at all without each user's explicit consent. What is Facebook's Value Proposition? If Beacon was gone tomorrow, would Facebook's value go down? Definitely. Not by much though. Facebook has begun collecting data about users whereabouts and activities outside of their site but many users have already provided that information via status updates. Even still, Facebook is in the business of tracking as much data as possible about each of their users. They are also willing to push the limits of privacy to reach their goals and the investors expect them to do exactly that. According to people I have spoken with, in countries outside of the United States, Facebook has become a similar platform to MySpace. People carelessly adding contacts and creating groups that are spammy. There has been much less spam control since Facebook doesn't have as effective a way for policing international activity on their site. At least that's according to the people I have spoken with and articles I have read. Whichever website can most accurately track people's real life connections and the various interactions taking place between those connections, will become one of the most valuable sites on the planet (if not the most valuable). So far, Facebook is that site and that is their entire value. The only problem is that people don't perfectly enter information about themselves. When you think about it though, even Wikipedia needs their own police to ensure accurate data. For the time being, Facebook needs to continue to ensure that information entered on their site is accurate even in other countries. If Facebook users begin actively entering inaccurate information about themselves and their relationships, it is the equivalent of corrupt data on a hard drive: it's useless. This has always been Facebook's most valuable asset and they need to protect that as much as possible. Conclusions Seriously, there is a point to all my rambling! Facebook needs to do two things: 1. Ensure the privacy of all the users on Facebook and users interacting on Beacon partner sites (especially make sure the program doesn't violate the law). 2. Ensure all information entered into their site is as accurate as possible. I'm not sure if they've already missed the boat on this second issue but they need to protect their data for all it's worth. Any other suggestions?

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The State of Facebook

Nick O'Neill

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Nick O'Neill