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Why Facebook IPO debacle may be good news

May 29th, 2012 by Graham Attwell

The Facebook IPO was very interesting for a number of reasons.

Facebook has managed to screw everybody. Firstly they persuaded us to sign over our data to them and then made a fortune out of selling it to others! And then they sold that model to investors a vastly over-hyped price.

At the end of the day Facebook has little market value, other than selling our data to advertisers. But in this they face three big challenges. The first is to actually get us to buy anything from Facebook ads. OK – I am pretty advert resistant. In fact I don’t actually ‘see’ most adverts. But if I do want to buy something, I certainly don’t go to Facebook. Like mots of us, I guess, I use a search engine. lately I have been using DuckDuckGo for the very reason that it doesn’t track my data, but if I use Google then very occasionally I might look at the sponsored results. More often though, I will buy a travel ticket and then find as a result of Google tracking, Guardian newspaper ads are advertising flight tickets to places I have already bought one for!

But back to Facebook. Their second challenge is getting us all to agree to open up our data. And that means relaxing privacy controls. So Facebook goes through a circle of relaxing privacy – leading to protests – and then having to produce new controls as a result.

But possibly more important in the long run is a commercial problem. Much of the protests around the IPO was that the banks behind the share release gave information to big customers which was withheld from smaller investors. And the main point of this was that Facebook are having problems selling adverts for the mobile version of the social networking site.

My guess is that it is not just Facebook. Whilst we can happily ignore advertising on a big screen, it becomes invasive and annoying on a mobile device. Quite simply users don’t like it.

Since Facebook’s financial model is built on selling targeted advertising and more and more people are using mobile devices to access the site, this is bad news for them. But what is bad news for Facebook (and Facebook investors) may be good news for the rest of us. It may force developers to move away from a model of selling our data to advertisers and look for more sustainable and – dare I say it – more people friendly and socially responsible business models.

 

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