If Facebook is to ever rival Google's dominance in the online advertising market, many believe that the world's largest social network will need to figure out how to take advantage of its treasure trove of user data.
That treasure trove includes significant amounts of personal information that users have provide about themselves, and it grows by the day as users upload and tag photos, share content with their friends and 'Like' brand Facebook Pages.
In theory, Facebook's data should allow the company to target users in ways that even Google can't. But theory and reality are two different things.
Facebook's Graph Search sparked a lot of buzz, as it gave the public its first good look at how the social network's data can be analyzed, but it also revealed significant holes in Facebook's data collection. Put simply, Facebook collects a lot of information from users, but where it counts, it may not have enough.
The catch-22: now that Graph Search is making users aware that sharing has consequences, Facebook might kill the goose that could have laid the golden egg.
Facebook's new best friends
So does that mean game over for Facebook as it continues to try to convince investors that it can be the $100bn service it had convinced them it was when it first went public? Interestingly enough, the answer is no.
Why? Last week, it was revealed that Facebook is working with a trio of companies which have quietly amassed all the data Facebook requires to connect the dots.
Those companies, Acxiom, Epsilon, and Datalogix, aren't household names and they try not to be for good reason. Acxiom, for instance, was profiled by The Telegraph in 2009. As The Telegraph's Rowena Mason detailed, Acxiom, which does more than a billion dollars in revenue each year, has "one of the world's largest consumer information databases: approximately 1,500 facts about half a billion people worldwide."
It collects its data from a staggering array of sources, including public records, surveys and customer loyalty programs, allowing it to create consumer profiles far more comprehensive than most would even imagine Facebook could create. To prove his point, Axciom chief executive told Mason he knew she was right-handed and had a cat -- both correct.
Facebook doesn't need more data
With Acxiom, Epsilon and Datalogix, Facebook doesn't need its users to provide more data. It should be able to take the information it does have, such as email address, and, in many if not most cases, connect its users to their Acxiom, Epsilon and Datalogix records.
As AdAge's Cotton Delo explains, this can enable the type of ad targeting many believe Facebook must deliver to be successful:
The targeting would hypothetically enable Coca-Cola to target to teenagers who've bought soda in the last month, or Pampers to show ads to North Carolina residents who've recently bought baby products, since Facebook's own array of demographic and interest-based targeting options can be added to further refine audience segments.
Delo notes that Acxiom, Epsilon and Datalogix are already active online, and have relationships with other companies, including ad networks. But the Facebook relationship is potentially far more powerful because Facebook can target down to the level of an individual:
The targeting will function through anonymized matching of loyalty-program members and Facebook users through email addresses and phone numbers, according to sources with knowledge of the product. (Holders of loyalty cards from retailers are asked for their email or phone number when they register, and Facebook users sign into the site using one or the other, and a match between two corresponding data points needs to be detected to enable delivery of an ad.)
Too much, too late?
The bad news for Facebook is that its aggressive push to become an ad powerhouse may prove to be too much, too late.
For obvious reasons, the type of targeting that relationships with Acxiom, Epsilon and Datalogix can enable is bound to raise significant privacy concerns. According to AdAge's Delo, such concerns, which have real legal implications, have limited the use of Facebook's Custom Audiences offering, which allows marketers to target (or stalk, depending on your perspective) their customers on the social network. If brands are reluctant to use that, the new offering may be a non-starter.
But privacy concerns aside, there's also the question of whether Facebook is too late. Yes, the social network retains a massive audience, but there are indications -- both quantitative and qualitative -- that more and more consumers are starting to tire of the social network. Coupled with the fact that users are increasingly being exposed to how much data Facebook has access to, one has to wonder if Facebook, and the marketers betting on Facebook, will find that their window of opportunity to use Facebook as a marketing trojan horse has already passed.