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Is Facebook the Next Tastemaker?

“Facebook me”. What a simple phrase that we now accept as part of our dialogue. As the web’s biggest social network, Facebook will now not only help you buy what you need, but also introduce what you might want. Using its large network of 800 million users, Facebook is teaming up with companies to use your friends’ interests to influence your choices.

On September 22, 2011, Facebook announced a new set of features that will update you on what your friends are watching, listening to, reading, and buying in hopes of influencing what you consume. This approach goes along with what we’ve studied in class: the principle of homophily – the tendency of individuals to associate and bond with others who are similar. Mark Zuckerberg called what Facebook is doing an effort to “rethink some industries” by having individuals discover new interests through their friends, which they believe is more effective than through strangers or advertisements.

To make this possible, Facebook is teaming up with vendors that distribute music, movies, information and games to challenge it’s biggest competitor, Google, in being the channel through which news and entertainment is found and consumed. For these companies, a partnership with Facebook can draw lots of attention and subscribers, although it is still unclear how much revenue this will generate. The potential payoff for Facebook is huge – access to this data will allow Facebook to fine-tune advertising and be even more valuable on the web.

At the same time, Facebook’s new collaboration with these vendors may also be detrimental to sales. The exchange of information between friends may actually restrict exploring alternatives outside of the network. In addition, not everyone shares the same tastes as their friends.

Let’s take a look at the payoff matrix:

As shown, it is in both parties’ best interests to form a partnership. If both Facebook and the Vendor agree for a partnership, they will benefit from access to the data for more targeted advertising (Facebook) and exposure to such a large network on a daily basis (Vendor).

Facebook users, be on the lookout for these new features and see for yourself if these partnerships are game-changing! For more information, click here.


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September 2011