A Case Study On Facebooks Dilemma Information Technology Essay

Facebook (Fb) is one of the largest social networking sites in the world. Facebook allows users to create a profile and join various types of self-contained networks, including college-wide, workplace and regional networks. Facebook is now one of the most recognizable sites on the Web. Facebook represents a unique opportunity for advertisers to reach highly targeted audiences based on their criteria. Meanwhile, for advertisers, Facebook present unique and exciting opportunities. It represents a gold mine of opportunity because of the information the site has gathered and because of the social networking. Despite these advantages, Facebook’s path to profitability has not been smooth. Though users contribute most of their information to Facebook willingly, the privacy and user controls over the information granted to Facebook are the biggest concerns most user have with the site.

Facebook’s dilemma is finding a way to turn a profit and to continue to increase revenues using the information its users voluntarily provide without violating the privacy of these users. To truly, capitalize on the massive audience and immersive environment of the site, Facebook needs to innovate and find new ways to grow revenue that do not alienate the very users that the company is depending on to spur its growth. The company’s Bacon advertising service was an example of Facebook grossly miscalculating the privacy demands of its users. The trouble with the service is that it shared information about users that they had not explicitly intended or agreed to share. As Facebook soon found out, this assumption was often mistake.The civic action group MoveOn.orf created a Fb group to protest Beacon and grew to over 50,000 members in 10 days.Beacon represented Fb’s hopes to expand its sources of revenue by offering advertisers access to its user’s information, but the company utterly failed to grasp the extent to which the service violated its user privacy as well as the uproar such a service was likely to cause. Facebook has subsequently changed the privacy controls for the service, as well as for the rest of its site, to be more transparent.

News Feed is a feature which provides updates to friends when perform actions via Fb, such as updating profile, adding new friends or adding new application. But, when this feature was introduced, it was met with significant resistance from Fb users, who considered the feature to be overly invasive. As with Beacon, users protected the features through Group features of the site, forming over 500 groups to protest it. In an open letter, Zuckerbeg apologized for the abrupt introduction of the feature, but defended the feature itself as a positive thing, nothing that users could control which types of items appeared on the News and who could view those items. On other hand, News Feed is one of the most popular features on the site and has been imitated by MySpace and other competing social networking sites.

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Facebook has also come under fire for its handling of the personal information of people who attempt to remove their profiles from the site. Facebook offers users the ability to deactivate their accounts, but the company’s servers maintain copies of the information contained in those accounts indefinitely. Users that attempted to delete their accounts were met with resistance and often required outside assistance from watchdog groups. Nipon Das, a business consultant in Manhattan, spent 2 months attempting to delete his profile unsuccessfully while still receiving updates and messages through the site. Facebook has joined MySpace, Friendster and other social networking sites in offering a simpler process to permanently delete accounts and the personal information it contains.

Currently, Facebook’s most promising prospects to become more profitable involve the development of applications for use via Facebook Platform which was an effort by the company to open up its site to third party developers to become a platform for their applications. These applications, sometimes also referred to as widget, consist of games, plug-in features for user profiles and other programs which are fully integrated with the Fb site. They are independently developed and their result, more than 24,000 applications had been created. Facebook Platform has been beneficial for both because Facebook’s environment has become even more engaging and self-sufficient and the developers gain unparalleled exposure for their applications. Companies attracting large numbers of users to their applications in Facebook are able to sell goods, services or advertising. All of the application earns advertising revenue. Others are using the exposure on Fb to raise their business visibility. Flixter , an online community for movies fan was reported that this applications, with about 482,000 daily users has hugely expanded its customer base and business opportunities.

In 2007, Microsoft purchased a small stake in Facebook, buying 1.6% of the company for $246 million. That investment put the Facebook’s valuation at approximately $15billion.The initial furor and subsequent acceptance of the News Feed feature shown that Facebook user’s stances on their privacy may be subject to change or persuasion and many users may not even be aware or care about the dissemination of their personal information. But it appears that enough Facebook users are concerned and aware if their privacy to prevent services as invasive as Beacon’s initial incarnation from becoming realities. It’s currently unclear as to whether there is significant revenue to be made through the development of these applications. Others believe Facebook’s own popularity will injure its chances to attract advertiser to its site, claiming that the engaging and immersive environment that draws visitors to the sites makes user less likely to click on ads. So far, only 200 Facebook applications have attracted more than 10,000 users per day and 60% failed to attract even 100 daily users. There is little doubt that Facebook applications will make Facebook a stickier destination for its users. However, that may not necessarily translate to increased profitablility.

Apart from that, Facebook has launched a new series of privacy controls, including a feature that allows user to sort friends into groups and grant access to photo album or parts of their profiles only to specific groups of friends. This is a step in the right direction, but the toughest tasks for Facebook will be to continue to preserve the privacy of its members while monetizing the user data it has collected. Only time will tell whether Facebook is able to make a good on its tremendous potential for revenue growth but for sure, the privacy concerns of its user will play a central role in its efforts to become profitable.

CASE STUDY QUESTIONS:

What concepts in this chapter are illustrated in this case?

E-commerce involves digitally enabled commercial transactions between and among organizations and individuals. Unique features of e-commerce technology include ubiquity, global reach, universal technology standards, richness, interactivity, and information density, capabilities for personalization and customization, and social technology. Digital markets are said to be more “transparent” than traditional markets with reduced information asymmetry, search costs, transaction costs and menu costs, along with the ability to change price dynamically based on market conditions. Digital goods such as music, video, software and books can be delivered over a digital network. The internet can help companies add extra value to existing products and services or create new products and services. Many different business models for electronic commerce on the Internet have emerged, including virtual storefronts, information brokers, transaction brokers, online marketplaces, content providers, social networks, service providers and portals. Business models that take advantage of the Internet capabilities for communication, community building and digital distribution have become especially prominent. The principal e-commerce payment systems are digital credit card payment systems, digital wallets, accumulated balance digital payment systems, stored value payment systems, digital checking and electronic billing presentment and payment system. Social networking sites are a type of online community that has become extremely popular. Social networking is the practice of expanding the number of one’s business or social contacts by making connections through individuals. The most popular of these sites attract so many visitor and are so “sticky” that they have become very powerful marketing tools.

What is the role of e-commerce and Web 2.0 technologies in Facebook’s widespread popularity.

The three major types of electronic commerce are business-to-consumer (B2C), business-to-business (B2B) and consumer-to-consumer (C2C). B2B e-commerce generates efficiencies by enabling companies to locate suppliers, solicit bids, place orders and track shipments in transit electronically. Net marketplaces provide a single, digital marketplace for many buyer and sellers. Private industrial networks link a firm with its suppliers and other strategic business partners to develop highly efficient and responsive supply chains.B2C involves retailing products and services to individual shoppers and C2C is electronic commerce involves consumers selling directly to consumer. For example, eBay, the giant Web auction site, enables people to sell their goods to other consumers by auctioning the merchandise off to the highest bidder.