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188 Part One Organizations, Management, and the Networked Enterprise

Facebook: It’s About the Money

CASE STUDY

O ver the course of less than a decade, and employers; Facebook has helped families find

Facebook has morphed from a small,
lost pets after natural disasters, such as when torna-
does hit the Midwest in 2012; Facebook allows active-
niche networking site for mostly Ivy
League college students into a publicly duty soldiers to stay in touch with their families; it
traded company estimated to be worth at least $50 bil- gives smaller companies a chance to further their
lion. Facebook boasts that it is free to join and always e-commerce efforts and larger companies a chance
will be, so where’s the money coming from to service to solidify their brands; and, perhaps most obviously,
1 billion subscribers? Just like its fellow tech titan Facebook allows you to more easily keep in touch
and rival Google, Facebook’s revenue comes almost with your friends. These are the reasons why so
entirely from advertising. Facebook does not have a many people are on Facebook.
diverse array of hot new gadgets, a countrywide net- However, Facebook’s goal is to get its users to
work of brick-and-mortar retail outlets, or a full inven- share as much data as possible, because the more
tory of software for sale; instead, it has your personal Facebook knows about you, the more accurately it
information, and the information of hundreds of mil- can serve relevant advertisements to you. Facebook
lions of others with Facebook accounts. CEO Mark Zuckerberg often says that people want
Advertisers have long understood the value of the world to be more open and connected. It’s
Facebook’s unprecedented trove of personal informa- unclear whether that is truly the case, but it is cer-
tion. They can serve ads using highly specific details, tainly true that Facebook wants the world to be more
like relationship status, location, employment status, open and connected, because it stands to make more
favorite books, movies, or TV shows, and a host of money in that world. Critics of Facebook are con-
other categories. For example, an Atlanta woman cerned that the existence of a repository of personal
who posts that she has become engaged might be data of the size that Facebook has amassed requires
offered an ad for a wedding photographer on her protections and privacy controls that extend far
Facebook page. When advertisements are served to beyond those that Facebook currently offers.
finely targeted subsets of users, the response is much Facebook wanting to make more money is not
more successful than traditional types of advertis- a bad thing, but the company has a checkered past
ing. A growing number of companies both big and of privacy violations and missteps that raise doubts
small have taken notice: in 2011, Facebook made $3.2 about whether it should be responsible for the per-
billion in advertising revenue, which constituted 85 sonal data of hundreds of millions of people. There
percent of its total revenue. The rest comes from the are no laws in the United States that give consumers
sale of virtual goods and services, principally Zynga the right to know what data companies like Facebook
games. have compiled. You can challenge information in
That was good news for Facebook, which launched credit reports, but you can’t even see what data
its IPO (initial public stock offering) in May 2012 and Facebook has gathered about you, let alone try to
is expected to continue to increase its revenue in com- change it. It’s different in Europe: you can request
ing years. But is it good news for you, the Facebook Facebook to turn over a report of all the information
user? More than ever, companies like Facebook and it has about you. More than ever, your every move,
Google, which made approximately $36.5 billion in every click, on social networks is being used by out-
advertising revenue in 2011, are using your online side entities to assess your interests, and behavior,
activity to develop a frighteningly accurate picture of and then pitch you an ad based on this knowledge.
your life. Facebook’s goal is to serve advertisements Law enforcement agencies use social networks to
that are more relevant to you than anywhere else on gather evidence on tax evaders, and other criminals;
the Web, but the personal information they gather employers use social networks to make decisions
about you both with and without your consent can about prospective candidates for jobs; and data
also be used against you in other ways. aggregators are gathering as much information about
Facebook has a diverse array of compelling and you as they can sell to the highest bidder.
useful features. Facebook’s partnership with the In a recent study, Consumer Reports found that
Department of Labor helps to connect job seekers of 150 million Americans on Facebook, at least 4.8

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