Monday, May 17, 2010

Facebook’s Strategy Shift: Social Media Gone Wild

By Hari Bapuji.

Critics are panning the social media site, Facebook, for mishandling people’s private information using its recent Open Graph technology. As a researcher, I try to take everything I read with a pinch of salt. When people complained that Facebook is selling gifts on its pages and engaging in targeted advertising, I thought “well, somebody has to pay for their operations.” When I read that Facebook’s privacy policy is longer than the constitution of the United States, I thought “not completely odd because the number of Facebook users is much larger than the population of the US.” All this changed yesterday and made me think about Facebook a bit more closely.

I was browsing CNN yesterday morning when the site prompted me with a news story shared by Israr Qureshi, one of my friends. I was not logged into CNN, but was logged into Facebook in a different window. My Facebook activity is quite minimal and I have kept all my settings to “only friends.” I keep myself up to date on Facebook’s latest privacy settings and try to change them to limit my profile from going out. Clearly, in this case all those things did not work and CNN (courtesy Facebook and a bit of help from technology) knew that Hari Bapuji was accessing their website and promptly recommended to me a story shared by Israr. It was really creepy...! I have no problem with customization, except that I don’t want it. I believe that people learn better when they are exposed to varying and diverse pieces of information and not just what their friends are reading. Leaving my personal preferences aside, I wondered about Facebook’s strategy and if its strategy might work in the long run. 

A leading theory of strategic management research (resource-based view) suggests that a company will achieve sustainable competitive advantage, if it (i) possesses valuable, rare and inimitable resources and (ii) can leverage those resources. Does Facebook have any resources? Facebook became what it is today (in a matter of about six years) by providing a platform for users who wanted to stay connected with friends. In other words, it was an idea with a few servers. People liked the idea and joined in droves. While I am not an expert on the Facebook company, based on what I see and hear I am tempted to believe that the only resources that Facebook has are Facebook’s 400 million plus users, spanning the globe. So, if Facebook has to succeed they must find a way to leverage these resources and not alienate them.

As Facebook realized that it has a large user base whose personal information can be sold to some organizations looking for that information, it thought it fit to change its privacy policies and “monetized the information.” In doing so, what they did was essentially follow the other leading theory of strategic management, which relies on the power of market position. Or, customers who are dispersed and have low bargaining power can be messed around with. This is particularly so, if there is no effective competition and there are no viable substitutes.

In other words, between its founding and now, Facebook’s strategy seems to have shifted. In 2005, it treated Facebook users as resources and protected their information. But today, the users are hapless customers whose information can be made public by default. There is nothing wrong with companies changing their strategies, but the problem is when they change them without taking into consideration their key resources. What is more important is that the strategy was changed unilaterally and without giving a chance to the users to effectively adjust themselves. In the process, just like boiling the frog, Facebook systematically and gradually violated the psychological contract it established with its users. This raises certain ethical issues, but that are best addressed by scholars of ethics and morality in business. Not surprisingly, some say that the worst for Facebook is not over yet.

PS: One must say that while the strategy shift itself is debatable, Facebook implemented it quite efficiently by not allowing its users to adjust because such adjustment would have meant a less successful strategy of monetizing the information. I suspect that Facebook shared the information about its users before they could change their settings. In the age of high-power computers, that could be done in matter of hours, if not in minutes and seconds. This I believe was the reason why CNN could customize its website for me, although both my friend and I are fairly careful about our profile settings.

After writing this piece, I thought it maybe a good idea to check once again. So I logged myself in Facebook and then opened Explorer again (in a new window, not a new tab). Lo and behold, it again showed me the same story Israr shared. In other words, even after I made all the necessary privacy changes, CNN could still customize their website because I browsed CNN while I was logged into Facebook using the same connection. Here is a snapshot of it.

[The friend's name in this blog post has been used with permission]

*Dr. Hari Bapuji is an Assistant Professor at the Asper School of Business, Winnipeg, Manitoba. Dr. Bapuji’s recent research on Toy Recalls received worldwide media attention and has been published in several prominent outlets.

1 comment:

Israr said...

I also faced similar situation. Name of one of my friends, who use CNN quite regularly and is also a Facebook friend of mine, showed up on CNN page. When this happened a few time, I was a bit suspicious.
I followed following steps to get rid of this problem.

Check the Facebook privacy setting
Privacy -> application and websites -->Instant Personalization Pilot Program

Opt-out (that is un-check this option)

Remove all the cookies from your computer (using internet explorer or Firefox tools)

Log out from Facebook and log-in back... Try opening CNN page and hopefully your problems will be solved...

By the way, I am not against the "Instant Personalization" technology. In Honk Kong many students like this feature. They do not see it as a privacy issue. To them, it is a useful feature. They would like to know what their friends are reading. This creates a sense of community even around the mundane matters such as reading news.

As long as Facebook informs me the upcoming changes in privacy policy and provide me an option to opt-out, I am comfortable with these changes in privacy policy.

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