About Facebook's monetization and our flirtations with privacy

If you're in the field of mobile advertising, mobile payments and social networks, some of the recent developments might be of interest.  I'd like to articulate a couple of these developments which may have significant industry ramifications.

MANNA DEW FOR MOBILE ADVERTISERS?
Last week, Facebook unveiled the Facebook Card.  There's quite a bunch to read (scroll right to the bottom of the post for details), but let me save you some time and get to the heart of the development.  Simply put, Facebook Card is a gateway which will allow Facebook to 'farm' the enormous amount of user data that's sitting in it's servers.  Google does it through serving customized ads by tracking user activities, Amazon does it by cross-selling you it's wares based on things you've purchased from them in the past / pages viewed.  

You don't make a billion friends without farming them for some dough

All these years, and especially since it's IPO last year, industry pundits have been wondering how effectively will Zuck and team monetize the tremendous groundswell that has been generated.  For many, if not all, today's Facebook represents the entirety of the internet - photos, videos, messaging, email and most recently, voice calling (currently available only in the US).  But let's face it, 'likes' and 'shares' don't pay salaries, money does.  Facebook's primary source of revenue has been the banner ads.  But here's the problem - more Facebook users connect from their mobile phones these days than the desktop site.  Advertising through the cramped mobile UI is tough and ineffective, not to mention the universal problem of ROMI (return on marketing investment) - how do I ensure my marketing $ spending amounts to something.  

This is where the Facebook Card comes handy.  In principle, Facebook has tied up with a handful of retailers cum advertisers to start with - Sephora, Target, Jamba Juice and Olive Garden (US only at present).  With time, it's not very difficult to expect the retailer list to expand (I'll come back to this in a bit).  Facebook will be able to push relevant offers to you based on what you've liked and shared (hello Social Graph).  Fan pages liked by millions of users are kicking in invaluable marketing data about user preferences which Facebook hopes to cash through it's Facebook Card.  How difficult is it to imagine a Pizza Hut fan 'liking' it's page on Facebook and lo behold, Facebook pushes out a $30 gift card to the user.  You can count on Facebook to thrown in some deal-sweeteners to ensure product differentiation from other gift cards.  And when the card-holder uses it at the store-front - voila, there's an instant linkage between the marketing / promotion and sales.
      
TALKING ABOUT PRODUCT DIFFERENTIATION...
Gift cards aren't anything new.  According to First Data, the gift card industry in the US alone was worth US$43 billion in the 2012 holiday season.  That said, there is some serious differentiation which could work for Facebook - brand connect.  My mom may not understand the business models of Amazon, Google or Apple, but she connects with the Facebook brand much easily.  

I believe this point is self-evident and hence I'd like to draw your attention to something even more intriguing.  There's something about Facebook which not only creates but also sustains user engagement.  

Of all companies I can remember, Facebook must have the best user engagement quotient - most companies would kill to have something like that.  

How many times does it happen that you observe a profound / weird / bizarre / funny incident during the day and have a sudden impulse to post it on Facebook?  What explains this phenomenon - why do we continue to broadcast what would've been mostly considered private conversations less than a decade ago, on to the Wall at the slightest opportunity and intent?

A recent study at Carnegie Mellon University suggests that internet users tend to deal with privacy more loosely in a social networking context (think Facebook, MySpace, Twitter) than in a setting with much higher privacy protection.  We shun modern day browsers to track personalized search histories so that those results can be used to optimize future searches.  On the other hand, we don't mind sharing almost fanatically-detailed developments of our personal life on Facebook.  

SO, WHERE DOES THAT LEAVE FACEBOOK'S MONETIZATION POTENTIAL
There's little doubt that Facebook Card represents a huge opportunity for Zuck to convince his shareholders that Facebook's future holds more than being merely a glorified photo gallery.  I'm convinced that mobile is definitely going to be a big strategic cornerstone of Facebook's chances to survive.  Facebook Card's business model is geared up to embrace mobile wallet in the future - a future which may be closer than we think it is.  Mobile wallets have struggled to take off commercially so far, but that could change soon.  

The thing with cutting-edge technology is that it requires a random industry player to make it work and then everything suddenly makes sense - look no further than the iPod.  

In the banking industry, there's already a talk about this model expanding into the realms of P2P transfers and micro finance.  You'd expect Facebook to figure this all out.  As long as we continue to flirt with our privacy, Facebook's future is secured.  Having said that, the strategy comes with certain pitfalls.  Facebook has met with severe public and industry pressure each time it tinkers with it's business model.  Why, because it's built entirely on monetizing our private conversations.  Till Menlo Park's hoody-clad prodigy figures this out, the jury will have to wait outside.

P.S. Your mileage may vary with the Facebook Card's announcement page link above, so here's the full link: http://newsroom.fb.com/News/569/Introducing-the-Facebook-Card-a-New-Type-of-Gift-Card

Image courtesy: 
http://www.netedgemarketing.com/Images/facebookimage.jpg
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