In a classic case of "Oops, we didn't think of that!" the fine folks at Facebook have had to do some major back-peddling in response to a huge backlash that resulted shortly after releasing their Beacon ad platform. Because of the way Beacon announces purchases made on participating e-com sites in the Facebook news timeline, friends and family were having their surprises spoilt by this innovative social-advertising model. Imagine logging into your Facebook account and seeing an update that your girlfriend/husband/mom/etc. had just bought a new digital camera at Best Buy - the same one you had hinted at wanting for Xmas. Doh!! Not surprisingly, the public outcry has resulted in a plague-like retreat from the Beacon offering by major advertisers.

Facebook CEO and founder Mark Zuckerberg posted a humble blog entry explaining the screw-up to his user base in response. Hopefully he won't lose too many users as a result of this gaff. As has been mentioned many times before, Social Networks are extremely vulnerable to mass-desertion/defection if users deem them to be not cool, or even worse, untrustworthy. Lessons learned, to be sure.

Yesterday Facebook announced a new and ambitious platform called Facebook Ads to leverage the social network to become an ad network in and of itself with tentacles that reach out beyond their own site.

Erick Schonfeld from Techcrunch describes the new program succinctly:

Facebook Ads is comprised of three parts: Ads targeted at Facebook members using their profile data such as age, gender, relationship status, work history, and stated interests (Social Ads); ad widgets that advertisers can put on their own sites that allow Facebook members to become product endorsers, and spread that endorsement to all of their friends on Facebook through their personal feeds (Beacon); and aggregated profile information that is exposed to Facebook advertisers that tells them what kind of people are getting their ads and who is clicking on them (Insight).

Of note, the inventory available to advertisers for this new ad platform is not going to be controlled by Microsoft. They will be left with the basic, un-targeted inventory, while Facebook maintains control of the new Social Ad inventory (which is presumably going to have a much higher eCPM).

Time will tell if this flies, but if Facebook users find that the more they give, in terms of profile information, the more they'll be targeted and pandered to by advertisers, then they'll be less likely to put their personal information online. Having lost their trust in the site, they might just decide to move on to a
less exploitative network, or give up on Social Network sites altogether (hey, it could happen!). Regardless, once the users leave, so will the revenue. Then that $1B offer from Yahoo a year ago will look like it was a pretty fair deal after all. The biggest loser in that scenario will be Microsoft, who have invested hundreds of millions of dollars in a site that could become a ghost-town overnight.

Well it was only a matter of time before the king of Internet advertising set its sights on the two remaining segments of the lucrative online ad market: mobile and interactive. The ad networks (and A-list publishers) should be nervous.

On Monday, Google put out a press release describing their master plan for the Mobile space: Google AdSense for Mobile. Basically an extension of its text-link offering, AdSense for Mobile is launching in 13 countries: US, England, France, Italy, Germany, Spain, Ireland, Russia, Netherlands, Australia, India, China, and Japan. No word yet as to when it will be available in Canada.

In other news, the search giant is getting set to launch a full-fledged interactive display media solution that is sure to generate a lot of dough for their shareholders. Google's new offering is called Google Gadget Ads and it allows advertisers to create some pretty compelling ads. Google recently graduated from offering basic text links (via the AdSense network) to offer basic display media via AdWords Image ads and Video ads.

Online video titan YouTube revealed a new ad unit this week, and it's been causing quite the buzz (or uproar, depending on who you ask). The reason it's getting so much attention is twofold: firstly, it uses a slick Flash technique to overlay a thin ad over top of the video you're trying to watch; secondly, while claiming this to be an innovation, several other companies including Brightcove and VideoEgg are claiming they invented the technique ages ago. So we may yet see this one going to court for patent infringement, though VideoEgg, who has apparently filed for a patent on the technique, has said they are not planning on taking this to court... yet.

A few important points have come out of the online discussions, including the fact that these ads will only be overlayed on "commercial content" and not on User Generated Content (personal videos). The real resistance is obviously going to come from the end users. Will they boycott YouTube or avoid the content that displays these ads? Or will they shrug their shoulders and suck it up and accept it as a fair and equitable way to "pay" for the otherwise free content? Only time will tell.

A popular blogger on Microsoft activities suggests in her latest posting that Microsoft is focusing on becoming more advertising juggernaut than software giant.

This is interesting when you consider that Eric Schmidt said in a recent Wired interview to think of Google “… first as an advertising system.” Pretty obvious to those following their recent acquisitions, but that’s obviously not how they market their brand.

And consumer perception is something both companies should be wary of. Consumers don’t like advertising as a general rule. They’ll tolerate it for free content, but push too far and they’ll just turn it off (a la Tivo and Javascript disablers) or go somewhere else. And this is something we should all be aware of, especially as we try to come up with more and more ways to "monetise" our online properties.

One thing is certain though: these are exciting times to be in the game!