Facebook, User Trust and Effective Data Management

Aug 02, 2012 by Phil Simon in Data Management

In my latest book, I write extensively about Amazon, Apple, Facebook, and Google (a.k.a., the Gang of Four). It turns out that these companies share many common characteristics, not the least of which is their use of the platform as a business model.

Well, that’s not all they have in common. Part and parcel to building a platform is effective data management and, to be sure, each company excels at tracking information on its users and customers. But the similarities begin to dissolve there, according to a recent BusinessWeek piece. In fact, there are major discrepancies among each of the Gang of Four with respect to user trust:

One-third of Internet users said they’re comfortable with Facebook’s handling of personal information to target ads for them, according to a Harris Interactive Inc. (HPOL) survey released today. Twice as many, or 66 percent, are comfortable with online retailer Amazon using data on past purchases to recommend products, and 41 percent of respondents trust Google to show ads based on past Web searches, according to the data.

Let’s delve a bit deeper into the source of these differences.

Explaining the Discrepancies

Now, it shouldn’t be any surprise that Facebook ranks so low. With its stock down considerably from its pre-IPO price, Mark Zuckerberg no longer only needs to worry about “connecting the world.” His company needs to monetize its site and, by extension, at least a portion of its 900-million user base. To boot, the world is going mobile and Facebook has never cracked the nut on making money off of mobile ads.

Those are the challenges. Fortunately (at least for Facebook), the company has quite the weapon in its arsenal: a massive trove of user-provided data on everything from demographics to products to political causes. Facebook has the incentive (imperative?) to turn that information into money via ads, or perhaps some other icky means. Hence, the widespread user distrust.

On the other hand, Amazon already makes profits (although its margins are razor thin). CEO Jeff Bezos is extremely comfortable operating at very low margins and has been for quite some time. Could Amazon make more money by selling customer data to third parties? I have no doubt, but two things prevent the company from doing so:

• Bezos doesn’t really care about profitability (yes, this is quite atypical for a CEO)
• Bezos is maniacal about the customer experience (note that customers are not the same as users)

Because of these factors, Amazon has little if no incentive to whore out customer data. Is it any surprise, then, that its customers trust it more?

Simon Says

Effective data management is one thing, but make sure that your business model, culture, and profit margins engender user trust. If your entire business relies upon users voluntarily providing data, what happens if that spigot gets turned off?

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