First off — It’s fascinating how the Silicon Valley love-fest can backfire like all hell. Just a few months ago Facebook was the best platform. Everyone proclaimed they were going to win, they had the winning API, they were so much cooler and better than Myspace. Kind of amazing how fast people will turn on you.

Second I’d like to point you to a Freakonomics post, “Why Is Family Guy Okay When Imus Wasn’t?”, which has probably the best explanation as to why this seems to have such a dramatic impact. Stephen asks why Imus got fired from his job for a bad racist comment when a show like Family guy airs similar or worse comments on a daily basis:

5. There is no real difference between the two, but the kind of big public storm that resulted in Imus being fired is essentially a random event, unpredictable and nearly inexplicable, and it typically arises when political, social, and media pressures all align just right. It can’t be concocted, or controlled. It happened to Imus because it happened; and it hasn’t happened to Family Guy just because it hasn’t.

Now to some extent this wasn’t a purely random event. Facebook has been the poster-child of the valley, so it was only a matter of time until they made a bad move. The fact that everyone happened to pick Beacons, more random.

What bugs me is that the media picked this particular invasion to draw attention to. You think Beacons are invasive? How about the fact that your ISP might be installing a sniffer box that not only tracks what you buy — it tracks everything. It tracks what movies you watch, what sites you go to, where you purchase things, how often you purchase things. I mean, that freaks me out a hell of a lot more than a little Facebook Beacon — because one you can control, the other you cannot. Don’t believe me? Check out: NebuAd or AdZilla. Or how about Errorsafe? The little program that installs on your machine and probably sniffs out and steals your credit card numbers when you buy something. It’s being distributed via advertising networks left & right, yet I don’t see much media attention there either.

Maybe it was part random, part fate — but Facebook has definitely gotten the full fury of the blogosphere thrown at it these past few weeks. So bloggers & journalists. We get the point — Facebook invades your privacy. It has from day one, showing your friends pictures, status updates, all sorts of things. Don’t like it? Stop using Facebook. In the meantime, please pay some attention to some more invasive and much scarier things, like Errorsafe or ISPs that sniff and sell your data without the opportunity to opt-out.

I will disagree with Greg though that we haven’t had privacy online for a while — even though our actions are being tracked they are all on an anonymous basis. Facebook is the first that wants to tie this with a name. There’s a big difference between being able to say:

“A user with cookie ID #ace8748dff clicked on a Netflix ad at 10:45am on Nov 29th on mikeonads.com after having seen it four times and then signed up for a 30 day trial.”

and

“Mike Nolet bought Netflix today.”

I’m fine with the former, but the latter kind of freaks me out!

I know this is somewhat unrelated to advertising, but Andrew Chen motivated me with a great post on why Myspace is still more popular than facebook. I’ve thougth about this a bit as well and agree that Silicon Valley people simply aren’t Myspace people. I’m not one either, I hate the fact that it’s so ugly and unstructured — but as Andrew points out, we’re not like the rest of the world. I also don’t like NASCAR, Oprah or Self-Help books, but each of those are billion dollar markets.

So I thought I’d throw out a couple other reasons why Silicon Valley should stop hyping Facebook for a few minutes and take another look at myspace:

Myspace has had full unhindered third party functionality for years

Facebook apps are great, but by being so incredibly structured they are also incredibly limiting whereas on Myspace non-limited third party apps have been a possibility for years. I can place any HTML on my myspace profile, which means I can embed any sort of dynamic third party content. Sure there are some security concerns, profiles get hacked and all that fun stuff, but users don’t care. This super simple method of allowing third party developers to provide applications for Myspace users in many ways works much better than the very structured Facebook App.

Myspace has built a solid behavioral ad-targeting platform

While Facebook is getting hammered in the press for their “Beacon” product, Myspace quietly, and with no complaints has rolled out a new behavioral platform based on their SDC acquisition earlier this year. They just recently announced that the “FIM Serve” platform will power the rest of Fox Interactive Media’s properties as well.

Considering it’s been less than a year I think this is a rather impressive feat. Building a massively scalable ad targeting platform isn’t easy. Myspace also managed to do it in a way that didn’t piss off it’s users, and with minimal negative press.

Myspace didn’t waste time building a CPC ad platform

Look, lets all admit it, Google is the best at CPC, contextual & all that fun stuff. Everybody tries, but nobody can even come close. So while Myspace goes off and signs a $900 million deal with Google, Facebook builds it’s own platform. Combine the Myspace search & cpc deal with the behavioral ad platform and there’s a solid revenue generating strategy.

Where’s Facebook? Microsoft reps their ad-inventory (and word on the street they’re losing money on this), they don’t have a search partner and have built their own CPC engine which from what I’ve heard isn’t that good.

Myspace makes money

Lots of it. It’s hard to find accurate numbers out there, but estimates lie in the $500-700m for 2007. I can’t find a reliable source, and it’s hard to tell now that Myspace has been acquired by News corp, but they’re supposedly quite profitable. In the meantime Facebook with all it’s hype is getting $15 billion valuations, and raising money to help their own cash flow.

Building for the sake of building

In the end, the big difference between Myspace and Facebook is that one is a technology company, and the other is large social network. Silicon Valley loves the tech company, but this is a great lesson that a lot of companies in the ad-space should consider as well. It’s generally not the best technology that wins — it’s the one that solves the right problem. Your end users will often not care whether you did that elegantly or not, they will care that it works.

Facebook clearly has the better technology. The Facebook platform is fast, elegant, and chock-full of features. Even so, the ugly Myspace page with an IFRAME on it manages to both attract more users and provide a better feature set. I myself may not like it, but then again I’m one of the few people who appreciates the elegant execution on the technology side, your average person does not.

Traditionally widgets & plugins interfaced with social networks by placing snippets of HTML on profile pages. In the Facebook world no content can show up on a user’s profile without passing through Facebook’s servers first. Even your actual application pages must either be within an IFRAME or pass through Facebook. This process provides Facebook with an extraordinary level of control over what can and cannot be displayed on a user’s page. FB can perform a virus scan on all content and analyze any scripts for vulnerabilities or exploits. By directly serving content Facebook also eliminates cookie access — making it far more difficult to track or distribute data about their users.

Yet, the approach has it’s limitations for application developers. I tried briefly to build a “stalker tracker” application which using cookies would tell the user how many people regularly checkout their profile page. No matter what I tried, I couldn’t get access to the cookie without somehow initiating a click — rendering my application completely useless.

Why should you care? Well — advertising isn’t that much different from a traditional social networking widget — both are delivered via a snippet of HTML. Online ads have also been plagued by security issues this past year and I wouldn’t be surprised if the bigger players (Myspace, Yahoo, MSN, etc.) start to ask for server-side ad-requests soon. Server-side requests are the only way that a seller can technically guarantee the safety of third-party ads. Of course this will open up a world of technical challenges — server-side cookies storage, strict global latency requirements and a need for increased capacity to only name a few.