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Is Facebook going to exploit its users' personal data to create one of the world's largest marketing research databases? UK newspaper The Sunday Telegraph says yes. Facebook says no.
At issue were comments made in an interview with Facebook global markets director Randi Zuckerberg. "Davos is really a key place to launch an instant tool like this. It's beneficial for everyone to see us as a global community of 150 million users. The vast majority are not just college students in the US talking about things in their bedrooms. We are showing how we are a serious and insightful community," Zuckerberg told the Telegraph.
Reporters Rupert Neate and Rowena Mason linked those comments to Facebook's demonstrations of engagement ads -- ads that trade information for an action -- and real-time targeted polling during last week's World Economic Forum in Davos, Switzerland.
Thus the assertion; Facebook, with demographically informed precision, could create the world's largest marketing research database. Mix in the world "launch," and you've a major story.
Or not. Company executives told the AllFacebook blog that the Telegraph article was "factually incorrect" but specifics weren't provided. Nevertheless, AllFacebook's Nick O'Neill wrote that "essentially everything about [the Telegraph] article was incorrect."
Let's hope not. Even if we were silly to think of Facebook as a $15 billion business, we know that the $240 million Microsoft (Nasdaq: MSFT ) bid for a 1.6% stake was an advertising cover charge. Marketing and advertising is Facebook's business.
Gimmicks produce some revenue. Applications, too -- witness The Knot's (Nasdaq: KNOT ) purchase of WedSnap, maker of a popular Facebook tool called Weddingbook. But it's the ads that pay Facebook's bills. The site was on track to produce at least $300 million in 2008 ad revenue.
Trouble is, that's less than one-third the estimated $1 billion MySpace generates for News Corp. (NYSE: NWS ) . And let's not forget Google (Nasdaq: GOOG ) , whose contextual search ads created $5.7 billion in fourth-quarter revenue. Plenty of money is being made in digital advertising, just not by Facebook.
Engagement ads and polling could change that. At the very least, it might convince big brands that, today, exploit its platform for free -- Burger King (NYSE: BKC ) , for example -- to take a closer look at Facebook's database.
The danger? Exploitation. Facebook shouldn't, and needn't, act as if it owns my data or any other Facebooker's data. Want to sell access to my information, Ms. Zuckerberg? Cut me in on the deal a la Google's AdSense.
Advertisers would win by getting access to rich, opt-in data. I'd win by earning a few pennies for my social scribbling. And you'd create a real and defensible niche in social advertising. Something that might make my Facebook profile worth more than the $4 it commands today.
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