Facebook recently announced three important projects, all of them potentially successful, all of them at risk. Why? Because the social network doesn't know how to communicate with its users.
Note: Guest writer Ted Rheingold Is VP, Social at SAY Media and was the founder and CEO of Dogster.com and Catster.com. You can follow him on Twitter at tedr.
First, in late September, the company introduced a gift-giving feature that promises big success. Mom's birthday coming up? Facebook will remind you, and then suggest great gifts you can buy on the spot. Your neighbor did a big favor for you? The perfect thank-you is just a few clicks away. Your child's sports coach, your busines associates, your spouse - they all deserve a token of your esteem, and Facebook will make it easy to give it to them.
This isn't the only thing Facebook has been up to. A month ago, the social network unveiled its ad network. The new network allows for retargeting. This means that if users visit Site A and then move on to Site B, they can receive an ad for Site A's product there.
Less widely noted is that Facebook has partnered with Datalogix, a company that aggregates purchase data, which Facebook plans to use to track purchases made after seeing an ad on Facebook. Turning ad impressions (versus ad clicks) into purchases is a Holy Grail of online advertising, and Facebook will be able to do it. Moreover, Facebook will share members' purchase histories with all its advertisers. If you buy a bike, other sellers will be able to target you with ads for bike lights, racks, jerseys, and so on.
Having watched Facebook community relations since its newsfeed launched and run the sizeable online communities of Dogster and Catster, I'm confident that Facebook has needlessly set itself on course to derail these initiatives, if only for a time. Why? Because it's not telling users that it will be tracking them, analyzing their purchases, and sharing the analysis with other parties. The company needs to tell its customers gently but clearly what it is doing, and right away, or it risks the whole ball of wax.
Proactive Communication versus Reactive Mob
On Oct. 1, Facebook COO Sheryl Sandberg said:
Privacy and trust is a cornerstone of our business . . . I think people do believe that we have an incentive to violate users' trust to build our ad business. That’s exactly wrong. We have every incentive to protect our users' trust so that we can build an advertising business that’s very protective of the information they share. That’s the whole business.
Will users who made what they thought was a private transaction believe that Facebook is very protective of their trust when it becomes clear that the site has sold information about their action? I doubt it. And no matter how often or loudly CEO Mark Zuckerberg says, "this is the future," his customers will be taken aback.
He needs to bite the bullet and share changes with users in advance or real time, so they can remain in control of their experience. Sure, he'll face a backlash. But it won't be nearly as bad as the firestorm if he lets users find out some other way.
The outcome of Facebook's latest round of data sharing is easy to foresee. Facebook will get plenty of industry ink for its Holy Grail offering. Privacy blogs will raise alarms, which Facebook will ignore, as it will ignore the chatter on Twitter, HackerNews and Reddit. Then mainstream publications like the Guardian, New York Times, and Atlantic will write scary reports about how purchases are being tracked and sold. Facebook will refute selected points in these articles, missing its last chance to avoid raising users' hackles. Because at that point scare-mongering coverage will run rampant in 24-hour news channels, local newspapers, lifestyle magazines, mommy blogs, you name it. Hyperbolic Facebook groups will see viral growth and politicians will rattle sabers. Facebook will struggle to explain why its innovative initiative isn't a bad thing and how much it cares about users - but no one will trust it.
The takeaway will be, "protect your privacy and don't buy anything via Facebook," effectively destroying Facebook's promising gifts opportunity. Meanwhile the press and politicians will scrutinize datalogix, Facebook retarget sites, and every ad network partner - the last parties who want to have to defend their business practices against pitchfork-wielding mobs.
I'm sure Facebook and its partners will weather the storm. But it's going to lose a year of gift buying, incremental ad buys, and related revenue. All because it doesn't know how to treat customers with respect.