Q&A: Clara Shih, CEO and cofounder, Hearsay Social

Clara Shih, CEO and cofounder of social marketing firm Hearsay Social and author of The Facebook Era, discusses data and privacy on Facebook and what could come of Amazon integrating with the social media behemoth.

Direct Marketing News (DMN): Facebook recently settled with the Federal Trade Commission (FTC) over privacy violations, and one of the counts against Facebook alleged that consumers’ personal information leaked to advertisers. What are the possible implications of that charge?

Clara Shih: I think it’s a real warning shot to the industry, both the technology/data side as well as to advertisers. It’s a call to action to use this data more responsibly, to provide disclaimers, to educate consumers about exactly how and when their data will be used. Facebook has been under a lot of media scrutiny over the last three years for its privacy policies, and part of that is in terms of continually redefining sharing and privacy norms: how people share and what they feel comfortable sharing. In the Facebook era, it’s undeniable that people share way more than they did [before] social became so popular. It’s become this expectation. That’s difficult at a number of levels, but given the fact that Facebook has been under media scrutiny, executives at Facebook have given a lot of thought to privacy. They’ve made sweeping changes every six months or so that are good for consumers. Perhaps had Google been under that same level of scrutiny for its privacy policies earlier on, there wouldn’t be this dramatic [reaction towards Facebook]. Google kind of went along and things got really bad before anyone knew anything. With Facebook, it’s almost like from day one they’ve been taking heat, so they’ve been evolving and getting better on the privacy and sharing side for much longer than other companies.

DMN: Much has been made about the Timeline profile format and the Open Graph that will allow companies to essentially customize the like button. But it seems like Open Graph is only important for companies like Nike or Spotify that have apps to plug into the Open Graph, so a marketer would need to develop an app in order to capitalize on Open Graph. What is the importance of Open Graph for the average marketer?

Shih: Open Graph is additive to what Facebook offered before. I still see a large number of advertisers benefiting tremendously from Sponsored Stories, Facebook Pages, Facebook Ads. I think there are some brands who want to take it to the next level and realize that engagement is not just hitting a like button, not just sharing a story, but potentially engaging with users and their friends and their friends’ friends in much deeper and more enriching ways. Open Graph is an actual way to do that.

DMN: Twitter is a high-profile marketing tool, but it seems more suited to brand advertisers than direct marketers. How can direct marketers use Twitter?

Direct marketing is about providing compelling calls to action; that doesn’t change in the social medium. What does change is the potential for an amplification effect: the idea that not only will x number of people take action but beyond that x number there will be a number of people who choose to share that offer. So whether the person took the offer themselves or not, they might share it with their friends and it continues to ripple.

DMN: What differentiates Google+ from Facebook, Twitter, etc. in terms of value for marketers?

Shih: Ultimately Google as a whole has a tremendous amount of use and a tremendous amount of data through their search business, Gmail and local. I don’t know anyone who doesn’t use Google for driving directions. So when you marry that data with a social graph, it can be tremendously transformative for both users and advertisers. That hasn’t happened yet. But what Google is doing is laying the foundational building blocks to get to that point.

DMN: In the December issue of Wired magazine, Amazon CEO Jeff Bezos was asked why the company hasn’t really integrated social into Amazon experience, and Bezos answered that the company hasn’t found the proper entry for Amazon. I don’t imagine we’ll see an “Amazon Lite” app on Facebook and that instead Amazon will use social to enhance its personalization technology. What are your thoughts?

Shih: I’ve been surprised too why they haven’t integrated with Facebook. I agree that the likely use case isn’t about building an Amazon storefront inside of Facebook, although that could be an interesting part of all this. I think the real value is taking Facebook Connect and bringing the rich profile and social data onto Amazon itself and being able to enrich what Amazon already knows about its customers, which is their past transactions and what items they’ve looked at, and couple that with all of the demographic and psychographic information from Facebook.

DMN: Wouldn’t there be hesitation from either company in combining data because both companies would rather keep that data for themselves?

Shih: That’s the challenge with Facebook Connect. A lot of brands feel like they want to own their customer and not have to go through an intermediary like Facebook. Ultimately it’s a trade-off. A lot of brands have found success trading off that customer ownership, or at least sharing it with Facebook, but for other businesses it might not make sense. What I found really interesting recently was the partnership between American Express and Facebook. Look at the businesses out there that have the most amount of consumer data; it’s probably Amazon, Facebook, Google and credit card companies. When you combine purchase behavior, not just on Amazon but across potentially any site and offline experience, which is what you would get through a credit card, and combine that with a social media profile, then you can start to do all sorts of things like truly custom-targeted offers and be able to measure the [return on investment]: I gave XYZ audience member this offer and then they in fact went through with the transaction and purchased it on their credit card. Pretty powerful stuff.

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