Facebook has stirred up a great deal of controversy and now harsh criticism with its Beacon advertising program. Three weeks after launching Beacon Facebook, the company did a 180-degree turn to make it more palatable for users rather than advertisers. It still fell short of the total opt-in approach that some critics called for.

Coke, one of initial “Landmark Partners” for Facebook’s advertising platform has backed out. “We have adopted a bit of a ‘wait and see’ as far as what we are going to do with Beacon because we are not sure how consumers are going to respond,” Carol Kruse, vice president of global interactive marketing at Coke, told the New York Times. In the end Facebook may have to capitulate with a 360-degree revision to address the privacy issues.

Now Facebook is in deeper with the revelation that Beacon affiliate sites are giving the company customer data even if they are logged out or aren’t Facebook members. Co-founder and CEO Mark Zuckerberg has been accused of being less the forthcoming, or clear, in representing Beacon at the beginning and in addressing the subsequent issues.

And some of Facebook’s body language is incomprehensible for a company of young and I suspect idealistic people who don’t find Google’s ‘do no evil’ policy disingenuous. For example, rather than directly addressing the issues, Zuckerberg lets his PR people do the talking. Chamath Palihapitiya, the former AOL executive and high stakes poker player who joined Facebook as vice president of product marketing and operations in July, implied that press and pundits were blowing the privacy controversy out of proportion. “Just to give you where a lot of this feedback is coming from, it’s coming more from the press than specific users. Right now, the right thing to do is to make sure we speak to actual users, not the pundits,” he told Brad Stone of the NYT. What are they smoking?

While this is a troubling and painful period for Facebook, a PR nightmare, it’s hopefully instructive. If not for Facebook, then for all of its competitors who are following the company’s lead in areas, such as activity feeds (Facebook News Feed) and adverstising models that tap into a social graph.

In this glaring light, Facebook is the canary in the coal mine, exploring the new social networking territory, stumbling along the way and creating shortcuts as well as paving the way for others to follow without making the same mistakes.

Xing just announced an activity feed. Google plans to support activity feeds. The Google OpenSocial API builds on the Facebook application concept. LinkedIn and Bebo are expected to roll out major enhancements taking cues from Facebook. MySpace is launching its hypertargeting advertising platform.

If Facebook keeps running into or creating the pockets of bad air, the popular sentiment that has given the brash upstart a giant hall pass and theoretical worthiness of $15 billion will fade away.

Some people make the case that most Facebook users don’t care about the privacy issues, but a company that claims to be user-centric but blatantly makes decisions that are by far in the best interest of advertisers eventually is broadly painted as a untrustworthy. A lack of character rots a company (or country) from the inside out, and there a plenty of competitors ready to ascend the mountain.
Facebook is too smart and full of ultimately well intentioned people to not make the right course corrections. The company needs to get its feet back on the ground and figure out what kind of company it wants to be when it grows up. Based on the last month’s activity, it’s clear that Zuckerberg and team could use some adult supervision or at least should be more transparent and open to listening to allies offering advice.

Source: blogs.zdnet.com

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