Rescue Beacon: Right Innovation, Wrong Context

“I don’t think there is a (serious) privacy issue in project beacon, (like there isn’t one with Gmail for example), the question is more do I seriously want ALL my friends to know which book I bought from Amazon or what colour underwear I ordered from Calvin Klein?” - Alberto, Gigacom, 7 Nov. 07

In early November 2007 Facebook announced the release of its social advertising platform, Beacon. The launch included up to 44 partner websites, such as eBay, Blockbuster, Sony, Travelocity, CBS Interactive, Hotwire, Typepad and Fandango. The technology effectively enabled purchases, bids, comments, reviews and sales made by Facebook members on these sites to be communicated to their network of Facebook friends.

Yet, no matter what the perceived benefits of the platform are, Beacon has been demonised from day one. A lack of clarity and transparency around the ‘rules’ simply fuelled the paranoia about the potential use of personal data, as well as legitimate concerns about stripping the privacy aspect from an individual’s purchase behaviour. While most of the tracking and broadcasting functions can be switched off by Facebook members, including what is tracked and who is privy to that data, a number of questions remain unanswered as to whether Facebook still collects a member’s purchase data regardless of whether the member opts out of the system or not.

Beacon is a very sophisticated component of Facebook’s Ads system, and deserves respect in terms of its intention to deliver the power of word-of-mouth marketing to a social network. An almost perfect example of the multiplier affect. What lets the system down is its failure to discriminate between the member’s friends if that member hasn’t already blocked certain friends from viewing certain types of purchases.

For example, a romance novel which has an overwhelmingly female-skewed audience, is purchased by Lucy, a female member of Facebook. Yet without Lucy filtering out her male friends for that particular purchase (or all purchases made at that online store) they will also receive notification about the book purchase. Commercially, is this the optimum method of securing further sales from Lucy’s ‘endorsement’?

Interestingly, the continued revelations about improved tracking and targeting techniques by social networks seems to correlate with a definite slow-down in both membership/account growth and activation levels. Given this anecdotal relationship, is it fair to ask the question: is Beacon operating in the wrong context?

The answer is yes in the short-term, but maybe not over the longer-term, by which time membership numbers naturally decline to a point where those who remain are exceedingly comfortable with the Beacon technology, and may even benefit from referral fees for every sale originating from their personal network

This phorphing of the social network into something more akin to a consumer network, where interaction and applications are more tailored towards the consumer’s experiences and opinions about products (particularly high value products), as opposed to the current social banter, creates a tremendous opportunity for Facebook and its Beacon platform. So much so, that analysts (and indeed Microsoft itself as both investor and Facebook’s ad rep) need to recognise that future revenues may indeed be dominated by transaction fees as opposed to dollars derived from display advertising and sponsorship.

In fact, if click-through rates on Facebook continue to hit lows of 0.04%, then the social media player had better start considering the transaction revenue option sooner rather than later.