Three weeks ago, Facebook unveiled a three prong strategy to monetize its active base of 50m users. (See http://www.theregister.co.uk/2007/11/09/facebook_analysis/.) It hasn’t taken long for one those prongs to go prang.

Facebook’s privacy-busting referral scheme called Beacon is to be modified. If you buy something elsewhere on the web, this information is piped back into your Facebook profile, so your social network can see what you’ve just bought.

Facebook already offered something similar, but with an opt-in model. This opted everyone in by default. People don’t mind telling friends they’ve gone to see Led Zepp – they don’t necessarily want them to see they’ve just bought a blow-up doll.

Who would have guessed?

It’s damaged Facebook and participating advertisers far more than anyone has realized. Facebook’s notoriously weaselly approach to privacy was well in evident, even as it begun to roll out the “fix”.

“Facebook already has made changes to ensure that no information is shared unless a user receives notifications … ” the company explained. Note, not “permissions”, but “notifications”.

In the reader comments, Darren Coleman asks,

“I can’t really see how Facebook can make any money outside of the traditional model of invasive banner ads and Adwords. As sites go it’s a victim of its own success – you can’t monetise the userbase because they’d sooner just jump ship to the next Web 2.0 darling, and if you’re seen to be doing anything that could be construed as towing the corporate line (e.g. ads, tracking, etc) then suddenly you’re no longer the plucky young upstart website – you’re the corporate mouthpiece bought and paid for by the kind of people that talk earnestly about monetisation, incentivising, growing brands, etc. Urgh.”

“It’s the ultimate self-defeating paradigm.”

Good point – is that it, then? Well, not quite, because there are three ways of making money here, and Facebook is trying them all.

Mark “I’m the CEO … bitch” Zuckenberg called the referral program the “holy grail” of advertising when he announced it, and it remains a pipe dream.

The other two programs are safer bets: giving advertisers even more slightly accurate demographic information is sure to be welcomed: advertisers currently get nothing at all.

And getting a cut of transactions through Facebook remains an obvious strategy. As I pointed out at the time, however, this may be smaller than many people suppose. A store that shares the transaction revenue with Facebook is only going to be prepared to do so as long as it considers Facebook a part of that transaction. Is Amazon going to be prepared to pay every referrer for a transaction? You can bet not.

Facebook’s Beacon experience simply demonstrates that it’s been too clever by half: thinking it can do “permission marketing” without your permission.

And the company’s impatience and greed also explain why it faces a long drawn out battle with regulators in Europe. Like a Roach Motel, you can join Facebook – but you’ll never leave.

On Wednesday, Facebook boss Mark Zuckerberg boasted that the “next 100 years” of advertising began here.

On the face of it, it looked like Web 2.0 had found its “Long Boom” moment. Facebook has yet to turn a profit, so Zuckerberg hardly seems in a position to advise other people how to make money – let alone place himself in a pantheon of historic business greats. In Web 2.0-land, merely “being there” is a substitute for having “made it”.

But then Zuckerberg is no stranger to bluster. This, notoriously, was the 22 year-old who had “I’m CEO…bitch” on his business card.

Behind the calculated bluster were a collection of ideas perhaps equally designed to distract the attention (no pun intended).

Of the three ideas Zuckerberg outlined, one in particular provoked horror and ridicule. It was to turn Facebook users, accustomed to its clean and spare UI, into human billboards. Advertisers could build presences in Facebook – at the moment, you must be a person – giving users the opportunity to “affiliate” with them.

“Users can become a fan of a business and can share information about that business with their friends and act as a trusted referral,” is how the company described it.

“What do the users get in return?” asked the IT commentator Nick Carr. “An animated Sprite Sips character to interact with.”

But Nick is forgetting that this cuts both ways – it isn’t a static picture at all.
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