Misiek Piskorski is an assistant professor at Harvard Business School focusing on strategies in emerging social industries.

This week, Facebook suffered its second product roll-out gaffe of the year, when user outcry over its new Beacon advertising feature reached such a level that CEO Mark Zuckerberg was forced to issue a public apology for the way the company handled the launch. Last year, the company suffered a similar humiliation when its NewsFeed product earned the ire of users.

Facebook apparently hasn’t yet learned that online social networks are successful only when they provide features that simultaneously pass two tests:

• First, features cannot disclose any information that people would never disclose offline. If a feature fails to pass this test, users will leave the site or engage in vehement protest.

• Second, features need to help people broadcast information that friends or other recipients will find helpful. If a feature passes this test, users are guaranteed to take it up in droves. Otherwise, people will opt out or ignore the feature.

Facebook has failed the first test twice already. It did so for the first time when it released the News Feed feature, which broadcast users’ activities on Facebook to people in their network, without giving users ability to withhold information from the feed. The company did not learn from its experience and suffered the same fate when it introduced the Beacon. Many surprises were ruined when the Beacon broadcast purchases of engagement rings. More seriously, feeds of a friend buying a book on Living with AIDS violated fundamental privacy laws. Facebook realized the gravity of the problem and has moved quickly to make it easier for people to opt out of Beacon.

Now that Facebook has passed the first test (albeit belatedly), the question is: will the Beacon feature take off much in the way News Feed did. I fundamentally do not believe that a sizeable proportion of Facebook users will take up this feature. This has to do with the second test (helping people broadcast information that recipients will find helpful) – News Feed clearly passes it, but Beacon does not. To understand why, let’s step back to think about the underpinnings of the test.

Broadcasting information about oneself is always a little bit risky. Telling your friends about how successful you are in attracting romantic suitors is likely to earn you a label of a braggart rather quickly. So, most of us would rather err on the side of saying too little rather than saying too much. This is true both offline and online. Indeed, in some of my research I find that no more than 5% of all activities on online social networks are related to producing information about oneself, while 80% are related to viewing profiles of others.

But people are less likely to shy away talking about themselves if they believe that the information has some use for their friends. So they will be more likely to tell their friends about their romantic successes in the context of describing a party their friends missed, but wanted to attend. This is why News Feed took off and so few people have opted out – it allows people to display information valuable to their friends.

Facebook reasoned that if people were willing to advertise their interactions with friends, they would be equally willing to advertise their interactions with products. But this is not going to work. The reason? When I buy something, most of the time this information is not immediately useful to my friends. If I buy a car, most of my friends are not likely to be in the market for a car. And even if they are, do they really want to buy the same car as me? So since most of the time the information is not helpful to my friends, I’d rather withhold it rather than be seen as someone who engages in conspicuous consumption.

Clearly, friends have a huge influence on what we buy, but notice how it happens—friends usually ask us for advice on a particular product. LinkedIn, with its “Answers” feature realized this. LinkedIn users can ask their contacts questions if they’re in the market for a car, for example. As seen in the examples mentioned earlier, privacy issues—and concerns about conspicuous consumption—keep us from broadcasting our purchases to our friends. Facebook failed to realize this fundamental element of the second test and will have to work hard to attract members to use the Beacon to fulfill its promise to the advertisers.

Will you be using the Beacon feature in your Facebook profile? Are there other rules Facebook or other social networks should abide by?

MORE ON SOCIAL NETWORKING AND PRIVACY:
A Framework for Customer Relationship Management (CMR Article)
Facebook (Case)
LinkedIn (Case)
Information Privacy and Marketing: What the U.S. Should (and Shouldn't) Learn from Europe (CMR Article)
The Hidden Power of Social Networks: Understanding How Work Really Gets Done in Organizations (Hardcover)