Investors Run from Facebook’s Best Marketing Decision in Years

A blog about business and economics.
Oct. 31 2013 12:45 PM

Investors Run from Facebook’s Best Marketing Decision in Years

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Mark Zuckerberg does his hovering-uncertainly-over-an-ad-before-clicking-on-it face.

Photo by JIM WATSON/AFP/Getty Images

Matthew Yglesias is on vacation.

Facebook beat expectations yesterday, and at first its shares spiked. As of writing this, it’s lost all of that 15.5% surge, thanks to two sobering jolts that woke up investors. First, there’s been a modest decrease in young teen usage, but scarier to advertisers was Facebook’s decision not to increase the number of ads it shows, which, according to ValueWalk, stands somewhere between one in 19 and one in 20 newsfeed stories.

The potentially good news for Facebook’s advertisers is in today’s Wall Street Journal, which reports that Facebook is testing software that would track your cursor’s movement. This new technology would represent a vast increase in data compared to simply knowing when and where your cursor clicks.

But would the data be all that valuable? On a laptop, I use a cursor only minimally, and only when I already know what I want to click—data to which Facebook already enjoys free access. However, if there are actually people out there who engage in a kind of theatrical hesitation as they decide whether or not to commit to clicking—leaving their cursors hovering over an ad for a pregnant pause—then this data would be hugely valuable.

For advertisers, it’s all about split testing: Which ad does better and why? The binary results of “clicked” or “not clicked” reveal immensely less than “never hovered,” “approached but backed away,” “lingered,” “thought about it and then clicked,” and “clicked right away.” The head of the analytics group also said it could be useful for product development.

One takeaway is that saturation of the advertising billboard is not the end for companies like Facebook. Not only can it still collect and sell users’ information, it can invent new ways to do it too. What happens when a company runs out of spaces to put ads on a free service? The company takes more from the customer, of course.

This tracking of unintentional and passive data is bound to become an important facet of the advertising and tracking industry. Google was just granted a “pay-per-gaze” patent, which would track eye movement. Eyeball-tracking in supermarkets and tracking of your steps in a retail outlet will soon become the new normal. For more creepiness, the continued development of brain-computer interfaces will expose even more of our passive data to tracking—everything from heartbeats to emotional reactions.

New tracking technologies are also, of course, a reflection on our current sense of privacy. People have been frustrated by cookies for a long time. Now the focus is on advertising networks and data brokers, which form a meta-backbone to all of the things people do online. The amount that advertisers are able to track keeps increasing, which makes every ad space more valuable. This means Facebook is innovatively, if creepily, figuring out new ways to increase its ad revenue without alienating its users through oversaturation of ads. 

Sean Vitka holds a J.D. from Boston College Law School. He was a legal fellow at the Open Technology Institute and a Google Policy Fellow at Georgetown Law.

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