Facebook

Facebook has incredible potential to deliver customers to advertisers based on information that members submit themselves, albeit unwittingly, when they communicate with friends, identify their “likes” on anything from coffee vendors to department stores to cola products, and share their interests. The Like button, introduced in 2010, allows advertisers to shower anyone who clicks it, as well as their Facebook friends, with messages. Within a year, the button was on 2 million websites. The button is a vehicle for what’s called referral traffic. Advertisers and other sites reported a huge increase in traffic. Sports News was up six-fold, Gawker tripled, ABC News 190%, and Facebook had become NBA.com’s second largest referral source.

Like buttons have not been without controversy. In the German state of Schleswig- Holstein, the data protection commissioner shut down Facebook fan pages to remove “Like” buttons as a violation of German and European law. Thilo Weichert, the commissioner, didn’t like that Facebook servers were passing personal data all over the place: “Whoever visits facebook.com or uses a plug-in must expect that he or she will be tracked by the company for two years.” His concern was that Facebook was building broad individual and personalized profiles of users.

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Some people share the German concern. Some don’t. In the technology magazine Wired, business writer Fred Vogelstein noted that people behave differently on Facebook than anywhere else online: They use their real names; connect with real friends; link to their real e-mail addresses; and share their real thoughts, tastes, and news. In contrast, Vogelstein notes, Google knows little about its users except their search histories and some browsing activity.

That Facebook is positioned to become the central component in the new media landscape has not been lost on investors. Microsoft bought a chunk of Facebook stock in 2007 at a price that suggested the company was worth $15 billion. Three years later, analysts put Facebook’s assets at $53 billion to $64 billion. Vogelstein explains the Facebook–Google contrast colorfully with the example of a friend whose Facebook profile has the usual stuff—birthday, address, brief bio, and pictures of his wife and kids. Vogelstein’s friend also shared that he likes to make beer, had eaten at one of Vogelstein’s favorite restaurants the week before, and likes to watch cartoons. The friend pondered in a Facebook message to a friend whether his son’s Little League game might be rained out. Also, he asked friends for help figuring out how the impeller in his central heating unit works. In contrast, a search of the name of Vogelstein’s friend on Google yielded that he holds a doctorate in computer science on a dated personal website with links, most of them expired, and a list of scholarly papers he had written over the years.

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