Facebook Loses Face

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It was recently discovered that back in 2015 Facebook allowed 3rd party Cambridge Analytica to access private data from over 50 million Facebook users without consent from those users.  Cambridge Analytica used that data to build psychographic profiles and use those profiles for targeted political campaigns.  Facebook actually discovered the issue in 2015 and told the offending parties they needed to certify that they deleted the data but they didn’t verify that deletion and they never notified users.  Now it looks like that data was not deleted and has continued to be used for political purposes by Cambridge Analytica.  You can read more about the incident in this article.

Facebook has received a fair amount of negative publicity recently that continues to erode their brand and the trust their customers have in them.  Ask your students how Facebook should respond.  Ask if they think the negative publicity will actually have a material impact on the number of facebook users or ad sponsors.  If students say it won’t have a material impact, ask whether Facebook should do anything about it or not if that’s the case.  This can lead to a rich discussion that covers business ethics, opportunities for competitors to differentiate, opportunities for startups, and more.  What role should the government play, if any, when it comes to regulating use of consumer information for marketing or other purposes?

Social Media’s Fight for Younger Members

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Facebook started as a platform for college students and quickly became popular with teenagers as well.  As the platform went through the adoption curve it started to pick up older users.  As the Facebook demographic shifted, so too did it’s appeal to the younger audience that helped establish its dominance.  This USA Today article, “Facebook losing young users even faster to Snapchat, eMarketer says“, talks about some of the challenges currently facing Facebook and how Snapchat is now growing its user base faster than Facebook.  Better privacy control, faster viewing, and limited permanence are some of the factors that are driving 12-17 teenagers toward Snapchat and away from Facebook.  6 years ago Facebook recognized the threat and acquired Instagram as a means of continued access to teenagers but Snapchat is now getting new users even faster than Instagram.

The consequences of this change can be significant for Facebook.  Their business model relies on advertising and if they can capture users early in life it is much easier (and cheaper) to retain those users rather than trying to switch users off of competing platforms.  Should Facebook modify their platform to cater to younger viewers?  What would they have to do?  Could they be successful with a redesign or is their present brand identity too strong for younger viewers to consider using them?  Can they succeed if they stay focused on an older demographic?

Facebook Changes News Feed Policies

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Social media marketing added a new and significant channel for businesses to reach customers.  However, when that channel is controlled by another entity it can create challenges.  In this press release, Facebook talks about changes they are making to their news feed policies.  They will start emphasizing social shares (posts from family and friends) and de-emphasize public content (think sponsored commercial posts).

How can companies adapt to this change and continue to benefit from the reach and popularity of social media?  The article, How publishers will survive Facebook’s newsfeed change, offers one perspective.  What do your students think?

 

Want to learn a bit more about how Facebook advertising works?

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[UPDATE] Last week we made a post, “Does Facebook Advertising Work?” (Teach the 4 Ps, May 17, 2012) with a number of links.  One of the links was to a blog post at the Planet Money blog.  Well, this morning I listened to the Plant Money podcast “Facebook:  Now What?” (May 22, 2012) and it provides a lot more details about advertising on Facebook.  So if you would like to understand a bit more about how Facebook advertising works, give this 22 minute podcast a listen.

Does Facebook advertising work?

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With Facebook going public this week, there is a lot of talk about whether its advertising works.  Since the social network’s valuation is based on an uncertain business model, that is a good question.  But we are not here to evaluate the worthiness of the investment in the stock — instead let’s look at whether Facebook ads make sense for marketing managers.

GM offers one answer to that question in  “GM Says Facebook Ads Don’t Pay Off” (Wall Street Journal, May 16, 2012, non-subscribers click here).  A case study reported by NPR found equally dubious results – “Pizza Delicious Bought An Ad On Facebook.  How’d It Do?” (Planet Money Blog, May 16, 2012).

Any in-class discussion should distinguish between the various ways brands can use Facebook.  Marketers can create a Facebook fan page and invite customers to “like” the page.  After liking the page, posts to that page appear in that person’s news feed.  The cost to the marketer is to create the page and keep it up — but there is no media cost.  There is also no revenue to Facebook, so the firm has developed other types of advertising. In theory and probably some time in the future, Facebook knows so much about users (through elaborate analysis of likes, posts, photos, the user’s network, etc.) that it can target customers.

Ask students if they ever click on Facebook ads?  Ask if they have “Liked” any brands — and if they read the brands’ posts in their news feed?   What messages appeal to them?  Why?  What can Facebook offer advertisers?  The articles I posted above tend to discount the role of advertising in brand building.  These questions are also posted at Learn the 4 Ps.

Getting back to the question in the headline:  well, the jury is still out.  Certainly a lot of investors buying Facebook stock are hoping that the company finds a formula to make it work.