Facebook's Beacon, Privacy and the Drive to Personalization and Revenue

Facebook's demise in light of the Beacon fiasco (if you want to even call it that), as noted in a recent blog at fortune.cnn.com, is clearly overstated. While the Beacon introduction can be taken as an indication of hubris which ultimately will cause the firm to mis-step, its' release is merely a small bump in the road for a spectacularly successful company. Beacon is not the first poor roll out of a new service by Facebook that raised protest from their user community. Facebook's introduction of their News feed functionality in 2006 caused a similar uproar and has since moved on to become a valuable feature of the Facebook experience. The level of protest against the Beacon service is also fairly modest, at least within community, compared to other Facebook issues, such as the voluminous user feedback on the former limitation of verb use to "is" for status updates as noted in Josh Catone's blog. While the latter is not exactly an interesting topic for New York Times coverage it clearly was a sensitive issue for users! Beta testing new service acceptability in front of 50,000,000 plus users may be unwise however it is far from catastrophic (at least in this case).

So what exactly is Beacon and what are the real issues and concerns with the service? From Facebook's perspective Beacon is a capability that allows them to track Facebook user purchases on traditional e-commerce websites such as Overstock.com (more than 40 websites are participating with Facebook in this effort). The e-commerce web sites run the Beacon software application and send details to Facebook of user purchases. This information is extremely valuable to Facebook in its on-going effort to gather more information on users to assist in target advertising efforts that ultimately drive higher revenue opportunities for the firm. Utilizing the information gathered via Beacon, Facebook then decided to allow the sharing of user's purchase information with their Facebook buddies via the News feed as an enhanced service feature.

Beacon as a Facebook user feature is not likely to prove acceptable. As noted by Professor Misiek Diskorski from Harvard Business School, the Beacon functionality does not pass the two requirements of any successful on-line social networking feature. These are:

• Features cannot disclose information that people would not disclose publically offline.
  
• Features must communicate information that friends or recipients will find helpful.

The Beacon user service as first introduced also had an immediate impact on users by demonstrating to them the type of information Facebook was collecting on their broader internet activity and requiring them to take action on this information. Benefit, immediacy, impact and transparency are four important measures to consider in any new service design. While Beacon certainly provided immediacy, impact and transparency, as first released, these features without the requisite user benefit merely speed user backlash.

On privacy, Beacon also fails the test of user acceptability. Data mining and tracking of user behavior on a company’s web site are common practices and users have demonstrated a willingness to accept this lack of privacy as a cost of access to the services the web property provides. The Beacon service steps outside the Facebook property and tracks user behavior more broadly without providing any real user benefit as noted above. The introduction of a user service of low utility based on this data merely highlights for users the real corporate driver of revenue generation through personalization. As quoted in a December 10, 2007 Computerworld article discussing privacy and the Facebook Beacon advertising service Pam Dixon, executive director of the World Privacy Forum, noted that "There are other sites and other places where very similar data arrangements exist, but it all happens under the radar." Fortunately for Facebook, users have shown an amazing willingness to accept their loss of privacy on the web however a service such as Beacon, with limited user benefit and requiring complicity and potential brand damage to third party web properties for its execution, poses potentially damaging strategic implications long term.

By changing the Beacon service as presented to users from "opt-out" to "opt-in" Facebook will gain valuable information as to the utility of any user services they can design with this information. While Facebook’s initial success was driven by the concept of trust (closed "safe" community versus open social networking sites such as MySpace) this trust must now always be questioned. When you "opt-out" of Beacon is the tracking of outside network web activity still occurring and just not being presented? A good question; however the drive for personalization and revenue by Facebook should come as no surprise and their lack of propriety will have little impact on the behavior of 50,000,000 plus users. Time to get back to Facebook!

Innovation and the CIO

It is interesting to note the significant coverage CIO Magazine and other IT-centric publications have placed on the role of IT in support of innovation within the enterprise. The February 1, 2007 issue of CIO Magazine ran a special report on I.T.'s role in innovation. The September 15, 2007 issue returned to the topic with editorial coverage by the magazine's CEO (with recommended links to www.innovation.net, www.innocentive.com. www.open-innovation.com, and www.wikinomics.com) and articles on Innovation ROI and Collaboration for Innovation. Intel's Premier IT magazine also covered the topic in it's Winter 2007 article discussing Developing Systemic Innovation in an IT Organization.

The reality of innovation within the IT enterprise does not appear to many of us to meet the potential discussed in these articles. In a November 15, 2007 CIO Magazine article titled "No Innovation for You" Gary Hamel, an expert on business strategy, blames obsolete management practices for the failure to establish a culture of innovation. Gary poses an interesting question by asking CIOs what percentage of their total budget and headcount is devoted to things that are unique in their industry. While Gary feels this percentage should be somewhere in the 30 to 50% range it requires no answer to the rhetorical question to know the reality is not at all close to such a figure.

This issue is not a CIO specific problem and stems from the enterprise's budgetary and rewards infrastructure. IT organizations are typically understaffed and underfunded so the focus remains on keeping the ship afloat versus innovating for the future. If operational shortfalls occur (and they do frequently despite best efforts) the application of resources to innovative programs versus optimizing current operational performance is clearly not a career enhancing decision for the ambitious CIO. For IT to realistically become a true partner in corporate innovation executive level commitment and support must be behind the innovation initiatives the CIO supports. Given the enabling power of the IT infrastructure to support innovation throughout the enterprise this support is critical for innovation to blossom company wide.

At times a ground swell of non-supported use of certain enabling technologies by corporate users can force IT to embrace these systems for either control or security reasons (and gain the buy-in for this effort by senior management). The corporate introduction of instant messaging and intelligent mobile devices followed this path within many firms. The availability and application of many Web 2.0 enabled services in the consumer internet arena makes it likely that many of these new capabilities will follow this path to corporate adoption and Enterprise 2.0 deployment.

As Gary noted in the recent CIO Magazine article "...The internet is doing exactly what management is supposed to do. It's amplifying and aggregating human capabilities. It's democratizing the tools of creativity..." Enabling the CIO to support this sea change in the tools of innovation is key to long term enterprise success.