Andrew Walmsley on Digital: Facebook's imperfect pitch

Engagement Ads are essentially a form of pyramid selling, and risk alienating site's users as a result.

A few years ago, I met up with a group of friends in the living room of a house in Wandsworth, London. We had all known each other for years, and had convened to hear a sales pitch from Jim for his new business.

Jim had been part of this group of friends since university; everyone knew he was struggling a bit with his income, or lack of it, and he seemed genuinely excited at the prospects this latest venture offered.

When he got out his sales materials, we naturally took the mick - but it was good-natured, and we listened to what he had to say. By the time we were 10 minutes in, it had become clear that what Jim had his hands on was a classic pyramid selling scheme.

He had never come across one before, and the genius of it swept him up - statistics not being his strong point, he hadn't figured out the unsustainability of the plan. His mates gave him a verbal kicking, first for being a mug, then for trying to sell them a pup. Then alcohol became involved, and the story got a bit fuzzier.

Jim still cringes whenever the subject is raised - and all his friends know it's a dead cert when they need to play a joker - but a taboo was broken: that of pitching your friends.

This is what makes Facebook's Social Ads such an uncomfortable concept for many people.

Social Ads usually appear in a user's newsfeed and allow advertisers to target them based on other users' actions in the network. If one of your friends bought something via a Facebook app, the system would tell all your friends.

Its first iteration, Beacon, was not opt-in, and caused a storm among users, who were surprised to see themselves endorsing all sorts of products. Last month a class-action suit was launched by 19 Facebook users who felt Beacon abused their privacy, by sharing details of their purchasing habits without their authorisation.

While privacy is undoubtedly important, it is really just the legal weapon that these users are wielding against the company. I can't help thinking that what's more hurtful is the abuse of friendship it creates.

I'm not sure why anyone would opt in to this scheme. Perhaps people are more exhibitionist than I imagine, or think their purchasing habits are more interesting to their friends than I do. Nonetheless, the Engagement Ads launched by the site last month are built on this assumption.

The film Tropic Thunder has already trialled the system, running a trailer that allowed users to leave comments about it, and other advertisers are signed up to the programme.

While these are softer, engagement- based concepts, as the name implies, they are nevertheless making Facebook users tools of the marketing game.

This is not an impossible circle to square, but it demands great sensitivity and humour. Unless users are aware and happy to participate in a venture of this sort, it will build resentment if they start to feel used, while their friends, on the receiving end of all this puff, will start to see them as what casinos call a 'shill' - a player paid by the house to pose as a punter, to get games going and move them up.

It is the friends' views that ultimately will count, because, as Jim discovered, the tolerance his mates were prepared to give to his proposal came from their desire to help him - and that ran out pretty quickly when they discovered his recommendation was a turkey.

There is a gulf of difference between buying a ticket to a movie and recommending it to your friends. When you cross that line, it's your reputation as much as that of the product that's at stake. Are your friendships worth it?

Andrew Walmsley is co-founder of i-level

30 SECONDS ON... WHY PYRAMID SCHEMES ARE UNSUSTAINABLE

- Pyramid selling is illegal in the UK, but still takes place, often under a 'business club' or 'multi-level marketing' tag.

- In a typical scheme, potential members are asked to pay to join. The only way to advance is to recruit others, who also pay to join. If enough join, the pyramid will grow, possibly enabling some to profit. But each new member has less chance of recruiting others and a greater chance of losing their money.

- If eight people invest £3000 each in a scheme and then progress up the pyramid, each will expect to receive £24,000 when they reach the top. For each of the eight to receive that amount, it will be necessary for 64 people to have each invested £3000.

- For each of the 64 investors to collect £24,000, 512 people would have to have invested. Subsequent investors would need 4096 participants, then 32,768, then 262,144, and so on.

- The supply of investors will dry up, leaving most of the participants out of pocket.

www.consumerdirect.gov.uk/watch_out/scams/pyramids-chains.

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