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Users in the Crosshairs
When social-media insiders are asked how advertising could capture users’ attention, they always answer, “Targeting.”

Targeting is at the core of traditional advertising; apparel manufacturers advertise in Vogue, for example, to reach readers interested in fashion. In the case of social-networking sites, targeting means sifting through the data in your profile to get an idea of what you’re interested in. Social networks know more about you, your preferences, and your behavior than most businesses, and profiles are generally considered, in the words of former Fox Interactive Media executive Ross Levinsohn, “digital gold.” Mining that gold is the best way for a social-networking site to make money–but, given users’ attitudes toward privacy, the trickiest.

Startups that help advertisers and marketers better target the users of social-networking sites are fashionable investments for venture capitalists in North America and Europe. Such startups hope to sell advertisers detailed information about individual social networkers. They include the brand-new 33Across (which we profile in our list of 10 notable startups, which begins on page 50) and the more established Finnish company Xtract, which counts Vodafone, T-Mobile, and Blyk among its customers and has begun selling its software to advertising agencies and online marketers and publishers.

For social-networking sites, targeting will necessarily entail getting “between” users, as Seth Goldstein put it. You come to a social network because you are interested in your friends; ergo, the thinking goes, in order to get your attention, advertisers need to let you know what your friends are buying or thinking about buying, or they must somehow get you to send each other ads. It’s either a beautiful idea or a creepy one, depending on whether you’re an ad executive or the user of a social network.

In November 2007, Facebook tried to get between its users with its Beacon program. Announcing the program in New York, Facebook founder Mark Zuckerberg declared, “The next hundred years will be different for advertising, and it starts today.”

Beacon was an advertiser’s dream–and, like many things that are good for advertisers, very annoying to ordinary folks. ­Working with commercial websites like Blockbuster and eBay, Beacon tracked Facebook users’ purchases and displayed them to their friends.

The problem was that users were enrolled in the program automatically. If a user went to, say, the Blockbuster site and rented a movie, that information was automatically sent to everyone in her Facebook network. (That’s what happened to ­Cathryn Elaine ­Harris of Dallas; she is suing Blockbuster for violating the Video Privacy Protection Act.) Online petitions and negative press ensued, and the program was clumsily scaled back. On the company blog, Zuckerberg wrote, “We’ve made a lot of mistakes building this feature, but we’ve made even more with how we’ve handled them. We simply did a bad job with this release, and I apologize for it.”

Still, “Beacon is alive and well,” says Chamath Palihapitiya, Facebook’s vice president of product marketing. “What happened was unfortunate,” he says. “We took a step back and tried to figure out how to improve it.” Now it’s an opt-in system, and users can choose what information to share–or whether to participate at all. About 30 companies are still with the service, he says.

Most of the industry members at EconSM liked Beacon, wished it had worked better, and felt it would work eventually; Goldstein called it a “sign of things to come.” But maintaining the user’s trust in how data is used is paramount, says Roger McNamee, a venture capitalist who made early bets on companies like Electronic Arts and Intuit. “Facebook is so much more personal than Google,” says McNamee, who invested in Facebook and is a confidant of Zuckerberg. “It really matters to people how their information is used.”

Not every attempt at targeting has aroused as much protest as Beacon. In 2007, MySpace launched its HyperTargeting system, which scans users’ profiles for information about their interests and demographics. It sorts the profiles into 10 rough categories–such as sports and entertainment–that are subdivided into more than 1,000 narrower categories, such as baseball or a specific film. (E-mail and personal messages are currently not scanned at either Facebook or MySpace.) Says Adam Bain, president of the Fox Interactive Media Audience Network, “People are essentially hand-raising every single day on MySpace and other social-media sites. What we want to do is take that and put it into easy-to-buy segments.”

Bain says MySpace did extensive research before the launch. “The users said, ‘I understand I have to live with ads, and I don’t mind them,’” he says. “The concept of relevance really resonated with users.” The algorithm is constantly modified by a 150-person team; it is already on its 12th revision. Although the program has not yet led to riches, “it has led to an unprecedented amount of advertisers coming to MySpace,” Bain says. “We’re getting blue-chip brand names like Adidas, Schwab, and Electronic Arts, Frito-Lay, Kraft, General Mills, and McDonald’s.”

Are those advertisers as excited as Bain is? “We’ve bought a little bit,” says Marc Ruxin, director of digital strategy and innovation at the advertising firm McCann. “It’s been okay.” Well, that’s better than nothing. Still, it doesn’t exactly settle the question of whether targeting, even if it avoids the worst of users’ privacy concerns, will ever be able to punch through the attention barrier.

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Credit: Jamie Kripke

Tagged: Business, Facebook, social networking, startups, advertising, MySpace, attention

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