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facebook: a perception problem Emily Olander Kevin Morris Tony Tala Billy Babis Erin Grunbeck Crustacean Consulting

+ Company Overview

Social networking site Founded in 2004 HQ in Menlo Park, CA 7,815 workers (June 30, 2014) Serves an audience of 829 million daily active users

81.7% reside outside of US and Canada. Competitors:

+ Financial Overview

Consistent Revenue Growth since 2007 ($7.9B in 2013, $8.6B through first 3

quarter of 2014)

2013 Net Income of $1.5B (all-time high)

revenue from mobile advertising, 90% from total advertising

Stock price $75.46 (12/2), up from $46 this time last year

+ The Problem : Perception

Privacy settings a.User directed ads

i. Users feel as if their information is being abused by Facebook

ii. Users feel invaded, creeped out b.Uncertainty about who has access to their information

and what is being done with that

c.Users losing control over their information a. 91% of Americans feel they have lost control over their

personal information- CNN

d.More of a corporation than a social network

45% of people polled said Facebook is the most

concerning company in regards to collection of

personal data -CNBC

The popularity of Facebook is dependent on how it is perceived by users in 2 ways:

+ The Problem : Perception (Cont.)

cool factor

i. Changing age demographic (more adult users) ii. Emergence of smartphones iii.Changing interests - looking for quick fixes

1. Instagram 2.Twitter

According to iStrategy, Facebook has 4,292,080 fewer high-school aged

users and 6,948,848 college-aged users than it

did in 2011. - Time

Diminishing Intangible Value for Young users

+

SNL Skit

+ Common Complaints

My moms on Facebook Teens see their parents and relatives on Facebook and perceive it as

being lame

I have no privacy Uncertainty about how Facebook is using user information User-specific ads

Data unknowingly taken from Google searches, likes, friends, etc. Theres too much going on

Facebook spread themselves too thin; information overload Status updates, pictures, ads, videos, games, events, links

+ User: to Use or be Used

FB has notoriously complex privacy settings

90% of Americans feel they have lost control over their personal info

80% are concerned about businesses and advertisers accessing their info

Recent survey found Facebooks privacy policies as Completely

Unacceptable. (Software Advice)

Facebook is the technology company that consumers most fear when it

comes to privacy (CNBC)

+ User: to Use or be Used

Unstated business goal: to sell more advertising Newsfeed manipulation experiment on reported

689,0003 users:

To Facebook, were all lab rats. -NYTimes The EPIC has asked the FTC to investigate.

"Until they forcefully say, `We care about customer privacy and this is why we care,' there's going to be a perception problem. - Bradley Shear, Shear Law LLC

+ How Facebook is Addressing this Issue

Privacy Checkup: review of privacy settings and controls When people are surprised by who can see their stuff, people have a bad experience. - Paddy Underwood, FB product manager

Privacy Basics: a how-to guide on the new privacy features and how to use them

Increasing transparency on data collection Settings only affect the way users share with each other; not how FB shares users info

Out of all the TOS I have dealt with in 20 years, Facebooks are the most intrusive. - Maninder Gill, intellectual property and privacy lawyer

+ Decreased Popularity Among Teens

Estimated FB lost over 11 million teen users since 2011 Younger generation with smartphones favor simple, narrow-focused apps Chart on right decrease in use of Facebook buy those 13-24 popularity has increased among all other age groups.

Chart on left % of 12-24 of those with phones who use smart phones potential correlation between more teens using smartphones and less using

Facebook. (Smartphones make apps: narrower, more focused, more convenient, more practical Facebook better designed for computers

+ How Facebook is Addressing this Issue

Investments in External Companies

Purchased Instagram in 2012 for $1B Regained dominance in photo sharing and mobile

markets Purchased WhatsApp in 2014 for $19B

Eliminated top external competitor to Facebook Messenger

Facebook Messenger App Narrower focus than Facebook app,

more practical for smartphones.

+ Possible Solutions (1)

Offer users the option to choose what info is gathered and distributed

by Facebook

Pros: Users feel more comfortable using Facebook

Cons: 90% of Revenue is generated from advertisers

sacrificing data may hurt profits

Customized Privacy Settings

+ Possible Solutions (2)

a)Allow users to specify what they want to see i) i.e sports, news, ads, photos, status updates, specific friends, etc.

b)Option to tell Facebook what theyre interested in to receive relevant ads, event updates, etc.

Gives user sense of control again (reframing) Opposed to Facebook taking their information, users willingly provide it

Makes Facebook appear to be less of a bad guy and makes them seem useful

Improved user engagement/experience Relevant newsfeed, keeps users interested Increases potential as a mobile app for quick updates

Facebook can now compete on the same level as Instagram/Twitter

Updated Newsfeed Filter

+ Possible Solutions (3)

Unbundling Facebook .

Unbundling functions of FB into apps, like Facebook Messenger (Thinning) News Feed App, Facebook Photos App, etc. May attract younger crowd due to narrower focus of Apps and smart

phone penetration.

May be changing too much May be complicated for older users, may be annoying for younger users Doesnt answer privacy/security issues

+ We Suggest.. Newsfeed Filter

Benefits to 4 interested parties 1. Advertisers

a. Facebooks data collection policy will not be changed b. Relevant posts on users news feeds will drive user engagement, improving the ability of

advertisers to target specific users 2. Users

a. Users will only see what they are interested in seeing. b. Relevant and useful ads will increase trust and comfortability with FBs data collection

3. Investors a. Interested mainly in FBs bottom line, satisfied users and advertisers will increase FBs

advertising revenue, already 90% of FBs business, and profit, 4. Facebook.com

a. Regain the teen market with an app/site more in line with what teens are looking for (one-stop shop for relevant updates?)

+ Questions?

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