Making Social Networks Pay, Part 3: An Eye on Privacy

Part 1 of this three-part series focuses on the strategies and technologies companies are employing to use online social networking as a marketing tool. Part 2 takes a closer look at some of the companies operating in this space and what kinds of specific services they offer.

Can the privatized and anonymized be monetized? When it comes to the mega-million-name member lists of social network sites like Facebook and MySpace, Big Business really wants to know.

As consumer databases go, the Facebook and MySpace lists have an appealing advantage over databases derived from indirect sources like phone books and rental lists — even those containing buying habit and lifestyle information pulled from product registrations, magazine subscriptions and survey responses. Social network member information is seemingly so much more authentic — and reliable.

After all, new social network members have little reason for obfuscation when entering personal data directly into their accounts because they don’t generally consider that they’re setting themselves up as marketing targets. However, this data typically includes, along with standard contact information, personal psychographic intelligence about ideas, opinions, interests, etc. For businesses, customer-initiated knowledge repositories provide a sweet spot of opportunity because these sources often openly and verifiably reveal strong individual affinities toward specific brands and products.

Much of this data is easily available for commercial use. Operators of online social networks are increasingly sharing potentially sensitive information about users and their relationships with advertisers, application developers and data-mining researchers. Thus, self-identified (thank you) prospects are much easier to engage with as potential customers.

However, while these databases provide business with a means to establish and enhance commercial relationships, they can also be used incorrectly and even unethically. From the annoyance of spam to the catastrophe of identity theft, the potential negative consequences of making personally identifiable information (PII) publicly accessible have driven concerns about its use and misuse.

The members of social networking services generally expect a certain level of privacy and confidentiality regarding their PII. To meet that expectation, Facebook, for example, provides privacy settings that enable members to control who can see their profiles and personal information, who can search for and contact them, what recent activity is visible on their profiles and on their friends’ home pages, and what information is available to the applications they use on Facebook.

Members can block specific individuals so that the blockees can’t find them in a Facebook search, see their profiles or interact with them through Facebook channels. However, according to Facebook, many millions of its users don’t even bother using their privacy settings.

Already Google Indexed

There’s a major not-so-secret secret about private social networks’ member PII — Facebook profiles have been indexed by Google for years, thanks to things like Facebook badges used by members to integrate Facebook into their mobile phones and personal Web sites, and to share information about themselves on other Web sites.

In addition, in 2007, Facebook introduced Public Search Listings that made profiles searchable through Facebook, Google, Yahoo and MSN Search. Restrictions include the following: a profile must be set to viewable by “everyone” in order to appear; only a limited profile to be made public; and only profiles of persons over 18 years of age can be shown. Even so, a lot of PII gets out there.

Colligent, a Bellevue, Wash.-based social networks research firm, makes a living (discretely, though) from this fact.

“We are consumer-friendly, and our privacy policy is the same as that of a search engine — everything we have in our database, Google has in its index,” said CEO Sree Nagarajan.

“We gather publicly available consumer data, including individual profiles, but [the] value for us is in getting statistical analysis done at the aggregate level of social clusters. We turn over aggregate information to our customers, not individual information,” Nagarajan told CRM Buyer.

“Privacy is user controlled, but not controlled as to where data goes or how it’s used,” said Chase McMichael, CEO of Palo Alto, Calif.-based Unbound Technologies. Unbound markets an online social network intelligence SaaS solution called the “Social Monetizer,” which the company has used to build a social graph database of extracted social network profiles totaling in the hundreds of millions.

“Google has stored every public profile that Facebook has, and all the content showing up on the public profile pages of every other social network as well,” McMichael told CRM Buyer.

Facebook ‘Anonymizes’

Facebook seeks to ameliorate privacy issue concerns in the commercialization of its member database by “anonymizing” user information.

Facebook’s approach to monetizing its free service is to invite advertisers to join in the conversation. New “engagement” ads ask users to become fans of products and companies — sometimes with the promise of discounts. If a person accepts, that commercial allegiance is then broadcast to all of the person’s friends on the site.

From the company’s perspective, the fact that users might eventually set their privacy settings to higher levels doesn’t matter. Whether someone shares his or her status messages with 20 people or 200, Facebook can still see all that information either way to generate ads. Facebook can monetize the user by anonymizing — culling only non-PII.

“What we do is abstract profile information, and the information flows off the site into keywords that advertisers can target their advertising against,” said Chris Kelly, Facebook’s chief privacy officer. “But the advertisers don’t get a list of who matches those keywords, so it doesn’t really impinge upon the users’ privacy interests.”

New York advertising company Media6 says that it uses no consumer or publisher data to map the social graph or deliver its targeting solution due to its status as a signatory to the Network Advertising Initiative (NAI) guidelines on the appropriate use of data in online advertising.

The NAI is a cooperative of online marketing and analytics companies focused on responsible business and data management practices and standards related to the use of sophisticated online advertising technologies and their impact on online consumer privacy. The NAI guidelines deal with data collection, data usage and choice, and the privacy concepts of notice, consent, control and dispute resolution. To date, the NAI has developed standards for third-party ad networks, cookies, spam and Web beacons. The emphasis, though, is on industry self-regulation.

While the law often trails the fast-moving Internet marketing front, many companies using online personal information for commercial purposes make a point of declaring and guaranteeing their bona fides in the fight against fraud and deceit. When it comes to respecting online PII, privacy protection disclaimers are just a normal part of doing business among the ad services, brand monitoring, and research and analytics firms toiling in the social networking services vineyards.

Social Network Marketers Show Respect

Sysomos is a Canadian social networking analysis company. “Sysomos respects the privacy terms of Web sites and individuals,” CEO Nick Koudas told CRM Buyer. “If someone does not want their Web site or information crawled or stored, we provide a way for them to remove their information from our service.”

PopularMedia, in San Francisco, Calif., is an online ad company. “As an enabling technology, we make it easy for advertisers to adhere to best practices,” CEO Jim Calhoun told CRM Buyer. “Each client publishes their own privacy policy for every campaign.”

Social media marketing firm Lotame Solutions fully supports consumer privacy and has taken strides to ensure its compliance with industry standards and regulations, according to CEO Andy Monfried.

“Our services are designed to provide consumers with relevant advertising and content at Web sites they visit,” Monfried told CRM Buyer. “These marketing activities help to underwrite the cost of the content and services made available to consumers online.”

To deliver its services, Lotame collects, organizes and uses data reflecting consumer interactions with a variety of Web sites. This data is PII anonymous, Monfried said, and Lotame does not collect information such as names, addresses, phone numbers, etc.

“We analyze this non-personal information and organize it into anonymous user profiles, groups and audiences, based on factors such as age, gender, geography, interests and online actions,” Monfried explained. “We and our customers then use these anonymous user profiles, groups and audiences to design and deliver targeted advertising campaigns or other relevant content.”

Making Social Networks Pay, Part 1: Strategies and Technologies

Making Social Networks Pay, Part 2: Players and Products

2 Comments

  • Social networks need to figure out the balance between benefits to users and benefit to business. fondalo.com for example is a start up that is providing the benefit of buying power through social networking for it’s users and direct to consumer access for business.

    Users enter offer requests for brands, products or services they want and other users interested in the same thing can join to build buying power. Business can make offers back to the group inexpensively and work directly with consumers that have already said they want that product.

    It’s a win/win.

  • Hi Ned,

    Another comprehensive piece, thanks. As one "toiling the vineyards" of the online space, and as one who spent a decade in database marketing analytics using demographics from companies like Acxiom, it feels to me as if social networks are going the way of big offline demographic providers.

    Like the offline world, if consumers would care more about their privacy, marketers would be limited. It’s even easier online to set privacy rights (versus trying to get legislation passed in the offline world) and, to your point, most "don’t bother" with it. Perhaps I’ve been in the industry too long but I keep my privacy settings (ironically?) as high as possible, online and offline.

    Another large consideration you highlighted – social media marketing is quite different. Yes, Facebook is the 900-lb gorilla but people can always flee to another network (e.g., Plaxo) if they start to get "monetized" beyond their appetite. That’s the edge that MySpace and Facebook are currently dancing on.

    Enough – great piece, I really enjoyed it.

    Dean Westervelt

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