+

facebook: a perception problem

Crustacean Consulting

Emily Olander Kevin Morris Tony Tala Billy Babis Erin Grunbeck

+ 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

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

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 Problem : Perception (Cont.)

Diminishing Intangible Value for Young users

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

cool factor
i. Changing age demographic (more adult users)
ii. Emergence of smartphones
iii.Changing interests - looking for quick fixes
1.Instagram
2.Twitter

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

Facebook Messenger App
Narrower focus than Facebook app,
more practical for smartphones.
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

+ Possible Solutions (1)

Customized Privacy Settings
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

+ Possible Solutions (2)

Updated Newsfeed Filter
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

+ 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?