Facebook Finds More Ways to Exploit Users

Unfortunately, it's going further toward alienating users

   

Facebook’s (NASDAQ:FB) horrible IPO clearly was a wake-up call for Mark Zuckerberg, who has quickly realized that if his company was going to get on par with the Googles (NASDAQ:GOOG) and Apples (NASDAQ:AAPL) of the tech world, he needed to tone down his idealistic ways and become more of a hardcore capitalist.

That would mean monetizing his network, and monetizing, he is.

In fact, in his shareholder-focused zeal, Zuckerberg now has managed to find a way to use data outside the Facebook network to turn users into dollars! As the Wall Street Journal reports:

“Facebook officially plans to roll out a new advertiser tool to help advertisers directly target Facebook users based on their offline spending history.”

No doubt, this has caught the interest of advertisers. Even those that have shown resistance to social media — like General Motors (NYSE:GM), which once publicly questioned Facebook’s efficacy as an advertising platform — have been getting excited about the new data programs.

Even though Facebook has massive amounts of data, there are still big holes. As information is widely dispersed across many silos, it makes sense to try to integrate different sources. Besides, Facebook has been mostly focused on brand advertising, which can be tough to measure. The company now is trying to find ways to move toward direct marketing, which tends to yield higher ad rates.

Still, Facebook should be wary.

“Facebook is assuming that the bigger the data, the bigger the dollars,” said Ethan Oberman, CEO and co-founder of SpiderOak, a storage company that focuses on privacy. “The question remains as to if this trend will lead to increasing privacy concerns around what Facebook knows — and how they can potentially use this consumer data in the future.”

Interestingly enough, there are already signs that users are getting Facebook fatigue. A recent Piper Jaffray survey of 5,200 teens showed that while Facebook still was the most important social network, it’s showing signs of waning interest. FB’s percentage in this category has gone from the low 30% level to the low 20% level in the past year. Though it’s not alone — other major sites like Twitter, Tumblr and Facebook-owned Instagram have also seen declines.

Maybe it’s more demand by teens for privacy, which would explain the adoption of mobile apps like Snapchat, which quickly destroy messages.

Over time, this trend might become more prevalent as younger and older users alike come to terms with the many downsides to sharing information.

All in all, Facebook could be in a tough spot. It’s already at 1 billion users, so just by sheer numbers it’ll be difficult to demonstrate significant user growth, and that won’t be helped if we start to see a secular decline amid the rise of privacy-friendly apps.

So even if Facebook can provide advertisers with stronger firepower, they might have to deal with fewer bullets.

Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities, and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/facebook-finds-more-ways-to-exploit-users/.

©2014 InvestorPlace Media, LLC

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