Beware of Facebook's Beacon?

The new Facebook advertising system, codenamed Beacon, represents an innovative approach to online marketing, but it also marks an additional step in the ongoing erosion of consumer privacy.

There are two primary aspects of the new Facebook ad system. The first is the expansion of the "friends" concept so that you can be friends (articulated as Fans) of a brand or company. Any company or organization can now establish a profile on Facebook and solicit support from other users. Each time a user adds the company as a friend, their connections are notified that they support that brand.

Companies can buy advertisements to support their new presence on Facebook, and these ads can be targeted by things like geography, gender, age, and any type of info that users have entered into the Facebook database.

The second aspect to this new ad system is the expansion of the Facebook data collection and reporting process beyond the confines of the Facebook platform. This is where the "Beacon" concept comes in — as participating sites will add a few lines of code to their website, acting as extensions of the Facebook surveillance system.

For example, when you engage in consumer activity at a partner website, such as Amazon, eBay, or the New York Times, not only will Facebook record that activity, but your Facebook connections will also be informed of your purchases or actions.

If you buy a book on Amazon, a little bit of code is embedded within that site then sends the data to Facebook and informs your friends that you've bought a particular book. Or say you're surfing the recipe/food site Epicurious and rate or comment on a few recipes, again your Facebook friends will be notified of your culinary interests, as will Facebook itself and their advertising partners.

Thus where Facebook used to be collecting data only within the confines of its own website, it will now extend that ability to harvest data across other websites that it partners with. Some of the companies that have signed on to participate on the advertising side include Coca-Cola, Sony, Verizon, Comcast, Ebay — and the CBC. The initial list of 44 partner websites participating on the data collection side include the New York Times, Blockbuster, Amazon, eBay, LiveJournal, and Epicurious.

Advertiser's treasure trove

Facebook has a huge database of consumer information and this new system allows advertisers to get at it. Companies that sign up for the plan will be able to target their ads based upon the information Facebook collects. This could start with general categories like age, gender, and geography, but could be further refined down to musical genres, taste in movies, books, magazines, as well as popularity and influence with regard to the number and type of Facebook friends a user has.

The expansion of the data-tracking abilities to other websites will allow Facebook to build even more accurate data profiles of its users. Partner sites like the New York Times will now know even more information about the readers using its website, as its own information will be cross-referenced to Facebook info.

This of course begs the question of whether Facebook users will accept this new aspect of the platform.

For a lot of consumers brand loyalty is an integral part of their identity. To use the New York Times as an example, users expressing loyalty to this brand do so as part of demonstrating their status or intelligence in so far as they're associated with the well-respected news organization. The CBC also has a page in the new system, and already many Canadians have indicated their brand loyalty to the CBC.

Since the system is open, and any company or group can set up a profile to accept fans, many small business and not-for-profits have established a presence and are using the system to build their own community of supporters. While I've not seen many of my own friends supporting large companies like Coca-Cola, I am seeing a lot of activity around the support of smaller companies that people like to champion.

There are, however, clear signs of fatigue with Facebook in general, as well as outrage expressed toward this new system.

Users who were afraid that Facebook was one big scam to collect people's information to sell to advertisers have had their suspicions confirmed. Facebook has also responded by saying there is no way to opt out of this system, although the site will introduce controls that allow you to block the sharing of data with specific individual websites.

In addition to continuing the general erosion of consumer privacy, this advertising platform may even be illegal in New York state. An obscure 100-year-old law states that it is illegal to use a person's name or likeness for the purposes of advertising without the user's express consent and permission. Since the system is already active and uses people's names to say they are fans of a particular brand, Facebook may have run afoul of this law in New York state and could thus face lawsuits.

Balanced on a knife edge

This may be a crucial point in Facebook's continued growth, as this advertising strategy is at the core of the company's ability to monetize all the data its users have entered into the system.

If people are not alienated and scared away, the potential for revenue is immense. However, this could be the tipping point as the fears around privacy are being substantiated, and it could be enough to drive people to another platform that is not as aggressive at collecting and sharing consumer information with advertisers.

One issue will be the extent to which Facebook secures or claims to have secured people's consent, or whether the users of the site will feel they've been deceived into entering their data before this advertising system was introduced.

Another issue will be how advertisers and brands use the system. If done in a creative and engaging way, the backlash could be minimized. However, another scenario could see the reaction against Facebook also encompassing the prominent brands participating in the system. Thus as fears of diminished privacy rise, the animosity toward Facebook could spread to partners like Amazon and the New York Times that are helping to facilitate the data mining and consumer profiling.

On the other hand, Facebook users may have been numbed into accepting the fact that they have no control, no privacy, and instead are going to be seduced by the way in which this system informs them of their friends' activities.

The power of surveillance is such that we can give up our own privacy as long as we also get to be in the position of the voyeur, spying on our friends and their online activities.

Jesse Hirsh is a broadcaster, researcher and internet consultant based in Toronto. He appears regularly on CBC Newsworld and CBC radio, writes for CBCNews.ca and hosts an interfaith TV show called 3D Dialogue for OMNI/Rogers.