Facebook Memo, Case Study Example

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Case Study

Facebook has come a long way since its humble beginnings in Harvard University and has grown and evolved since then in ways no one could have predicted. It is not that Facebook is the first ever social networking website because its business model and competitive strategies are indeed first of a kind. Thus, unlike some other organizations Facebook doesn’t have the luxury of learning from history or others mistakes. This may explain why the organization has to carefully introduce new features and then closely monitor the feedback from its users to modify or improve the features.

The creation of Facebook was inspired by the idea that people want to share information but are also concerned about their privacy rights. The two principles that form the core of the organization are (1) an individual should have control over his personal information, and (2) an individual should have access to the information others want to share. This is why the company has put in great efforts in designing privacy tools that allow users to conveniently select the personal information they want to share and what they don’t want to share.

Facebook users have come to expect the highest standards of privacy from Facebook which is why Facebook has been gaining ground over its competitors such as MySpace. Thus, the company has the legal obligation to honor its users’ expectations when designing new features or modifying existing ones. The two guiding principles are very clear in this regard that users will have complete control over their personal information and they will also be able to select those with whom they want to share specific pieces of personal information. This is why there has been a strong backlash against the company’s Beacon program by its users because the program violates the very basic expectations they have from the company. The users felt that they had no control over their personal information being stored by the company or shared with the company’s business partners. Similarly, it was being shared with their friends without their consent. The company did take measures to let users opt-out of the program but the solution is not sufficient due to common user-habits which the company is now aware of. Facebook’s  management understands that notifications are not taken seriously by a significant number of its users and moreover, the users do not always understand the message being conveyed by the notification or its potential implications. Thus, when faced with unintended consequences of failing to opt-out of the Beacon program, they didn’t blame themselves but believed that the company had violated their expectations to privacy.

Like any other organization, Facebook has a duty to understand its users and their behavioral pattern. Facebook users are just like customers because their personal information is the company’s most valuable asset and forms the basis of all commercial opportunities available to the company now or in the future. The company has a huge data reserve on its users that should enable the company to understand its users’ browsing habits on the website. Thus, the company has an ethical duty to not merely comply with legal obligations that it did by giving notifications and providing opt-out option, but also to anticipate the users’ reactions. If the company knew or soon came to understand that notifications were not being effective, it should have gone for alternative methods to ensure that users properly understood the Beacon program as to how it works and consented only after properly understanding the implications.

When Facebook started, it targeted college crowd in the age range of 18-22 but now Facebook users come from all age groups. People in different age-range may have different expectations of privacy rights and different ideas on the type of information that should be shared and what should be kept confidential. Many of Facebook’s new features seem to take into account the user habits of its younger users who have grown up with the internet technology. Thus, Facebook has an ethical responsibility to take into account the diversified characteristics of its users from different age groups and be more communicative in the implications of its new features.

Facebook should also ensure that its practices do not come as deceptive because one could argue that about the Beacon program. Beacon program tracked users even after they had logged out of the website as well as those who had already opted out of the service. Users also didn’t know that the data was always flowing back to Facebook and even though the users didn’t have the option to block the information from flowing to Facebook, they did at least have the right to be aware of it.

When Facebook started, it started as a virtual social hub but now the company has been taking steps to become a commercially profitable enterprise. But many of its users still see it as the same social networking website and may not be fully aware of how their data is now used and with whom it is shared (Facebook’s advertisers). Thus, the company should communicate with its users about its changing commercial nature and how the users’ personal data is being shared with the advertisers so that users also change their privacy expectations from the company. This will help build the trust between the company and the users.

Facebook can take various measures to ensure that it has more trusting and mutually beneficially relationship with its users. The success of Facebook has revealed the commercial potential of social networking and, thus, there will be no lack of competitors who will try to emulate Facebook’s success and possibly replace it just as Facebook has been gaining market share at the expense of MySpace. One of the most important things for Facebook is to improve its communication with its users and be clearer about the features it introduces. In this regard, Beacon has important lessons. The users’ furor over Beacon turned into a huge negative publicity for the company and it was clear from the users’ complaints that many of them really didn’t understand the program even when they consented to. Since they didn’t understand the program and the company didn’t do a good job of explaining the Beacon program, it gave birth to speculations which the company’s management was forced to respond to.

Facebook also needs to expand its public relations team because the company has been growing at exponential rates and, thus, any negative publicity will have only higher prices over time. The media publicity over Beacon shows that Facebook didn’t have a proper public relations team in place which could respond in a systematic way to the negative stories being published in the print media as well as being spread by online activists and bloggers.

Facebook’s management has to do a better job of shaping its users’ expectations from the company. It is apparent from the users’ backlash on various features such as newsfeed and Beacon that many of them still do not understand the extent to which Facebook has become an economic enterprise. Once the users better understand how their personal data is being used, while they may not be able to do much about the data posted already, they will become more careful about what they post from then onwards.

One of the core strengths of the company is its reputation and the management could explore other potential sources of revenues that may have the potential to create less privacy concerns. One possibility is to focus more on apps that are being created by the private sector in millions and have become popular on Facebook. At least 95% of Facebook users have installed at least one app. The company could either charge the users for installing apps for which there is a market as shown by the success of Apple with its marketplace for iPhone and iPad apps. Similarly, market for Android apps is also booming, proving that users are willing to pay for quality apps.

Another option may be to give incentive to users to publicize their purchases. Users make purchases for different reasons some of whom they won’t mind making public but others are more personal in nature as the case of Sean Lane shows who bought a diamond ring for his wife and would definitely not have wanted the surprise purchase to become a public feed. It may be almost impossible for Facebook or its business partners to decide what purchases may be appropriate for the news but users may be willing to publicize if given commercial incentive. For example, the business partner may refund the customer one percent of the purchase price. The discount will be well spent because of the marketing the company’s business partner may get. Thus, the company should involve its business partners more to explore opportunities for marketing that may have lower potential for privacy concerns from the users.

The company may also be better off in changing its policies regarding data storage of users’ information. The company was founded on the principals that the users own the data and have a right to determine how that data is shared but now the users are increasingly becoming concerned about their real ownership of their personal data on the website. This could create opportunities for the competition why may pledge to the users that they will never store data without users’ consent and history shows that users can migrate to other social networking websites. It would be an expensive mistake for Facebook to create openings for other potential competitors and overestimate the loyalty of its users.

The Beacon program may have been a blessing in disguise because it has shown that a significant communication gap exists between the company and its users and the company doesn’t have a proper damage-control team in place. Thus, the company should invest in more effective public relations team and should also take the privacy-related aspects of its features more seriously in the future. The company’s most valuable asset is users’ data, thus, the company needs to ensure that users continue to feel safe about sharing data on Facebook.

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