NQ Logic

Technology | Strategy | Consulting

Facebook and The New Age of Privacy

Five months after the first announcement, Facebook has decided to implement on December 09, 2009 its new privacy setting policies for its now 350 million users worldwide.

In this latest setting, this popular Social Network Service (SNS) rolled out a new Publisher Privacy Control tool to let users share their personal information updates to Individuals (Customizable), Friends, Friends of Friends or Everyone (removing at the same time the confusing “regional networks”), and recommended that people should choose the most open setting (Everyone) to increase information sharing.

In addition, Facebook’s latest privacy policy, indicates that certain basic information such as Name, Profile Picture, Gender, Current City, Networks, Friend List, and Pages would be categorized as “publicly available”. These information will be now visible to profile page’s visitors, and “Facebook-enhanced applications”. The privacy settings can still allow users to avoid being found in searches or prevent being contacted from non-friends.

These changes followed two business agreements Facebook signed with both Google [Dec 07, 2009] and Microsoft’s Bing [Oct 21, 2009] to allow people’s public status updates to be real-time indexed by both search engines, similar to what Twitter had signed a few days prior.

On Dec 17, 2009, the Electronic Privacy Information Center (EPIC) filed an official complaint to the Federal Trade Commission (FTC) to examine Facebook's recent privacy changes, alleging that “these changes violate user expectations, diminish user privacy, and contradict Facebook's own representations”.

The next day Facebook’s spokesman Barry Schnitt declared that the company has gone to lengths to inform users of the company’s new policy, and he had also discussed the changes with regulators, including the FTC, prior to the implementation. “We've had productive discussions with dozens of organizations around the world about the recent changes and we're disappointed that EPIC has chosen to share their concerns with the FTC while refusing to talk to us about them” he concluded in his public statement.

On Jan 04, 2010, Jon Leibowitz, chairman of the FTC, declared that the commission did not greenlight the changes, and that the complaint is now being reviewed by the commission, adding that “online privacy will be among the agency's top priorities going forward”.

Last Friday, Jan 08, 2010, Facebook founder and CEO, Mark Zuckerberg, made one of his very few public appearances on the stage of the Crunchies 2010, at which he received later the Best Overall Startup Or Product Of 2009. Zuckerberg defended the changes made by Facebook and argued that they were in line with the new social norms, pointing that now The Age of Privacy is over in the social network world.

People have really gotten comfortable not only sharing more information and different kinds, but more openly and with more people. That social norm is just something that has evolved over time.

We view it as our role in the system to constantly be innovating and be updating what our system is to reflect what the current social norms are.

A lot of companies would be trapped by the conventions and their legacies of what they've built - doing a privacy change for 350 million users is not the kind of thing that a lot of companies would do. But we viewed that as a really important thing, to always keep a beginner's mind and what would we do if we were starting the company now and we decided that these would be the social norms now and we just went for it.
” — Mark Zuckerberg, Facebook’s Founder & CEO [Jan 08, 2010]

Where’s Facebook Now?

Facebook is the world’s largest social network with over 350 million active users as of December 2009 (one in five internet user is an active user of Facebook). Originally founded by Mark Zuckerberg in February 2004, it was initially designed as an exclusive network for Harvard students, but was rapidly extended to other American Ivy League universities. Students used Facebook as a platform to stay in touch with each other, uploading photos, sharing links and videos, and learning more about the people they met.

The original name came from Zuckerberg’s high school book The Exeter Face Book, which was passed around as a way for students to get to know their classmates for the following year. Over the years Facebook to capture over US$ 716m in various rounds of funding, and turned down many deal proposals, earning Zuckerberg an instant notoriety as the "kid" who turned down a billion dollars [Sep 21, 2006].

On May 24, 2007, Facebook launched Facebook Platform, providing for the first time in the internet history a framework for developers to create applications that could interact with the core platform by using a new language called Facebook Markup Language (FML). The inventive idea gave an instant credibility among the developer community and created a large base for new functionality and half a million applications, fueling in return more people to join the social platform.

