Can Facebook Possibly Build a Business Model That Isn't Inherently Creepy?

By Derek Thompson

That question is meant 100% seriously. The issue isn't that I find Facebook creepy. I don't, really. But today's story about the company tracking drug store purchases to display more relevant ads to users is a good example of the tension between social media and social mores.

For now, Facebook uses aggregated information about the lives of its hundreds of millions of users to place relevant ads next to pictures and stories from our friends. That's how it makes money. Our information is currency. More information makes better ads with better click-throughs at better rates for Facebook.

But the road to more information runs straight into user fears of creepiness. Today, to get advertisers more information, Facebook announced that it is partnering with Datalogix, a company that can tell whether a social network ad-click leads to a purchase. Datalogix has done similar work with CVS's ExtraCare card program. As The Atlantic Wire reported in an article entitled "Facebook Now Knows What You're Buying at Drug Stores":

Facebook will be using Datalogix to prepare reports for its advertisers about who, if anyone, bought more of their stuff after they ran ads on the social network. But by matching your Facebook profile with your CVS bill, this means that Facebook has the potential to know some of your most intimate details (my, that's a lot of bunion cream you're buying!), and the privacy concerns are enormous. When DoubleClick attempted something similar to this, user-backlash ultimately led them to cancel the project.

Consumer advocacy groups are pushing back. "We don't believe any of this online-offline data should be used without express consumer approval and an opt-in," Jeff Chester, executive director of the Center for Digital Democracy told the Financial Times.

Facebook's relationship with Datalogix is unlikely to make or break the company's next few quarters. But Facebook's financial future depends on its ability to glean information from its customers to serve more relevant and more lucrative advertising, and if the only way there is through companies and processes that writers, users, and consumer advocates characterize as "creepy" that poses a huge challenge to a company that has always put a premium on being cool.

Update: Here's Nicholas Carlson from Business Insider on Facebook's newish ad strategy, called "re-targeting":

How re-targeting works: You visit Warby Parker, the online glasses seller. You look at a pair of glasses you might like to buy. You decide not to buy them right then. You leave the Warby Parker website. Later, on other Websites, you  see ads with the pair of glasses you liked.  

You see those ads because when you visited warbyparker.com, your browser downloaded a tiny piece of software, called a "cookie," that told the ad servers on sites using re-targeting that you had previously gone to warbyparker and looked at a certain pair of glasses.

Sounds smart. And hopefully lucrative. I don't mind being followed around on the Internet by an advertising bot that keeps reminding me that I checked out lime green capris on Gap last week. But I don't know how other people feel about being regularly reminded about their past clicks.

This article available online at:

http://www.theatlantic.com/business/archive/2012/09/can-facebook-possibly-build-a-business-model-that-isnt-inherently-creepy/262785/