I earn my living from Facebook and am usually one of the platform's biggest advocates. As part of NewsCloud's Knight Foundation grant, I regularly evangelize Facebook applications to media companies and publishers. But Facebook's increasingly hostile policies toward end user privacy keeps making my job more difficult than it should be.
Facebook's Most Valuable Asset is the Trust of its Users
Venture investors often focus on the burn rate of a startup to determine how long a company can operate before it becomes profitable. After last week, investors in Facebook should be asking how long the company can continue its phenomenal growth as it quickly burns through the trust of users that expected the company to protect their privacy. See How Facebook Is Putting It's Users Last (CNet), Facebook Further Reduces Your Control Over Personal Information (EFF) and Facebook’s Instant Personalization Is the Real Privacy Hairball (GigaOm).
It's awkward critiquing Facebook for its recent anti-privacy moves while Microsoft's running sexting ads to promote its new phone to teenagers and dodging taxes in deficit-ridden Washington State and Apple's getting the cops to bust Gizmodo, banning cross-platform application frameworks and beating up on Ellen Degeneres. It's not like the company's leaking thousands of gallons of oil into the Gulf of Mexico.
Instead, it's leaking information its end users expect to be private into the hands of preferred partners, application developers and advertisers while refusing to provide plain language explanations of the impact of its practices to end users.
Facebook's a Repeat Privacy Offender
Recently, Google amazed me when after all of Facebook's privacy gaffe's and backtracking, it made many of the same mistakes and more with Google Buzz. Google tried to design a product that would give them an upper hand against Twitter and Facebook - regardless of the benefits or concerns of such a product to end users.
Now, I've even more amazed that after Google's Buzz debacle, Facebook has drawn a line in the sand against common sense and the basic privacy expectations of its growing user base with its new social graph.
Just as Microsoft employees, incredibly, seemed to think they could surreptitiously market exploitative sexting ads to teens by using a male rather than a female, Facebook thinks that it can sustain its growth while essentially pimping the private lives of its users to the highest bidder. There seems to be no adult supervision at either company.
Apparently, Facebook has calculated that it's exponentially more lucrative to sell off its users' private profiles to advertisers than charging a fair price for providing aspects of its utilitarian service, that of helping people keep up with friends and family. As a comparison, Flickr, Yahoo's social photo sharing service, has posted consistent profits by charging a reasonable fee to advanced users.
Facebook's investors should be shocked by the lack of creativity in its business development team. Only this group could weigh the good will of 400 million users and determine the best way to make money here is by surreptitiously selling their private details to advertisers. Worse yet, Facebook seems to be deliberately failing to communicate these changes clearly to users. Global class action attorneys are drooling as they quantify the monetary damages caused by the leakage of our affiliations and interests.
The drive for Google-sized profit may have originated with Microsoft's $240 million investment (a tiny fraction of that company's cash on hand) for a tiny, almost meaningless share of Facebook. I suspected at the time it was only partly to broaden distribution of Microsoft's Silverlight Media Player, but more importantly to implant a poison pill into the long term capitalization of Facebook. Microsoft's investment valued Facebook at $15 billion dollars. In order to grow Facebook without a down round of financing, Facebook would have to set its revenue aspirations through the roof. There would be no Flickr-like, slow growth approach. In fact, Facebook's anti-privacy, anti-consumer efforts provide cover for Microsoft's own business practices - it's also one of Facebook's initial instant personalization partners.
The Technorati are Pissed
I agree that the scale of the recent $65 million settlement with ConnectU goes beyond typical corporate risk management and calls into question the relative ethics of a younger Mark Zuckerberg. See Top Ten Reasons You Should Quit Facebook. Facebook and Zuckerberg might be wise to imitate Google's Sergey Brin and Larry Page and recruit a more experienced executive (similar to Google CEO Eric Schmidt) to lead the company.
At 29, I was CEO of a comparably miniscule internet startup. I remember being pushed by older directors and attorneys to take common corporate steps towards profitability that often conflicted in varying degrees with my instincts and traditional ethical values . It's easy to stumble. I think Zuckerberg has.
Facebook made another big change last week that did not receive as much attention. After spending the last couple of years pushing businesses and celebrities to create Pages, Facebook's created identical Facebook-owned search pages using content from Wikipedia. In its efforts to become a walled garden its users never have to leave to search the Web, its pissing off thousands of Facebook Page owners by essentially competing with them and confounding users.
Should Media Companies Adopt the Facebook Social Graph?
Currently, I'm advising larger companies to hold off on adding Facebook's social graph features to their Web sites. I believe there is substantial downside to associating your brand with Facebook in the midst of what I expect will be a growing controversy. Until Facebook reverses course, I would not want to have my company viewed as complicit in promoting these kinds of confusing opt-out privacy practices. If I was the CEO at Yelp or Pandora, I'd consider pulling out as an early adopter.
It's important for media companies to recognize that the products and policies they launch on the Internet make statements about their brand and their company's vision for how the Internet should operate in the future. It's important for companies to have a long term vision for the web that advocates for their customers and reflects today's common sense values of our culture.
Facebook's More Vulnerable Than It Realizes
Ironically, Facebook's promotion of Facebook Connect as a universal authentication system has made its platform more vulnerable to alternative solutions. Our open source NewsCloud application technology runs as a Facebook application but also as a website with Facebook Connect. It would be quite easy for our partners to migrate from Facebook's closed application platform and its authentication system to our web solution using an open authentication system like OpenId. Our system is not actually very dependent on the Facebook platform.
A colleague of mine shared concerns that one company such as Facebook could control so many of the basic use cases of the Web. But, really, Facebook is the first successful delivery of an aggregation of common utility features users long ago discovered on the Internet e.g. email, chat, photos, microblogging, relationship management, etc. Similarly, Twitter is also a utility for a form of communication and broadcasting, like RSS before it and in some ways SMS instant messaging and email.
Utilities generally become commodities over time. In 1900, electricity was the killer app, today it's broadband...soon it may be some amalgamation of email, Twitter, Facebook and FourSquare. Twitter already has an open platform competitor in Status.net. It provides features that Twitter will never likely offer. If Google had provided native support for open microblogging services instead of launching Buzz, it might have Twitter on the ropes today.
Coincidentally, on the day Google released its allegedly open, supposed Facebook-platform killer "Open Social", I published a piece called "Breaking Open Facebook with Open Source Software" (Part 1 can now be found here, Part 2 here) which appeared in Sys-Con Journals and Slashdot.
If Facebook continues to squander the trust and good will of its users, it will stoke the fires of innovation that drive developers to create more open initiatives such as I described. Think Firefox to Microsoft's Internet Explorer.
If I was the CEO of Google or Microsoft, I'd be supporting open technology development specifically towards breaking the backs of upstarts like Facebook and Twitter rather than self-serving, proprietary Buzz-like initiatives. In the long run, you can't go wrong providing easy to use, seamless solutions that benefit end users.
Applications such as TweetDeck, HootSuite and FourSquare and the success of the iPhone and Android application platforms hint at a future in which competitors to many of the services Facebook offers could be easily aggregated for end users in mobile applications and web sites. The distributed nature of the Internet and the creativity of web developers is likely to kick Facebook's butt over time. All that it has going for it is the good will and loyalty of its end users. Apple would be wise to reflect on this about now as well.
I respectfully hope that Facebook CEO Zuckerberg and company do the right thing and back down from this precipitous, anti-consumer, anti-privacy ledge.