Facebook outgrew its original American college base long time ago and has embraced more people around the globe than any of the other social networks all put together, except MySpace. Back in January 2009 the number of active Facebook user was just peaking at 150m; three months later it had reached 200m users worldwide. In July, CEO Mark Zuckerberg said that the SNS has passed 250m users, and he confirmed that December saw the 350m bar topped, making Facebook a platform that grows at 50m users per quarter. This constant inflow of newcomers has moved the original median user age from 26 years (May 2008) to 33 years (Oct, 2009) in the past 15 months.

Mapping 250 Million [HD Video]

In November 2009, the company created a new class of stock, which carries additional voting power to current shareholders and Zuckerberg, similar to what Google did prior to its IPO. The company with its new status of cash flow-positive can wait for the optimum economic conditions to try to top Google’s U$1.9bn offering in 2004, the biggest internet IPO so far.

Today, its impressive statistic sheet with billions of photo uploads, status updates and user connections each month, only equal the notoriety of the platform and its deepening roots in today's global social interactions, be it virtual or real. The SNS is so prevalent in our lives that in the UK, Facebook has been referenced in 20% of all the divorce petitions.

The secretly-guarded company's revenue has been estimated for 2009 to range from U$300m to U$500m. Private share marketplace (SharesPost, SecondMarket) and recent common stock purchase by Digital Sky Technologies have valued the company close to US$11bn. Today Facebook's mission seems more obvious to give all people on the internet the power to share, and make the world more open and connected.

Facebook's Competitive Landscape

Out of the 1.8 billion internet users (Sep 30, 2009) Facebook has managed to capture a staggering 20% (one in five). The SNS platform became in September 2009 the leading US social networking destination, with 105.4m unique visitors, growing 170% year-over-year [Nielsen]. And it has continued to conquer new territories from its competitors (Orkut in India, Hi5 in Latin America, Odnoklassniki in Russia, Maktoob in the Middle East, Cyworld in South Korea and Skyrock in France). If Facebook were a country today it would be number three in terms of population after China (1.4bn) and India (1.2bn), and before the USA (300m).

Map of Leading Social Networks (Dec 2009),
Vincenzo Cosenza (www.vincos.it)

The number of total minutes spent on social networking sites has increased 83% year-over-year in the US, and close to 700% year-over-year on Facebook alone, growing from 1.7bn minutes in April 2008 to 13.9bn in April 2009, making the SNS the number one online destination overall when ranked by total minutes per month [June 02, 2009].

Unique Audience Composition Index
by Age Group for Facebook and Myspace.com (U.S., Home and Work)
Source: Nielsen (April 2009)

Facebook may be ranked fourth in unique visitors, but it has captured the largest amount of time users spend on the site, topping any other website in the world. The SNS checks in at a bit over 6 hours per person, on average, for the month of November 2009 [Nielsen].

Social Network Landscape:
Top 30 Social Networks by User, Global Reach & Functionality

Source: NQ Logic (Jan 2010)

In other words, Facebook is the world's leading SNS with the biggest online growth (adding 50m users per quarter), global dominance (the SNS leader in 110 out of 123 measurable countries), the largest developer community (500,000 active applications), the stickiest platform (average user spends more than 55 minutes per day), the most connection of the SNS planet (45.5 billion friend links), and is set to beat MySpace in number of users by mid-2010.

Redefining the Social Network Privacy Problem

Social Networking Sites account for more than 20% of all US online display Ad Impressions, but has only managed to monetize them at a fraction of other online activities, capturing only 5% of the total online US revenue (2009 SNS Ad revenue in the US was U$1.2bn out of 2009 Total US Online Ad revenue of U$22.4bn). This can not be justified by the novelty of the social network platform, or the difficulty to intrude a social activity, or the less Ad-permissive mindset of users, but rather by a lack of marketers to pour their billion dollars in any of the Social Networking Sites, which don't provide sufficient user information for marketing.

Facebook has so far been a nominative (versus anonymous), private, and social service preventing marketers from invading users’ private social place. By forcing everyone on the platform to reveal their basic marketing demographics and potentially disclose their full profile to third party applications, Facebook has given the best marketing tool ever on the planet to segment the now only nominative, fast-growing, global, soon largest, stickiest and most affluent (over 30-year-old) online community in the internet history.

Combined with its now real-time search status update, Facebook is also giving marketers a tool to not only measure and monitor brands (and therefore measure and monitor Return On Investment dollars), but also understand real-time consumer needs. This new real-time information pull, combined with large computer storage capacity is giving any marketing company a unique tool to identify the “right people” to send the “right message” at the “right need” immediately, at a very minimal cost.

