eBrandz Blog

The biggest conundrum for world’s top social site

In the US, Facebook faces official audits for the next two decades about how it gathers and shares personal data of user, not less than 845 million of them, along with a slew of lawsuits, which accuse the social site of tracking online users across the world. The White House also stepped into the fray recently, demanding that top Web companies let users have greater say in how their personal information is used.

Safe ways to monetize data into profit

For Facebook in particular, slated to go public this spring, it is the biggest conundrum. The world’s largest social platform faces scrutiny from courts, regulators and consumers bodies over the issue. But as a company preparing to go public, it is under pressure to find new ways to turn that data into profit.  Similar scrutiny takes place in Europe. Ireland’s Regulators have demanded it give users more control over their data.

Among the business risk factors listed in Facebook’s IPO filing is the possibility of ‘any adverse changes in our products mandated by legislation, regulatory authorities, or litigation, comprising settlements or consent decrees.’ The varied and rich pool of data is greatest asset of Facebook, giving it a lot of means of getting creative with advertisements and sponsorships.

A research firm Altimeter Group’s Rebecca Lieb, who analyzes online advertising, has been quoted as saying in The New York Times:

“Facebook already has more data than they are leveraging. There are so many infinite ways to slice and dice the data Facebook currently has that it’s rather daunting. But slicing and dicing it for the purposes of serving up advertisements is a tricky business. It can’t freak people out; it has to be cost-effective; it has to be relatively easy to do at scale.”

Tracking user inclinations

The same filing suggested just how profitable the company already is – and also the growth trajectory in ad revenue it must try to retain. In effect, the company’s palpable achievement is also the area of its greatest concern. It has prompted its members to share a great deal of personal information voluntarily, including who they are, whether they follow soccer or opera, and even what their children prefer and look like. That data could make it a major game-changing advertising platform.

Brand managers can tailor their messages on the basis of demographics such as age, gender, hobbies and on other affinities and preferences of Facebook users. Clicking ‘like’ for a grocery store chain, for example, their name – and their picture at times – can surface as part of an ad for that chain on their friends’ Facebook pages. The same might be done when a user reads a news site that is connected to Facebook, or a song that they stream from one of its entertainment partners, though the site users can opt to tweak their settings to prevent it from using such bit of information for advertising.