Facebook's Beacon service turns users into living ads, but at what cost?

Facebook's new Beacon advertising platform, which leverages its users' news feeds as a sort of personal endorsement for products and services used, is already coming under heavy criticism.

On November 6, Facebook launched an advertising system called Beacon that consists of a partnership between the popular social network and 44 other sites. The system allows a user's activity outside of Facebook to be recorded and then posted on his or her news feed.

In Beacon, when a user is logged into a Facebook session while simultaneously browsing another participating site, that site records behavioral events pertaining to the user's actions. The user is prompted with an opt-out message, alerting him that his action will be posted to his news feed unless he chooses not to. If the user misses this message in some way or it never pops up -- which is reportedly a common occurrence -- the feed item is posted by default.

Merchandise purchases, rentals of films and games, streaming videos being viewed, or reviews being written and submitted, all trigger events that are linked back to the user's Facebook page as an update that friends can view.

For example, News Feed: 'Tim purchased How to be a Better Writer on Amazon.com' would be broadcast to everyone I'm connected with on Facebook.

One big problem with this system may be that it's turned on by default, and requires multiple opt-outs when using more than one participating site. The political activism site Moveon.org has gotten into the act, declaring Beacon a glaring violation of Facebook users' privacy, and offering an online petition for users to submit grievances to the social networking site.

"Facebook says its users can 'opt out' of having their private purchases reported to the world," writes MoveOn. "But the link is easy to miss. And even if you do 'opt out' for purchases on one site, it doesn't apply to purchases on another site--you have to keep opting out over and over again. The obvious solution is to switch to an 'opt in' policy, like most other applications on Facebook."

Perhaps more importantly, Beacon uses a customer's buying habits as product or service endorsements with no reward given to that person as an endorser.

True, Beacon could be heralded as an advertising breakthrough, blurring the line between advertiser and consumer, but the potential problems with the system could be far too numerous, far too soon. One user complained that Christmas gifts she purchased from Overstock.com were announced on on her Facebook page item by item, effectively negating any level of surprise. Another user's charitable donation on Kiva, intended to be anonymous, was advertised in his news feed without his knowledge.

In the meantime, as Beacon peels back a layer of security, it appears to be forcing users to consider the social ramifications of their purchases.

Participating sites include AllPosters.com, Blockbuster, Bluefly.com, CBS Interactive (CBSSports.com & Dotspotter), ExpoTV, Gamefly, Hotwire, Joost, Kiva, Kongregate, LiveJournal, Live Nation, Mercantila, National Basketball Association, NYTimes.com, Overstock.com, (RED), Redlight, SeamlessWeb, Sony Online Entertainment LLC, Sony Pictures, STA Travel, The Knot, TripAdvisor, Travel Ticker, TypePad, viagogo, Vox, Yelp, WeddingChannel.com and Zappos.com.

For its part, Facebook dismissed the assertion by MoveOn.org that it is misleading users and turning them into advertisements.

"We encourage feedback from our users on new products," the company said in a statement, "but in this case, the MoveOn.org-led group misrepresents how Facebook Beacon works. Beacon gives users an easy way to share relevant information from other sites with their friends on Facebook."

"Information is shared with a small selection of a user's trusted network of friends, not publicly on the Web or with all Facebook users. Users also are given multiple ways to choose not to share information from a participating site, both on that site and on Facebook," the company added.

But as anyone using such sites knows, social networks do not just connect a user's closest friends, but also colleagues and acquaintances. With many users counting hundreds or thousands of "friends" on Facebook, and an individual's Beacon information available to anyone in the same network, the threat to privacy is a big one.

Facebook also did not specifically address concerns about why its service is opt-out, rather than opt-in. Of course, the problem for the site is that if Beacon notices were opt-in, few users may actually turn them on, limiting a great deal of revenue for a company that has struggled to monetize tens of millions of users.