That would be sufficient to have any online marketer anywhere to start redirecting some of their money to the number one SNS platform, but Mark Zuckerberg has decided to give them another gift for Christmas. In forcing the Social Graph [List of Friends] to be publicly available, Facebook gives away the only competitive advantage that the SNS has against any other online real estate, whether it be search engine, email platform, content provider. Facebook gives the method to identify, reach, engage and monitor social influencers of the online world, a powerful and unique tool to anyone involved in the new fields of word-of-mouth marketing, social group-purchasing and other macro marketing campaigns. Who would you rather trust, an anonymous ad on a search results page or Steve, your best friend from college?

Facebook with its new privacy policies has made a strategic defensive move to eclipse Twitter, the fast growing startup, in the real-time conversation race; and another strategic offensive move to give marketers the best online community to spend money on. In the world of "winner takes all" and "grow fast, monetize later", the social platform has decided to aggressively go after against all competitors and satisfy online marketers at the risk of having to manage at least bad PR, certainly regulator sanctions and at most their own users departing the now public platform to a more private one.

Facebook has once again pushed the privacy boundaries, and its previous debacles would definitely be a legacy when time comes to face its responsibility in front of the FTC.
Going along the memory line:
  • In September 2006, personal information were leaked through the “News Feed” program, leading to massive controversy; Facebook quickly removed the functionality from the platform.
  • In November 2007, personal information were also revealed through the “Beacon” program, but this time the program halted after litigation and a U$9.5m for lawsuit settlement.
  • On May 30, 2008, the Canadian Internet Policy and Public Interest Clinic (CIPPIC) filed a complaint with the Privacy Commissioner of Canada concerning the “unnecessary and nonconsensual collection and use of personal information by Facebook”. Subsequently on July 16, 2009, Facebook was found “in contravention” of Canada’s Personal Information Protection and Electronic Documents Act, and forced to change third-party applications' data collecting behavior.

The Real Privacy Issues

Laws on privacy may vary from country to country, but the laws of economics in the information age do not. Information has value and therefore is traded like any other product or service on the planet, following the basic law of supply and demand and under the supervision of local and global regulators.

Selling personal information to a third party without the person’s knowledge or consent is considered in the US to be an unfair trade because it "causes or is likely to cause substantial injury to consumers, which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition" (FTC v. Reverseauction.com). The injury could be defined as "substantial" (monetary harm), but also as "unwarranted health and safety risks" causing a breach of privacy.

Privacy is the desire by each of us for physical space where we can be free of interruption, intrusion, embarrassment, or accountability and the attempt to control the time and manner of disclosures of personal information about ourselves.” — Robert Ellis Smith, editor of Privacy Journal (2000)

Facebook, in changing the privacy rules, not only misled its user community by promising an initially moral contract (private personal information) and reversing it later on (open public content), but also trapped users by not giving any option to control the disclosure of information. EPIC, by engaging the FTC to regulate privacy policies for social network sites, is moving the battle to the legislative courts, counterbalancing the aggressive and repetitive steps Facebook is taking towards personal content disclosure.

You have zero privacy anyway, get over it” — Scott McNealy, former Sun Microsystems CEO (Jan 25, 1999)

Asymmetric information gained by companies or governments thanks to their large capacity and resources, is once again the issue for today's internet consumer. Individual privacy has always been defended across continents and at times at a heavy cost by consumers and citizens alike, and has consistently been a rule of exception, not one of the majority. Furthermore, no one company or government could define what social norms are, but could only influence it a little (or be a victim of it a lot). Technology has helped government first, companies later and now free social networks to gain intrinsic knowledge from their consumers, citizens or users; regulators and social activists so far have helped to counterbalance the dominant position heading towards lack of privacy.

Certainly the privacy advocates and regulators must continue to press on not only the immediate social networks platforms' privacy litigation but also the future privacy challenges in the arenas of privacy at work, with health data, regarding marketing to children, at school, under the name of national security, for a unique national ID, around biometrics, with DNA databases, using RFID, on CTTV network, and any other Location-Based Services that will flourish soon in the mobile smart phone era.

The Age of Privacy has just started.

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