Next, do the same exercise comparing the cost per thousand likely customers for a car dealer or restaurant to advertise in the local newspaper or on the local television station in Columbus, Ohio, versus using Facebook or Google to reach the same people. My guess, by the way, is that Google’s search ads will still be the best buy in terms of cost per thousand likely customers because search ads reach people at exactly the moment they’re searching for the product being sold.
Then, there’s the flip side of the story: How does Facebook’s economic model for this kind of targeted marketing actually affect the privacy of us targets? There has been lots reported about this, but I’m still waiting for a story—in plain English—that explains exactly what the vulnerabilities are. What exactly can Facebook do or not do with our personal information? Can it sell or provide our email addresses or even our names to its marketing clients? Can Facebook send targeted e-mails or messages to us on behalf of clients, which might be just as annoying or compromising? Or can Facebook only put the clients’ ads on Facebook pages that we view? I know they say they won’t ever sell anything that actually identifies individuals by name, but what are all the ways they monetize personal information? And are our names available if the information is subpoenaed—or hacked, or abused by those “third parties” described above? What about Google?
While we’re at it, a story like this should add some perspective by comparing what Facebook or Google do with names and personal information to how credit card companies monetize personal data having to do with their account holders’ buying habits. Isn’t American Express, for example, as much in the data business as Facebook?
3. Facebook and the threat of mobile:
One of the most interesting sections of the prospectus is this entry in the section under “risk factors”:
Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results We anticipate that the rate of growth in mobile users will continue to exceed the growth rate of our overall MAUs [monthly average users] for the foreseeable future Although the substantial majority of our mobile users also access and engage with Facebook on personal computers where we display advertising, our users could decide to increasingly access our products primarily through mobile devices. We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven. Accordingly, if users continue to increasingly access Facebook mobile products as a substitute for access through personal computers, and if we are unable to successfully implement monetization strategies for our mobile users, our revenue and financial results may be negatively affected
There is no guarantee that popular mobile devices will continue to feature Facebook, or that mobile device users will continue to use Facebook rather than competing products. We are dependent on the interoperability of Facebook with popular mobile operating systems that we do not control, such as Android and iOS, and any changes in such systems that degrade our products’ functionality or give preferential treatment to competitive products could adversely affect Facebook usage on mobile devices. Additionally, in order to deliver high quality mobile products, it is important that our products work well with a range of mobile technologies, systems, networks, and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks, or standards
In other words, people are increasingly going to Facebook through their mobile devices, which reflects a general shift toward accessing content through smartphones and tablets. The problem is that advertising on those devices is harder to sell because it is harder to display. Equally important, it’s harder to integrate if you don’t control the mobile devices’ operating systems. And the operating systems that control the most important of those devices—Android and iOs—are controlled by Facebook’s key rivals: Google and Apple. The New York Times had a good story Monday on the general challenge of selling advertising on mobile devices that keys off of this Facebook disclosure in its IPO, but it seems there’s a good story out there for whoever can scope out if and how Google and Apple could and might take advantage of Facebook’s vulnerability.
4. Facebook and litigation: