Case Study #2: Facebooks Dilemma

1. What concepts in this chapter are illustrated in this case?

The concepts that the case study entitled, “Facebooks Dilemma” highlights out of chapter 10 of Management information Systems: by Kenneth Laudon & Jane Laudon are based around what is identified as Electronic commerce. Electronic commerce is the use of the internet and the web to perform business transactions more specifically, to perform commercial transactions between organizations and individuals alike. Facebook is what is known as virtual community, it falls under a more specific kind of virtual community known as a social networking site. Online communities are used by individuals for expanding business or social contacts, and social shopping sites; in which users swap shopping ideas. The case study goes into a detailed analysis of how facebook has become an opportunity for electronic commerce to take place, however the process of allowing this electronic commerce to take place has been hampered due to legal issues concerning the users privacy in these interactions that private companies use to create their advertising. Currently face book is not generating the expected amounts of revenue that it is capable of based upon the beliefs of some, one of those select corporations that does believe it will someday soon be a Mecca of advertising commerce is Microsoft, who bought 1.6% of the facebook company for $246 million (Laudon pg 409). Surely if a corporation like Microsoft is willing to spend an immense amount of money to become a select share holder like that must believe that there is some truth in the predicted success of face book advertising opportunities.
2. What is the role of e-commerce and web 2.0 technologies in facebooks widespread popularity?
In terms of e-commerce facebook is such an important tool because it has so many members that share information through the site in turn making it easier or a primary social networking site for companies and corporations to identify and interact with potential customers on several different levels. Facebook is a tool from understanding that in terms of information density can and is exactly what companies would be interested in order to cultivate advertising to specific individuals. Facebook also has a global reach that spreads further and to more people than most other sites except for one, Myspace.com(Laudon pg.388). Because of its attractive simplicity and easy maneuverability to the user it is growing rapidly along with the e-commerce opportunities that it presents to businesses. Web 2.0 technologies is basically referring to applications that facilitate communication in terms of sharing information, however they are based upon user-centered design. Social networking sites such as Myspace.com and Facebook fall under that definition, and have become extremely popular to communities and individuals all across the world. In terms of business, businesses have exploited this free advertising by creating their own pages to allow the users of Facebook to explore information that they wish to share with a large amount of individuals. It is a platform for free advertising in that sense, however the case-study is more based around the creation of advertising that will produce a larger revenue stream.
3. Describe the weaknesses of Facebook’s privacy policies and features. What management, organization and technology factors have contributed to those weaknesses?

Businesses are interested in the information that is shared by the individuals through facebook in order to advertise effectively to an immense amount potential customers; however the users of facebook have a right to privacy that has in the past been violated by facebook in attempts to allow these businesses to advertise to their users. The example that the case study uses is the launch of a company’s advertising campaign called Beacon. The plan was for Beacon to inform other facebook users when their friends made some sort of economic transaction through the purchase of product and at the same time engaged in activity that was not restricted to facebook. The problem with this was that it was sharing information about users that was never agreed upon or intended to be shared. Another aspect of this service that was alarming in my mind was that it continued to fulfill the action of letting other users know what you were doing until you disabled it manually. It is what is known as an “opt-out” application. So unless you manually turned off the applications, it would continue to share personal information with whoever you were friends with while under the belief that Facebook had ensured the full consent of the users. Another privacy error that was incurred by facebook was the incorporation and handling of its news-feed feature. A quote from the Washington post solidifies the fact that the incorporation of certain applications is a cause for concern, “Facebook fanatics who have covered their profiles on the popular social networking site with silly games and quirky trivia quizzes may be unknowingly giving a host of strangers an intimate peek at their lives.(Kim Hart: Washington Post)” The news feed feature provided other users that you are friends with updates of actions that you performed while logged into facebook; who you befriended, whose wall you wrote on, what new applications you installed, updates on your page. When this feature was originally introduced on the social site it was met with a controlled outrage from its users, stating that it was an invasion of their personally privacy to broadcast information of the tasks that they performed while on the site. Other than these two major issues in terms of privacy, there have been isolated incidents where people have discovered glitches within the facebook site and have been able to view information from other user’s pages that had been blocked to them. Finally the last cause for concern in terms of privacy for any facebook user is that you can never really delete you facebook account or any of the information that is on your account. Facebook keeps a copy of your entire account even after you deactivate it and no long wish to have any affiliation with facebook whatsoever. Not only does facebook apparently have technological issues where sensitive information can be compromised but from a managerial standpoint they have also ignored the options of allowing their users to choose whether they wanted their information to be seen by people that they do not know or choose to see it.
4. Does Facebook have a viable business model? Explain your answer.

Facebook currently is spending as much to advertise and reach people as it earns from those very advertisements. In terms of generating revenue from advertising it’s basically hit or miss with many of its users. There are no fees that are to be paid to join facebook, or for its use; it all seems like they threw in a few advertisements and hoped that its exposure would bring in consumers. From what I see on the facebook website, it incorporates a weak Business to Consumer module (B2C) (Chapter 10 Study Guide). There are advertisements that’s main objective is to retail products and services to individual shoppers based upon the personal information that they display on their facebook pages. If facebook continues to wish to use the information that people post on their accounts a clear distinction must be made to the users about what they are using the information for and what information they will be using in order to reduce the legal risks and solidify the legality of their advertising. Once the facebook management can do this then a broader, more organized and more successful advertising campaigns can be launched.
5. If you were responsible for coordinating facebook’s advertising, how would you balance the desire to become increasingly profitable with the need to protect the privacy of your users?

If I were in a position to manage facebook advertising the first thing I would be to alert all the members of facebook with a detailed letter stating that for advertising purposes information that is submitted to your information pages will be used by facebook company. I would give the users the option to either accept or reject this offer in order to instill a legal standing that with the users of the site as well as protect the integrity of the company. Another option that I would try to explore is by offering applications that could be put on their pages in terms of interactive games and trivia, in return for allowing facebook to access their info pages for advertising purposes and advertising purposes alone. In order to protect the facebook users the information that they share should not be used by anyone other than specific groups that are pertinent to advertising and advertising alone. By stating these offers in writing and allowing the users to accept or disagree the site would be able to increase its advertising capability as well as ensure the users that the information that they give to facebook is not being used for anything other than business practices.