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[answered] CASE STUDY - 1 FACEBOOK: MANAGING YOUR PRIVACY FOR THEIR PROFIT Facebook is the largest social networking site in the world. Founded in 2004 by Mark...


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CASE STUDY - 1

 

FACEBOOK: MANAGING YOUR PRIVACY FOR THEIR PROFIT

 

Facebook is the largest social networking site in the world. Founded in 2004 by Mark

 

Zuckerberg, the site had over 500 million worldwide users as of October 2010, and

 

has long since surpassed all of its social networking peers. Facebook allows users to

 

create a profile and join various types of self-contained networks, including collegewide, workplace, and regional networks. The site includes a wide array of tools that

 

allow users to connect and interact with other users, including messaging, groups,

 

photo-sharing, and user-created applications.

 

Although the site is the leader in social networking, it has waged a constant struggle

 

to develop viable methods of generating revenue. Though many investors are still

 

optimistic regarding Facebook?s future profitability, it still needs to adjust its business

 

model to monetize the site traffic and personal information it has accumulated.

 

Like many businesses of its kind, Facebook makes its money through advertising.

 

Facebook represents a unique opportunity for advertisers to reach highly targeted

 

audiences based on their demographic information, hobbies and personal preferences,

 

geographical regions, and other narrowly specified criteria in a comfortable and

 

engaging environment. Businesses both large and small can place advertisements that

 

are fully integrated into primary features of the site or create Facebook pages where

 

users can learn more about and interact with them.

 

However, many individuals on Facebook aren?t interested in sharing their personal

 

information with anyone other than a select group of their friends on the site. This is a

 

difficult issue for Facebook. The company needs to provide a level of privacy that

 

makes their users comfortable, but it?s that very privacy that prevents it from

 

gathering as much information as it would like, and the more information Facebook

 

has, the more money it earns. Facebook?s goal is to persuade its users to be

 

comfortable sharing information willingly by providing an environment that becomes

 

richer and more entertaining as the amount of information shared increases. In trying

 

to achieve this goal, the site has made a number of missteps, but is improving its

 

handling of users? privacy rights.

 

The launch of Facebook?s Beacon advertising service in 2007 was a lightning rod for

 

criticism of Facebook?s handling of its private information. Beacon was intended to

 

inform users about what their friends were purchasing and what sites they were

 

visiting away from Facebook. Users were angry that Beacon continued to

 

communicate private information even after a user opted out of the service. After

 

significant public backlash and the threat of a class-action lawsuit, Facebook shut

 

down Beacon in September 2009.

 

Facebook has also drawn criticism for preserving the personal information of people

 

who attempted to remove their profiles from the site. In early 2009, it adjusted its

 

terms of service to assign it ownership rights over the information contained in

 

deleted profiles. In many countries, this practice is illegal, and the user backlash

 

against the move was swift. In response, Facebook?s chief privacy officer, Chris Kelly, presided over a total

 

overhaul of Facebook?s privacy policy, which took the form of an open collaboration

 

with some of the most vocal critics of the old policies, including the previously

 

mentioned protest group?s founders. In February, Facebook went forward with the

 

new terms after holding a vote open to all Facebook users, 75 percent of whom

 

approved. The site now allows users either to deactivate or to delete their account

 

entirely, and only saves information after deactivation.

 

In late 2009, tensions between Facebook and its users came to a head when the site

 

rolled out new privacy controls for users, but had adjusted those settings to be public

 

by default. Even users that had previously set their privacy to be ?friends-only? for

 

photos and profile information had their content exposed, including the profile of

 

Zuckerberg himself. When asked about the change, Zuckerberg explained that the

 

moves were in response to a shift in social norms towards openness and away from

 

privacy, saying ?we decided that these would be the social norms now and we just

 

went for it.?

 

The fallout from the change and is still ongoing, and more privacy problems keep

 

cropping up. In October 2010, Facebook unveiled new features giving users more

 

control over how they share personal information on the site with other users and

 

third-party applications. These include a groups feature allowing users to distinguish

 

specific circles of ?friends? and choose what information they want to share with each

 

group and whether the groups are public or private.

 

Shortly thereafter, a Wall Street Journal investigation found that some of the most

 

popular Facebook applications (apps) had been transmitting user IDs? identifying

 

information which could provide access to people?s names and, in some cases, their

 

friends? names?to dozens of advertising and Internet tracking companies. Sharing

 

user IDs is in violation of Facebook?s privacy policies.

 

All these privacy flaps have not diminished advertiser interest. Facebook serves ads

 

on each user?s home page and on the sidebars of user profiles. In addition to an image

 

and headline from the advertiser, Facebook ads include the names of any user?s

 

friends who have clicked on a button indicating they like the brand or ad. A Nielsen

 

Co. study found that including information about individuals a person knows in an ad

 

boosted recall of the ad by 68 percent and doubled awareness of a brand?s message.

 

To determine what ads to serve to particular people, Facebook abstracts profile

 

information into keywords, and advertisers match ads to those keywords. No

 

individual data is shared with any advertiser.

 

However, it?s still unclear how much money is there to be made from advertising on

 

Facebook. The site insists that it doesn?t plan to charge its users any kind of fee for

 

site access. Facebook?s 2010 revenue was expected to approach $1 billion, which is a

 

far cry from a $33 billion private market valuation. But the site has already become a

 

critical component of the Web?s social fabric, and Facebook management insists that

 

it?s unworried about profitability in 2010 or the immediate future. Sources: Emily Steel and Geoffrey A. Fowler, ?Facebook in Privacy Breach,? The Wall Street Journal,

 

October 18, 2010; Jessica E. Vascellaro, ?Facebook Makes Gains in Web Ads,? The Wall Street

 

Journal, May 12, 2010 and ?Facebook Grapples with Privacy Issues,? The Wall Street Journal, May

 

19, 2010; Geoffrey A. Fowler, ?Facebook Fights Privacy Concerns,? The Wall Street Journal, August

 

21, 2010 and ?Facebook Tweaks Allow Friends to Sort Who They Really ?Like,?? The Wall Street

 

Journal, October 5, 2010; Emily Steel and Geoffrey A. Fowler, ?Facebook Touts Selling Power of

 

Friendship,? The Wall Street Journal, July 7, 2010; Brad Stone, ?Is Facebook Growing Up Too Fast??

 

The New York Times, March 29, 2009; and CG Lynch, ?Facebook?s Chief Privacy Officer: Balancing

 

Needs of Users with the Business of Social Networks?, CIO.com, April 1 2009. CASE STUDY QUESTIONS

 

1.

 

2.

 

3.

 

4 What concepts in the chapter are illustrated in this case?

 

Describe the weaknesses of Face book's privacy policies and features. What

 

management, organization, and technology factors have contributed to those

 

weaknesses?

 

List and describe some of the options that Face book managers have in

 

balancing privacy and profitability. How can Facebook better safeguard user

 

privacy? What would be the impact on its profitability and business model?

 

Do you anticipate that Facebook will be successful in developing a business

 

model that monetizes their site traffic? Why or why not? MIS IN ACTION

 

Visit Face book's Web site and review the site?s privacy policy. Then answer the

 

following questions:

 

1.

 

2.

 

3. To what user information does Facebook retain the rights?

 

What is Facebook?s stance regarding information shared via third-party

 

applications developed for the Facebook platform?

 

Did you find the privacy policy to be clear and reasonable? What would you

 

change, if anything?

 


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