Social Networks’ Tough Balancing Act

REDWOOD CITY, Calif. — For the truly digital, status is a literal thing: Every status update on Facebook, comment, every tweet contributes to their online personae. And the more updates, the more status they gain.

All this user-generated content could provide a blank canvas on which to spread ads, while the information to be inferred from people’s posts and updates could become a mother lode of ad-targeting data. Moreover, all this data comes in close to real time, making it potentially easier for advertisers to strike while the interest is hot.

But the companies sitting on all this consumer data balance on the knife edge between making tons more money and alienating their users. Representatives from Facebook, Twitter and FriendFeed pondered the problem in a panel discussion during CrunchUp, a conference sponsored by TechCrunch today.

Twitter has often been dinged for its money-free business model, although various options have been flitting around.

Facebook, meanwhile, added “the stream” in March, providing Twitter-like instant status updates.

Chris Cox, director of product for Facebook, said the company instituted the stream in response to user behavior. “People wanted to see what was going on now,” he said. “The latest redesign addresses the use-case of having real-time interaction with all your friends.”

Facebook did get complaints from users who had trouble understanding the new interface — and trouble grappling with the nonstop updates. It’s now testing multiple versions of the profile page, trying to find the balance between the real-time view of friends and a summarized view.

Cox said Facebook was willing to participate in developing a standard for the “activity stream.” He said, “Our view of Facebook is that it’s a view and graph of connections. The Web site is just one view of it. Eventually, content will come from the phone, Amazon, Netflix, GPS in your car — wherever something interesting is happening.”

A barrier to third-party applications using that view is some social networks’ belief that their users want to keep some communications private. Bret Taylor, co-founder of FriendFeed, told the audience that FriendFeed is not about only sharing, but also facilitating conversations. “By posting it, you’ve made it a shared experience, and you get to share with your friends and discuss it.”

Taylor’s response to a question by panel moderator Eric Schonfeld of TechCrunch showed the pleasant isolation from market realities that venture-funded startups enjoy. When Schonfeld asked him about the value of the content produced by FriendFeed users for real-time search, Taylor replied, “The private information is valuable to people in the private network.”

You could almost hear the entrepreneurs in the audience grinding their teeth in frustration.

Twitter’s Dorsey pointed out that his company has been open with its stream technology and plans to take it further. He told the audience, “The more access we have to public information in real time, the more accessible we can make the technology — and the more things we can do.”

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