The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Wednesday, February 17, 2016

Strategic CSR - Facebook

The article in the url below tackles the issue of online privacy, focusing particular on the relationship we have as consumers with social media:
"FACEBOOK. Instagram. Google. Twitter. All services we rely on — and all services we believe we don't have to pay for. Not with cash, anyway. But ad-financed Internet platforms aren't free, and the price they extract in terms of privacy and control is getting only costlier."
The price the author is referring to is our privacy, which we surrender in terms of the information that we provide in return for the service. The problem, the author argues, is that online ads are not very effective unless they are expertly targeted, which requires a great deal of information about the user:
"Mr. Zuckerberg points out that Facebook makes about 20 cents per user per month in profit. This is a pitiful sum, especially since the average user spends an impressive 20 hours on Facebook every month, according to the company. This paltry profit margin drives the business model: Internet ads are basically worthless unless they are hyper-targeted based on tracking and extensive profiling of users. This is a bad bargain, especially since two-thirds of American adults don't want ads that target them based on that tracking and analysis of personal behavior."
Because, even when targeted, ads do not generate much revenue, only those firms with the largest customer bases can be profitable using this business model. This therefore incentivizes companies to prioritize increasing member numbers and the amount of time each person stays on their website, rather than necessarily developing the best product:
"Ad-based businesses distort our online interactions. People flock to Internet platforms because they help us connect with one another or the world's bounty of information — a crucial, valuable function. Yet ad-based financing means that the companies have an interest in manipulating our attention on behalf of advertisers, instead of letting us connect as we wish. Many users think their feed shows everything that their friends post. It doesn't. Facebook runs its billion-plus users' newsfeed by a proprietary, ever-changing algorithm that decides what we see. If Facebook didn't have to control the feed to keep us on the site longer and to inject ads into our stream, it could instead offer us control over this algorithm."
The solution that the author offers is for those users who do not want to sacrifice control over their privacy to pay an amount equal to that generated by the online ads:
"What to do? It's simple: Internet sites should allow their users to be the customers. I would, as I bet many others would, happily pay more than 20 cents per month for a Facebook or a Google that did not track me, upgraded its encryption and treated me as a customer whose preferences and privacy matter."
The argument against a fee-based service is why should the user pay for something they currently get for free. The author argues this logic only holds if you discount the value of the information the user provides in return. A broader definition of 'value' reframes the debate about the costs associated with our use of social media.
Take care
David Chandler & Bill Werther
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What 'Free' Really Costs
By Zeynep Tufekci
June 4, 2015
The New York Times
Late Edition – Final