How Google and Facebook might lose their edge by selling out their users

I am not a big fan of doom saying and predicting the demise of two of the most important companies in the IT industry in the last decade. Nevertheless in recent months some very interesting events have happened at Google and Facebook.

These events are worth a closer look to better understand current industry dynamics and the challenge of balancing the needs of your users with those of paying customers.

What is Google’s and Facebook’s business?

Google and Facebook are two companies that offer free services ranging from search, email, social networking and others. Both make their money through advertising which brings us to the core concept of the business model of these companies: If users get everything for free, Google and Facebook need to make money another way by getting to know their users and selling that information through advertising channels to other companies.  

Are these companies in the business of “organizing the world’s information” (Google) or ” to give people the power to share and make the world more open and connected” (Facebook)? Or are they in the business of selling access to users for advertisers?

Now I don’t want to criticize this business model because obviously it is working from an economic perspective and users can have value by very targeted advertisements. Yet evolving such a business model is a very delicate endeavor. There is a fine line between balancing the need to increase user engagement through remarkable user experiences and the need to increase “access to and information about users” for advertisers.

One indicator that this balance has been slightly lost is how the communication of Google and Facebook has changed in recent months. It has changed in a way where both companies are disguising their intentions to collect more information about their users with new features and then arguing their way around it. Let’s look at two examples:

Google Plus: We need your real name

Why does Google want to you to create a profile on their social network with your real name? Because this dramatically increases the value of their platform to advertisers. Once you sign up to Google Plus and agree that Google can use your personal information for advertising, users give permission to be targeted by name. It is probably just a matter of time until you can buy Google Adwords to target specific people in specific circles or network. 

By hiding this behind a social network and combining it with Eric Schmidt’s famous statement of “Privacy is not such a big deal because if you have nothing to hide, you have nothing to be afraid of” shows that Google is pushing hard to move its advertising platform to the next level.

Facebook Like Buttons: We know everything about you

Facebook is also trying to create better profiles about its users with Mark Zuckerberg advocating that people should start sharing more and more of their life. To support this, people started adding Facebook Like buttons added to a homepage, Facebook is able to track your behavior online – even without you clicking on the button. This creates sophisticated knowledge about its users and what they are looking at. Once again, a brilliant business move that disguises behavior tracking through a “Like Button”. By the way, Google is doing the same through its free Google Analytics platform that is installed on the majority of websites to track visitor statistics.

The challenge when users and customers are completely different

In both companies and in the underlying business model, the users are different from the customers. While the initial success of these companies has been driven by a focus on the end user and the user experience, it seems that in order to achieve further economic success, both companies focus primarily now on their paying customers than on their users.

It is a very crucial moment in the growth of both companies and also a very interesting case study for customer experience practitioners. We can observe at the time it is happening whether Google and Facebook are able to balance this trade-off or if they drift off in one direction. Either development will be interesting to observe.