• by Wendy Davis , Staff Writer @wendyndavis, June 2, 2008

Facebook didn't cause a public relations problem just for itself with the Beacon debacle. The social networking site's doomed attempt to enlist members as unwitting brand ambassadors was a setback for the entire online ad industry.

Or so says entrepreneur Seth Goldstein, co-founder and CEO of SocialMedia.com, who spoke today about advertising on social sites at an Interactive Advertising Bureau conference in New York.

Goldstein, like other Web strategists, is trying to figure out the key to advertising on social sites. He said he's planning to soon launch a new type of ad platform, "Social Banners," soon, aimed at monetizing such sites.

For now, however, he appears to blame Facebook for giving the industry a black eye by launching Beacon without enough consideration of privacy. Certainly, Facebook's worst problem with Beacon was related to privacy. At launch, the program was opt-out only and many users either didn't see or understand the notice informing them that if they didn't opt out, news about their purchases would be shared with their friends.

But that wasn't the only problem with Beacon. On a more fundamental level, it's questionable whether users either want or will accept being pressed into service by marketers. And even if individual users are willing -- happy, even -- to advertise their favorite brands, whether their friends want to listen is another matter.