Facebook founder finds a way to profit from its members' private data

Let's play with some numbers to see whether this is a viable income model for facebook.

Gartner, one of the largest marketing research companies in the world, had an operating income of 133 million US$ in 2007 according to their annual report. 56% of their turnover comes from market research, the rest from consulting and events. Assuming that all divisions have a similar operating income per 1000$ this puts the operating income of the market research division at $75 million.

Assuming a P/E ratio of 10 this values the marketing research division of facebook at $750 million.

In other words: If facebook marketing research executes perfectly and becomes the world leader in this field, which is very crowded with a lot of large players that have been around for many years, it will be able to account for 5% of their current valuation of $15 billion.

Even if they did pull this off, which is unlikely, it would still be a drop in the ocean.

Why is Facebook so hellbent on being an advertising and marketing company? Nobody wants to see ads when they're reading up on their friends' lives, and people will leave in droves if they feel like their private info is being overly exploited, or if they're constantly bothered to participate in stupid marketing surveys.

People spend money in social contexts, why not try to take a cut? Let event planners set a price for events, and take a small cut. A group of friends wants to go to a movie or a concert? Make it trivially easy to set up the time and place and take a cut of the ticket sales. Someone's birthday coming up? Let groups of their friends make a group purchase from their Amazon wish list and take the sales commission (then gradually phase out Amazon). Where's Facebook's version of Paypal, OpenTable, etc?

When I get birthday event invites (and for other activities) to various restaurants and bars, and the event creator (or administrator) asks "where do people want to go" I'd like to see some relevant ads here. Perhaps describing the atmosphere, music, menu, prices, etc.

It seems like it'd be self-policing because it was local. It'd be a somewhat efficient market. Just a thought

Umm, isn't this pretty much what Facebook Polls did before they pulled the plug on it?

Is there an option to opt-out? If not, my resignation will be on Zuckerberg's desk by Monday.

I realize the potential Facebook has with it's member base, given the inherent nature of Metcalfe's Law but I use Facebook to keep in touch with my friends who aren't savvy or willing enough to use Twitter; a networking site that doesn't expect it's users to sit by idly while companies poll and query us to sell products otherwise we wouldn't even blink at.

Overall, I can't help but think that their time would be better spent working on a premium consumer offering.

Let's hypothesize that hyperbolic discounting is a good model for how market research people will value focus-group information: they will pay twice as much if it takes half as much time to perform a focus group and digest the results.

If it currently takes two weeks to do a focus group, and it takes 30 seconds on Facebook, then not only does it become reasonable to ask questions that you need only five minutes to digest the results of --- but you'll be willing to pay 4000 times as much, say, per question. Or, more likely, ask questions that are 4000 times less valuable, and pay the same amount.

That's not plausible --- there's probably some other limiting factor. But it could easily be bigger than Gartner.

Doing a poll on this thing could have the same relationship to traditional polling and focus groups that Google has to library research. I do maybe 100 Google searches a day, maybe 100× as many as I ever did card-catalog searches in a library. Can you imagine marketing guys and politicians doing 100 opinion polls a day?

As much as I like the fact that facebook provides a bunch of free services this is simply bait and switch. Turn a social networking site into a marketing panel.

Besides that, using facebook as a 'panel' seriously degrades the value of the company as a whole, panels are commodities and are definitely not valued in the 10's of billions, even the very large ones.

There are lots of players in that segment and most of them were put together with the express purpose of being used as panels, it's quite easy to get access to panels with large numbers of respondents in a given target demographic.

That's especially hard when your demographic is working single moms from Nebraska or something equally arcane, if your database isn't set up to record such information right from day 1 then you're not going to add it afterwards in an easy way.

And those respondents are usually paid for their work, fb will do the opposite, nag you and charge you to opt-out.

Of course facebook will have to turn a buck but I highly doubt this is the way to make it happen.

This is just as theoretical as every other monetization scheme they've come up with so far, all of which have failed. The problem is that people on social networks just want to hang out and maybe play games. They don't click on ads much, and when they do, they don't buy things at the places they land. You can show them polls all day, but they'll mostly ignore it.

Facebook is providing a platform for a huge number of businesses to make money off Facebook Apps. I would look at building part of their business model off that. Facebook Apps makes it virtually impossible for them to make money off their own applications because there will always be incentives for new players to make a competing app.

This is an indication that they are going to blow it. Actually Beacon was an indication. This is the confirmation.

So Zuckerberg, under the auspices of world peace and progress, opens up it's users' private data to multinational corporate businesspersons, who are also there under the guise of world peace and progress. That's genius. Evil genius.

Anybody know how large the overall market research industry is at the moment? Is this a big deal, or a drop in the bucket?