
Facebook took it on the chin this week. The online social network launched a new advertising scheme on November 6 to much applause, because advertisers were champing to get at Facebook's wildly growing user base -- 20 million in April and up to 45 million in October. Last night, Facebook removed a key element of the program that could cost it billions of dollars in missed revenue.
The heart of Facebook's new advertising program was something called "Beacon," a variation of its News Feed. News Feed sends a little post to all of your friends inside the Facebook system every time you update your home page, and has become extremely popular. The sense you get when you log in to Facebook is it becomes The New York Times of your personal life -- you get an entire page of news that Sally bought a dog, Henry ran a 5k, and Johnny found a really cool video. Facebook News Feed makes you and your friends the center of the news universe.
Beacon attempted to give advertisers a line into this News Feed, and tapped data about users from 44 sites partnering with Facebook. The targeting possibilities are wonderful, because users log in names, addresses, genders, ages, and even employers and job titles. The idea was Beacon would fire off a little email blurb to all your friends inside Facebook every time you bought something, so they'd get a "referral" of sorts that you like a certain product. Advertisers loved this idea -- virtual word of mouth! Automated! Among 45 million consumers!
But big trouble came when Facebook launched it as an opt-out program for users, rather than an opt-in. Suddenly, if you bought underwear, every friend and business colleague you know on Facebook gets the news notice. Order a racy movie? Perhaps pharmaceuticals? Your boss, on his Facebook page, just got the update.
More than 50,000 Facebook users filed complaints, so Facebook reversed course late last night and
changed Beacon to an opt-in model. What's missing from most news reports is this will strangle Facebook's new advertising model -- because Facebook just went from offering advertisers a universe of 45 million consumers to a universe of, oh, the few people who think telling buddies they just shopped for acne cream is a good idea.
To put this in context, imagine what would happen to the direct mail industry if homeowners had to "opt in" to receiving unwanted junk mail. Hmm. Eddie Bauer might go broke.
NYT says Coke is holding off on joining Beacon until it sees how the ad model shakes out. Media planners are going to have to understand exactly what audience we are getting before we tell clients Beacon is a bright idea.