• by Mark Simon , November 12, 2007

The rich user data in Facebook makes it, at least in theory, the greatest online ad platform yet devised. But the advertising platform it launched last week -- which its management termed "a completely new way of advertising online" -- raises enough warning flags to warrant real caution on the part of marketers.

A Privacy Disaster?
There are two components to Facebook's ad platform. The first simply lets brands build pages that Facebook users can interact with (e.g., one can become a "friend" of the New York Times or Coca-Cola). The second component (Facebook Beacon) lets Facebook track the user's activity across a network of external participating sites and report such activity back to Facebook. In certain cases, this activity can appear in the form of "endorsements" (e.g. "Polly just bought a roundtrip to Amsterdam Using STA Travel.com") which appear in a Facebook RSS feed area.

Here's the problem. Let's say that Polly is a real friend of yours, and you happen to know that she's quite a party girl who goes to Amsterdam several times a year and never fails to bring back a few ounces of a joyful substance for her pals to enjoy. You honestly like Polly so you're definitely not going to call up the local office of the DEA to meet her at Kennedy Airport upon her return. But somebody else in Polly's social circle may not feel the same way that you do, in which case Polly will probably be spending Christmas on Riker's Island.

You get the picture here: the goods that people buy, the plans they make, the networks they belong to, paint a near-complete portrait of their lives. The information that's useful to a marketer may be even more useful to a criminal or a cop. The young people who form a large share of Facebook's usership may not be overly sensitive to privacy concerns, but they surely understand this basic fact.

Will Facebook's Users Bolt?
Facebook's management is clearly betting that enough of its users won't care about Beacon illuminating the details of their lives to bolt to another service (or perhaps start their own social networks, which a new generation of toolsets have made easier than ever). But this is a risky bet, because Facebook's usership is fickle, fashion-minded, thin-skinned and highly mobile. They might be loyal to their friends, but their loyalty to any social networking site isn't very deep. It will only take a small but influential percentage of Facebook's users to defect before the public perception of Facebook changes from "cool" to "uncool," a fate that has already befallen similar sites such as Friendster, LiveJournal, and Myspace. Beacon may or may not be the factor that causes such a shift in mood, but all social networking sites are vulnerable to such user migration. Keep the ephemeral nature of online communities in mind before you commit resources to Facebook.

Are Facebook's Ads Even Legal?
Facebook's Beacon has another big problem, because the appropriation of a user's likeness or image for commercial purposes without expressed consent may actually be illegal in several states. A New York State law specifically prohibits the use of a person's name, image or voice for advertising purposes without their written consent. Violation of this law is both a civil and criminal offense. Facebook claims that such users grant such consent when they agree to Facebook's Terms of Service, but only the courts can decide whether doing so is the legal equivalent. It's unlikely that marketers will get sued in any ongoing litigation, but you may not want to get your brand too close to a process that might turn ugly.

This is a Laboratory and We're All Guinea Pigs
Nobody really knows whether Facebook's users will accept social ads, and nobody knows whether marketers will yield meaningful returns or perhaps get stung by a user rebellion or privacy-related litigation. Predictably, many marketers rushed into Facebook to enjoy some first-mover advantage, but my advice to you is to wait until this experiment progresses for a while. There are many far more mature marketing mechanisms (such as search) that are time-proven and have established rules of engagement.

Pioneers, it is so often said, are the ones who take the arrows, and you should think carefully about all the pros and cons before committing sizeable resources to marketing on social networks or on experimental ad networks where the rules haven't yet been written. On the other hand, if you have some testing budget available, you may want to test out a small media buy and see how the waters feel. Someone's nightmare may be someone else's dream .