5 key trends from the $15B Facebook class action lawsuit
Here are five takeaways from the ongoing USD 15 billion class lawuit against Facebook, which is accused of violating its users’ privacy online.
Over the last few weeks, news on Facebook has been dominated by its Initial Public Offer (IPO) on the NASDAQ Exchange; the controversy surrounding its first day of trading; and the company’s subsequent lacklustre performance in the stock market. However, while Facebook made history at its 18 May IPO – by raising USD 16 billion (the third largest in US history) and achieving a market value of approximately USD 104 million – on that same day, a class action lawsuit was being filed against the company for which the claimants are seeking USD 15 billion in damages.
… The class action asserts federal statutory and California State causes of action related to the revelation in September 2011 that Facebook was improperly tracking the internet use of its members even after they logged out of their accounts. The action consolidates 21 related cases filed in more than a dozen states in 2011 and early 2012… (Source: Stewarts Law)
To be clear: websites attempting to track their users’ activities online is not new – this is what most tracking cookies do. Moreover, there has been a growing trend, particularly by social networking sites, such as Twitter, and websites that offer personalised recommendations, such as Google, to try to learn as much about their users’ activity across the web, to better inform their suggestions. However, while Twitter and Google, for example, have introduced facilities to track their users’ online, both announced their new policies and provided on opt-out option. In the case of Twitter, persons can select “Do Not Track”, and with Google, which is now consolidating user data across all of its services and applications, persons can choose to not have their Google web history collected.
As expected, Facebook intends to contest the lawsuit. However, here are five takeaways from such a significant turn of events.
1. Facebook still has an uneasy relationship with its users
2. Even websites as large and powerful as Facebook are still trying to figure out how to become profitable businesses
As at May 2012, Facebook reportedly had over 900 million subscribers, which means that if it were a country, it would be the third largest, behind China and India. However, although Facebook is a large, powerful and highly valued social networking website, its revenue has been comparatively small – USD 3.71 billion in 2011 (Source: Securities Exchange Commission).
Much of Facebook revenue is generated from paid advertising. However, a number of industry publications have been reporting that
…Facebook generally has a lower clickthrough rate (CTR) for advertisements than most major Web sites. According to BusinessWeek.com, banner advertisements on Facebook have generally received one-fifth the number of clicks compared to those on the Web as a whole, although specific comparisons can reveal a much larger disparity… (Source: Wikipedia)
Moreover, earlier this week Reuters published the findings on it recent online poll on Facebook, which revealed that “[f]our out of five Facebook Inc users have never bought a product or service as a result of advertising or comments on the social network site… “. Hence Facebook’s paid advertising model appears to have relatively little influence among huge customer base, which was emphasized in General Motors’ recent decision to stop advertising through the site.
3. The shift toward ultra-personalisation is continuing
Bolstered by the recommendations models that websites such as Google and Amazon have perfected, many businesses aim to offer personalised recommendations to their customers. However, as reported from the e-G8 Forum held in May 2011, there has been a growing trend towards ultra-personalisation of services, i.e. taking personalisation of services to nth degree. This shift could be a major contributing factor to businesses not being satisfied to track their customers activity on their own websites only, but to also collect as much information as possible on their interests and behaviour from a range of other sources.
Although we might scoff at the ultra-personalisation trend, we as users often welcome the recommendations made, and even expect websites, in particular, to offer suggestions consistent with our tastes and those of others who might have made similar selections. Hence into the future, ultra-personalisation may become a competitive and distinguishing feature that customers consider when choosing one business over another.
4. Online users are still grappling with privacy issues
5. With growing data, specialist skills will be in demand
Finally, data will continue to be big business. By 2106, it is anticipated that 22 ZettaBytes of data (1 ZettaBytes = 1 trillion GigaBytes) will exist globally, from 5.3 ZettaBytes in 2011 (Source: Fortinet). This exponential growth in data means that in the coming years, there will be even greater need for systems and personnel who can manage and process the wealth of information that is being generated and stored. Hence persons versed in subjects such as, statistics, modelling, analytics and operational research, will become increasingly in demand into the foreseeable future.