The online advertising system that was supposed to light Facebook Inc.'s way to riches has created such a storm of negative publicity that Chief Executive Mark Zuckerberg personally apologized Wednesday and told users they could turn it off.
In a mea culpa designed to appease the social networking site’s more than 57 million users and the marketers trying to reach them, Zuckerberg said Facebook should have responded to the public outcry sooner.
“We’ve made a lot of mistakes building this feature, but we’ve made even more with how we’ve handled them,” he wrote on the Palo Alto-based company’s blog.
Zuckerberg’s rollout of Beacon, an online tool that tracks the purchases and activities of its users on dozens of websites, marked his first major stumble since becoming Silicon Valley’s newest golden boy.
The Facebook flap comes amid growing concern about the increasingly sophisticated technology used to track online activities in an effort to more precisely target advertising.
Consumer and privacy watchdogs say Facebook and other social networking sites have not been forthcoming enough about how much user information they harvest and what they do with it. They pledged to continue to press regulators in the United States and abroad to develop guidelines to protect online privacy, particularly of teens.
“Young people are pouring their hearts out, living their lives and interacting with all of their friends on these sites,” said Kathryn Montgomery, a professor of communication at American University. “The more we live our lives online, the more we need to have a set of rules of how businesses operate there.”
Unveiled last month as part of Facebook’s broader advertising strategy, Beacon is considered crucial to the company’s drive to capitalize on its soaring popularity and valuation.
In October, Microsoft Corp. invested $240 million for a small stake in Facebook, valuing the privately held firm at $15 billion. More recently, the richest man in Asia, Hong Kong billionaire Li Ka-shing, invested $60 million, and Facebook is trying to raise an additional $200 million in the next few months.
Beacon sends messages telling Facebook users when their friends buy jewelry on Overstock.com or a movie ticket on Fandango.com. The idea is that referrals from friends drive sales at partner sites and generate more ad revenue for Facebook, the No. 2 social networking site behind News Corp.'s MySpace.
Instead, some users complained that the system was too intrusive and even ruined Christmas surprises when they saw what gifts their friends and family were buying. They said Facebook didn’t clearly explain how to prevent that information from being shared or give them the ability to opt out.
Advocacy group MoveOn.org organized nearly 70,000 users in a protest on Facebook. Although they are only a tiny fraction of Facebook users, the protesters represent a significant percentage of the users who have come into contact with Beacon.
Facebook last week tweaked the system, saying it would no longer alert users’ friends about what they do and buy without their explicit permission. But MoveOn.org continued to pressure Facebook to allow users to adjust their privacy settings to avoid Beacon completely, which Facebook finally did Wednesday.
“Many people who joined our Facebook privacy group remain concerned that their private actions on other sites continue to be tracked, even if not posted publicly,” MoveOn.org spokesman Adam Green said. “As Facebook decides their policy on private data collection, we hope they apply the principle that this last fight stood for: That the basic rights of Internet users must be put ahead of the wish lists of corporate advertisers.”
Facebook spokeswoman Brandee Barker said the company would delete its records on what members buy on partner sites if users did not want that information shared.
Facebook sparked a bigger protest last year after it launched a “news feed” feature that tells users what their friends are doing on the site. The company calmed users by allowing them to disable the feature, which has since become one of its most popular.
Sean Lane, 28, of Waltham, Mass., joined the MoveOn.org protest after a surprise Christmas gift of a ring from Overstock.com for his wife, Shannon, was spoiled. He said Zuckerberg’s contention that Facebook was just trying to help friends more easily share information, not pump up profits, rang hollow. But he praised the company’s move Wednesday and gave it credit for listening to users.
The opposition to Beacon also prompted concern among some marketers. Anticipating the privacy issues, EBay Inc. decided to let online auctioneers alert their friends about items they are selling through Beacon starting next year, but only if users give explicit permission.
“Brands have become skittish in deploying advertising and marketing initiatives with this level of negative press and user privacy concerns,” said Jeremiah Owyang, a senior analyst with Forrester Research.
Overstock.com Inc., which received a handful of customer complaints, pulled out of the Beacon program last month and won’t turn it back on until more Facebook users are happy with how it works.
“We need to wait and see what the Facebook community reaction is,” said Jonathan Johnson, the online retailer’s senior vice president of corporate affairs.
Facebook’s future depends on the goodwill of its users, said Nick O’Neill, who writes the AllFacebook.com blog.
“Facebook has die-hard fans, and it needs to keep those people,” he said. “They are the ones doing the job of marketing and turning Facebook into one of the most hyped products out there right now.”