facebook values, e-commerce, and endless possibilities

8/3/2019 Facebook Values, E-commerce, and Endless Possibilities

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Facebook Values and Future E-commerce 1

Facebook Values, E-commerce, and Endless Possibilities

Jay Campbell

MBA6180 Managing Information Assets and Technology

Dr. Charles Watkins

Capella University

February 9, 2012


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Abstract

Facebook is currently the worlds largest on-line social network. In its quest to virtualize the

social experience, it has been challenged with developing socially responsible controls to protect

its users from unauthorized information sharing in its own applications and advertising.

Facebook continues to balance end user privacy with business profitability in order to sustain

itself as a company but in a way that does not alienate its own users.


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Social networking can easily be seen as the big thing of today, however beyond what

merely looks like just another collaboration tool has developed into something that is so much

more. Social networking at its core feeds on our own need to be part of a collective entity and in

much the same way the Internet has transformed electronic commerce (or e-commerce for short),

the same Internet is transforming the way in which we interact with each other. In this case, the

largest social networking site, Facebook, is the catalyst for that change. At more than 500

million users, if it were a country its virtual population would make it the 3rd largest nation in the

world. With all that user data, Facebook is the prince of information in the social space the way

Google is the king of information in the global Internet space.

E-Commerce, Digital Markets, and Facebook

In our textbook, Laudon (2010) discusses e-commerce in depth. E-commerce has added

a new rich dimension of content in which Internet users can get much more information on a

product more quickly than going to traditional stores to learn about it. E-commerce enables

ubiquity, global reach, universal standards, richness, information density, personalization, and

social technology. Most recently, these digital markets have taken an interest in social media to

add the additional level of personalization to compete with traditional brick-and-mortar retailers.

This reach will continue into immediate future as electronic retailers continue advancing into the

mobile technology space to increase the level of user interactivity through deeper personalization

(personal cell phones) and location based service as tracked through the phones GPS.

From a social media perspective as covered in the case study, Facebook is social

networking. Its ability to bring together users with common product and activity interests and

friends is what electronic retailers desire to help them sell goods and services more effectively.

Facebook adds targeted advertising and shopper analytics to drive social-based shopping to a


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higher level beyond simple on-line stores. It merges the social and retail presence together to

allow online marketers to tap new markets and is ubiquitous given that most social interfaces are

free or low cost to advertise. Facebook also encourages information asymmetry by allowing

users to discuss issues around a common product or retailer. Finally, Facebook creates new

digital goods through games such as Farmville that allow users to spend real dollars to enhance

their gaming experience.

E-Commerce and the Web 2.0 Impact in Facebook

Facebook incorporates many Web 2.0, such as blogs and mashups, and e-commerce

technologies in creating the social experience. At its core, Facebook is a combination of micro-

blogs where each user can post anything about on any topic. These blogs are mashed up to

produce a users Wall to allow a user to see their friends updates as well. Facebook also allows

e-commerce retailers to establish commercial pages which users can choose to Like and have

those pages Walls mashed into their personal News Feed. Most recently (since this case study

was published), Facebook has introduced tagging whereby another user or product can be tagged

in a users post. This allows a user to create a link back to an electronic retailer and lets the

retailer know what users are saying about them. This new bidirectional Web 2.0 technology

continues to enhance the role of Facebook in e-commerce.

Facebooks Privacy vs. Usability Challenges

Facebook continues to come under fire as it attempts to carefully balance privacy with its

business operation. When Facebook was first introduced to the public, it was simply a way for

users to share thoughts, messages, and photos with friends, friends of friends, and the public.

The interface had very rudimentary technical controls for controlling permissions and the

controls could be circumvented to see what should have been otherwise protected data.


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Additionally, there were originally no organized groups to allow users to segment one type of

friend from another. In a need to generate revenue, Facebook added on advertising services and

interfaces to allow retailers to get access to user information. Unfortunately, Facebook

significantly underestimated its users desire for privacy and opted-in its users by default to

allow advertisers access to their personal information. Pressure from advertisers and Facebooks

own managers have driven the decisions to relax the privacy policies in exchange for generating

revenue. Fortunately, Facebook has since taken steps to add a user-, group-, and advertiser-

based policy governance processes (Facebook, 2009) and continues to redesign its privacy

control based on user feedback by giving users more granular and easy to use controls over how

their personal information is shared. Additionally, Facebook continues to challenge advertisers

over the inappropriate use of their users data, as the information is impossible to protect after it

leaves Facebooks infrastructure.

Facebook A Social Business Model

Facebook definitely has a viable business model. Its users information including user

interests is extremely valuable to advertisers, retailers, educators, and even law enforcement.

The challenge is putting a price on that information and organizing and distributing the data to

the interested parties in a way that is both meaningful to the recipients and safe for the users.

Without the inherent trust of the users of the Facebook service, there would be no information to

share at all. Socially Facebook has a responsibility to its users to maintain a level of implied

confidentiality but should encourage the use of services such as tagging where users might stand

to benefit from the leverage of common interests such as getting a volume-based price reduction

on a good or service. At the same time Facebook must consciously disclose that the use of these

tools may imply the collection of that information by third parties. Ultimately, Facebook needs


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to keep the rights of the data with the users but educate on how the conversations in Facebook

are a matter of public record -- the same as talking to people in public places. On the advertising

side, it would be prudent for Facebook to partner with an analytics service such as Omniture or

Webtrends who specialize in the collection and obfuscating of personal data so it can still be

useful to advertisers. On the retail side, businesses should expect to pay Facebook for

advertising space, for analytic data about Facebooks users, and for enhanced services that give

retailers a personable interaction with the Facebook users on the users terms.

Advertising With Facebook

If I were employed to work with Facebooks advertising I would seek out new revenue

streams that leverage the volume of user information with individual user privacy. The

challenge is to effectively model global social interaction in a virtual space. As mentioned

earlier, one stream would be through aggregating user data through an ongoing partnership with

one or more analytics companies. The aggregated results could then be used to sell advertising

space within the Facebook service similar to the way Google uses banner ads on their search

result pages. This is already being done on Facebook today, but Im not sure it is fully effective.

To enhance the value of the ad space, Facebook needs to continue to leverage Web 2.0

technology in the ads themselves. This would make the ads more valuable to retailers by

attracting more potential customers. This still leaves control with the Facebook user but adds

value for the retailer.

Facebook could also increase the ad volume on the space. As with many free services,

users have come to expect a higher volume of advertisements in the fixed space as a means for

the service to cover costs. For example, Facebook could add a section of Google ads on each

page that would create a new revenue stream for Facebook. Facebook could also add a


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subscription service for the users so that if they want an ad-free experience, they could simply

pay a small fee per month or year. Neither of these approaches violates user privacy or changes

the functionality of existing Facebook services. As with any approach, there is a careful balance

between profitability and user security.


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References

Laudon, K., Loudon, J., & Dass R. (2010). Management Information System: Managing the

Digital Firm. 11th ed. India: Pearson. ISBN: 978-81-317-3064-5.

Facebook Hits 500 Million Users. The 3rd Largest Country in the World. (2010). In

ArabCrunch. Retrieved from http://arabcrunch.com/2010/07/facebook-hits-500-million-

users-now-the-3rd-largest-country-in-the-world.html

Facebook. (2010, October 29). Press Room - Statistics. Retrieved on October 29, 2010 from

http://www.facebook.com/press/info.php?statistics

Facebook. (2010, October 29). Press Room Company Timeline. Retrieved on October 29, 2010

from http://www.facebook.com/press/info.php?timeline

Facebook. (2010, May 26). Press Room - Facebook Redesigns Privacy. Retrieved on October 29,

2010 from http://www.facebook.com/press/releases.php?p=164155

Facebook. (2009, February 26). Press Room - Facebook Opens Governance of Service and

Policy Process to Users. Retrieved on October 29, 2010 from

http://www.facebook.com/press/releases.php?p=85587

Facebook. (2006, September 8). Press Room - Facebook Launches Additional Privacy Controls

for News Feed and Mini-Feed. Retrieved on October 29, 2010 from

http://www.facebook.com/press/releases.php?p=643

facebook values, e-commerce, and endless possibilities

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