Data Mining and the Targeting Paradox

Following a recent report that Facebook is now expected to valued at around $76.4bn, each user would be worth over £78 each [1][2]. This comes just 2 months after Goldman Sachs valued the company at $50bn [3]; a 50%+ increase in value. Admittedly, this latest valuation comes from a rather contentious source but, if true, Facebook would be worth more than Disney [4][5][6]. These figures perfectly demonstrate just how much we are each worth to a company like Facebook who shares our data with advertisers.

The rapidly growing numbers of people from around the world connecting and sharing via Facebook is expected to hit or even exceed 1 billion members by the end of this year [7][8]; Facebook is becoming a new superpower.

But how does a company of such ever-expanding magnitude afford to keep running? An article from Business Insider (which can be found here) explains how the social media giant utilises self-service ads amongst other forms of marketing to generate revenues capable of keeping the titanic Facebook afloat [9][10]. Back in 2009, Andrew Keen said that “Facebook is now too large to fail. At worst, it will turn into AOL. At best it will become a legal monopolist like Google,” [11]. It has only been in recent years that the company actually began to turn a real profit and, unless revenue streams pick-up, the company may be in something of a quandary.

At the moment, the click through rate (CTR) for Facebook ads are averaging out at about 0.05% as of 2010 which is down from 0.06% in 2009 [12]. At the same time, the cost per click (CPC) is actually increasing which suggests that buyers are paying more and receiving less.

Facebook harnesses users activities, posts, check-ins, fan pages, links and likes as well as their basic personal information such as gender, age and marital status to sell them to advertisers. Anyone can create an advert on Facebook to advertise just about anything. Below are some images of my own Facebook ad for my website (Note: I haven’t purchased this advert yet as it is purely for demonstrative purposes on this blog):

But are users happy about having their data shared with organisations purely so they can be sold things more specific to their likes and needs? Andrew McStay proposes the theory that:

“In advertisers’ endeavour to get close to their target audiences they may in fact alienate or stifle their audiences. In attempting to create intimate relations with their audiences, it is likely that marketers and advertisers do not dispel distrust but instead amplify distrust by utilising the same mechanism that users are distrustful of, that is, the surveillance of users’ activity and the positioning of users as information providers.” [13]

Conversely, a study referenced by Nelson (2007) found that web users in America would prefer to see advertisements more tailored to their need and wants [14].

Both of these findings suggests that there is also some form of, what I would call, a ‘targeting paradox’ whereby users “relish the notion of not being bombarded with irrelevant advertising” but are “unsure about having significant banks of data being held about them” [15].

The New York Times coined the term “Zuckerberg’s Law” from a Web 2.0 conference in 2008 where he said:

“I would expect that next year, people will share twice as much information as they share this year, and next year, they will be sharing twice as much as they did the year before,” he said. “That means that people are using Facebook, and the applications and the ecosystem, more and more.” [16]

This form of data mining seems to be so flippantly and positively paraded around by the face of Facebook but are users getting a fair deal in this process? Facebook ads riffle through our private life and source information without prior consent to sell on to advertisers. However, the more information we give the more specific and target these advertisements are resulting in less clutter and an arguably better benefit for us as consumers. But what do you think? Below is a privacy poll and your clicks would be very much appreciated:

There is, of course, the argument that if you don’t want to someone to know something about you then you shouldn’t be posting it online anyway. Yet Facebook gives us a freedom to express ourselves and communicate within the safety of a limitless reality (see my previous posts here and here for more information) so should our privacy be packaged and sold to the highest bidder?

Katie Roiphe says that “Facebook is the novel we are all writing” but whether the advertisements are cast as victor or villain is a chapter we are only beginning to write [17].

References

1. $76,400,000,000 = £47,160,357,032.81 / 600,000,000 Facebook users = £78.60

2. http://www.bbc.co.uk/blogs/thereporters/rorycellanjones/2011/03/russian_bank_facebook_worth_76.html

3. http://advertising-communications-culture.blogspot.com/2011/01/58-per-facebook-user.html

4. http://www.bbc.co.uk/blogs/thereporters/rorycellanjones/mail_ru_report.pdf

5. http://www.chacha.com/question/what-is-disney-net-worth

6. http://www.sec.gov/Archives/edgar/data/1001039/000119312510268910/d10k.htm

7. http://www.wired.co.uk/magazine/archive/2011/03/features/sharing-is-a-trap?page=2

8. http://www.guardian.co.uk/media/2010/jun/23/mark-zuckerberg-facebook-cannes-lions

9. http://www.businessinsider.com/how-does-facebook-make-money-2010-5

10. http://www.guardian.co.uk/technology/blog/2009/sep/16/facebook-money

11. http://blogs.telegraph.co.uk/technology/andrewkeen/100003534/can-facebook-fail/

12. http://searchengineland.com/study-facebook-ad-click-throughs-declining-63324

13. McStay, A., 2010. Digital Advertising. Palgrave Macmillan. p.125

14. http://www.clickz.com/showPage.html?page=3627288

15. McStay, A., 2010. Digital Advertising. Palgrave Macmillan. p.124

16. http://bits.blogs.nytimes.com/2008/11/06/zuckerbergs-law-of-information-sharing/

17.  http://www.nytimes.com/2010/08/15/fashion/15Culture.html?pagewanted=2&_r=1&partner=rss&emc=rss

Useful references

1. https://paulmmartinblog.wordpress.com/2011/02/21/proximity-marketing/

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2 thoughts on “Data Mining and the Targeting Paradox

  1. Pingback: Digital Ethics « Paul Martin's Blog

  2. Pingback: Week 6: Are We Sacrificing our Privacy? | 2.0 &Me – A Digital Diary

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