U.S. Civic Group Says Facebook Ads Invade Privacy

Facebook has become one of the most highly valued companies in the internet sector since its deal with Microsoft last month. But now it is critised for running apps. that are believed to invade members’ privacy.

The criticism is mostly directed at the company’s Beacon system, applications that enable advertisers to track user activity as far as outside Facebook’s own premises. For instance, if users use the Beacon App to buy items at Ebay, the data is sent to the person’s friends list. Even though that is something that the user will have to give their full approval to, the feature is drawing a lot of criticism. “It's unlikely it would prove very successful unless Facebook arranges for some kind of rewards for those pressing the “OK” button”, says an analyst at PortalIt. Among the groups that are most fiercely criticising the company are MoveOn, a US civic action group which has created a 5,000 strong Facebook group protesting the advertising ploy. On its pages, the group introduces its protest; “Matt in New York already knows what his girlfriend got him for Christmas... Why? Because a new Facebook feature automatically shares books, movies, or gifts you buy online with everyone you know on Facebook. Without your consent, it pops up in your News Feed--a huge invasion of privacy." The group provides a link to the Beacon app.´s demo which shows quite convincingly just how tricky the sign up procedure is and how difficult it is to get rid of the application. It is a powerful accusation, showing users how unprotected their privacy really can be. In answer to the protest, Facebook defended itself, saying that users can opt to share "Information with a small selection of a user's trusted network of friends, not publicly on the web or with all Facebook users. Users also are given multiple ways to choose not to share information from a participating site, both on that site and on Facebook." If this is the sort of criticism that is going to be targeted at the rest of Facebook´s ad strategy, it would be a true shame. The company is under scrutiny, ever since the big companies Microsoft, Google and Yahoo started to talk deals last summer. Its advertising plans are subjected to a lot of analysis not only because of the criticisms but also because the company only recently has divulged this information. There´s a risk that Facebook members that do not like the strategy will feel the proverbial ´catch´ once more turns up a bitter taste. “The entire revenue model comes into play after the traffic and is never considered when building the application. [But] if you integrate the advertising right from the start, users will more naturally accept them as time progresses”, the writers at AdvertiseSpace already warned last September, in an article analyzing Facebook’s revenue model. It´s true, the Facebook business model has been convincingly sold as operating on the idea that traffic numbers are immense and that this ultimately will create one big happy family that the advertisers will be magically attracted to. Dosh coming in by the bucketload. But the time has come for delivery on the ad strategy. With the tensions struck high due to the company´s skyrocketing valuation, there was bound to be a lot of disappointment as well as exhuberance over its strategy. Analysts for one got more convinced about the viewpoints they started to develop ever since talk of a deal with an outside company started in the Summer. Yet a lot of these opinions are based on very scarce information about the company’s main revenue spinner; advertising. Even now, it is very difficult to gauge the true value of the social network giant. Microsoft’s deal last month puts it at the astortionate level of $15 billion USD. Microsoft paid $240 million USD for a 1.6 per cent share in the company. This kind of money is ludicrous. At 500 times the annual profits, the social network will have to live up to very high expectations. Under the terms of the deal, Facebook will run Microsoft adCenter sponsored links and other ads, through 2009. The price Microsoft paid for Facebook is umpteen times more than Google’s USD1.65 billion purchase of YouTube, the video sharing platform, which was already seen as a high amount. It’s an indicator that market conditions are preposterously high. Let the differential sink in for a minute and be dumbstruck. What’s more, Facebook generates a turnover of just under USD150 million. During the past year, internet stocks have caused a real hype on the investor front. Prices are skyrocketing as deals take place. Last April, Google paid USD3.1 billion for DoubleClick, the digital advertising company. Google might be making business sense, but it's mostly on the capital markets and the actual businesses will have to prove their worth to the mother company still. That is aside from other issues, including the approval of regulators for the Google-DoubleClick deal. But any worries over issues like this are not visible in Google's share price, which is soaring at over USD600. The way Facebook’s ad strategy will be delivering will be a good indicator for people to get an idea of what the company’s health -and value- is. Don’t forget that the company only spelt out its plans as late as the beginning of the month. What is even more scary to imagine, given the sheer value of investments involved, is the fact that Facebook is one of the pioneers in the sector. The company signed deals with several dozen partners at the beginning of November, notably with phone company Verizon Communications Inc, movie rental chain Blockbuster Inc and online auction market eBay Inc., Reuters reported Mistakes might be costly. “Facebook is not the Internet — it’s a more intimate environment, a gated opt-in social community of loose trust networks. Clumsily inserting the standard keyword-based advertising model may not be effective”, says Jane Pinckard at Gigaom. “Users are already trained to ignore the usual ad placement areas on a site, and if a tide of tacky ads floods Facebook, we could see an exodus of users seeking virgin territory.” Ad revenues alone aren’t going to pull the cart all by themselves anyway for internet giants like Facebook. One reason is that analysts predict there’s going to be more advertising space available than demand in the longer run. There are plenty of other sites competing with Facebook, which all are luring big investments on promises of similar advertising opportunities. In the end, something will have to give, if the advertisers´ budgets are spent. People commenting on AdvertiseSpace's FaceBook article confirm this, saying the advertising based model is hardly without risks and is far from fool proof, despite there being a real glut of advertising based revenue models. "It feels scarily like 99…", one commentator says.