Facebook was founded in 2004 by Mark Zuckerberg and is arguably one of the largest social networking sites, beaten only by MySpace in the United States (Laudon and Laudon, 2003). According to (Laudon and Laudon, 2003), the site boasted of 118 million followers in 2008; recent statistics by (Infographic, 2012), estimate that Facebook has 845 million users in the beginning of 2012. Facebook typically allows its users to create a profile, and members can interact with other members (friends) through messaging, sharing videos, photos, and various applications created by users.
Facebook is very popular with advertisers because they can access targeted audiences based on their demographics, geographical placement, and personal information. Advertisers are able to take advantage of the vast resource of information contained in the site and the robust networking environment (Laudon and Laudon, 2003). Despite the potential goldmine represented by Facebook, it has still faced challenges especially with regards to privacy concerns.
Q. What concepts in this chapter are illustrated in this case?
This case best illustrates the concept of electronic commerce as reviewed in this chapter. Electronic commerce is the utility of the internet to carry out commercial transactions between businesses and individuals (Laudon and Laudon, 2003). Facebook is a popular social networking site boasting of millions of users. This case study explores in detail the great opportunity for ecommerce represented by Facebook, due to its great potential to generate advertising revenue. Facebook, has however, not been able to fully exploit this potential for revenue because of privacy concerns of its users, as it gathers a vast resource of personal information of its users that it amasses. This potential was demonstrated by Microsoft, which bought a 1.6% share stake in Facebook for $ 246 million in 2007 (Laudon and Laudon, 2003). Should Facebook manage to adequately address the critical privacy concerns of its users, it will be able to fully benefit from the opportunity presented by electronic commerce.
Q. What is the role of e-commerce and Web 2.0 technologies in Facebook’s widespread popularity?
Facebook is an important tool in ecommerce because of the large number of members it has who share vital information amongst themselves. This makes it much easier for a company or organization, to identify and target potential customers. Due to the information density present, it is much easier for companies to create advertisements targeted at specific groups (Laudon and Laudon, 2003). Facebook is also very attractive in ecommerce because of its global reach. It is very easy for clients to use because of its simple interface, and its interactivity makes it easy for users to manouvre. As a result, membership on Facebook is growing, along with the options for ecommerce.
Web 2.0 technologies have played a fundamental role in the rising popularity of Facebook. These technologies enable the formation of applications which enable the sharing of information and whose aim it is to make the user derive more value from using the platform. These technologies allow users to generate their own content, for example, businesses are able to create their own pages where they can share information or advertise their products or services.
Q. Describe the weaknesses of Facebook’s privacy policies and features. What management, organization, and technology factors have contributed to those weaknesses?
Facebook prevents an opportunity for businesses to advertise due to the vast informational resource available from the content generated by the users. However, in Facebook’s quest to allow businesses to take advantage of this resource, it has severally violated the privacy of its users (Campbell, 2009). A notable example is Beacon, whose initial function it was to update users of what activities their friends engaged in outside Facebook (Laudon and Laudon, 2003). However, Beacon often shared information which it had not been authorized to share by the users. Shockingly, Beacon was an ‘opt-out’ service, which meant that unless the user manually turned it off, it would continue to share this information. Even more disturbing was that Beacon often continued to gather and share information even after the user had opted out.
Another issue was that Facebook’s policy on deleting accounts was faulty; in that, it was not possible to completely delete an account. Facebook rationalized that by storing the deleted information on its servers, it would be easier to reactivate their accounts later (Laudon and Laudon, 2003). Thankfully, Facebook adopted a simpler way of totally deleting these accounts. In 2008, Facebook introduced new privacy controls designed to deal with the privacy issues (Laudon and Laudon, 2003). However, a glitch was discovered in the controls which allowed an individual to access private photos and information of another individual; this was however, corrected promptly. Facebook therefore faces weaknesses in its managerial and technological departments with regards to security which have contributed to the widespread privacy concerns. To enjoy total success, Facebook needs to address these issues from both managerial and technological standpoints.
Q. Does Facebook have a viable business model? Explain your answer.
Facebook is currently making much less revenue than it should, and it spends more money than it earns. Revenue generation from advertisers is a shaky affair, sometimes it works, and sometimes it does not. Joining Facebook is free, and thus it relies completely on advertising revenues. Facebook demonstrates a Business to Consumer (B2C) model which is weak, as it relies on advertising dependent on the personal information of the users. To be able to make this model work, they must be able to give a distinction to its users about the information they will use, to eliminate the legal risks posed by these privacy concerns.
Q. If you were responsible for coordinating Facebook’s advertising, how would you balance the desire to become increasingly profitable with the need to protect the privacy of your users?
Should I be in a position to manage Facebook’s advertising, I would ensure that I get consent from the users to use their information for advertising purposes. I would do this by including this option in the Sign Up form, where the user can accept or decline to allow their information to be used. For those who had already signed up, I would incorporate a pop-up box or peg their access to a large number of the applications to their consent to use their information. By ensuring the clients are fully aware of the implications of declining or accepting to have their data used, I would ensure that a balance is attained between advertising and privacy.
Conclusion
Facebook indeed demonstrates great potential for success once it is able to fully address the privacy concerns which have arisen in the past. Facebook will greatly aid ecommerce because it provides a large virtual community and a user-friendly platform from which to operate. This user-friendly platform has been made possible by the variety of web 2.0 technologies to create interactive programs.
References
Carlson N. (2010). At last-the full story of how Facebook was founded. Available at http://www.businessinsider.com/how-facebook-was-founded-2010-3
Campbell Brown (2009). Facebook privacy issues. Available at http://www.youtube.com/watch?v=9wgAsFoYLys
Infographics (2012). Facebook user statistics. Available at http://ansonalex.com/infographics/facebook-user-statistics-2012-infographic/
Laudon K. and Laudon J. (2003). Management information systems. Prentice Hall: New Jersey.
Phillips S. (2007). A brief history of Facebook. Available at http://www.guardian.co.uk/technology/2007/jul/25/media.newmedia
