A few quick thoughts this evening on Facebook and their privacy crisis.  Recapping the last few weeks:

  1. f8 happened and Facebook announced its ambitious vision to more or less take over the Web
  2. People got uneasy as more evidence surfaced that Mark Zuckerberg maybe can't be trusted
  3. Some influential folks decided to quit Facebook
  4. An open-source alternative, Diaspora, has raised almost $200k in donations in just a few weeks
  5. The meme has spread so much that there is now a Quit Facebook Day on May 31
  6. Nonetheless, Facebook is set to announce its 500 millionth user soon

So what the heck is going on here?  My theory is that you're seeing the confluence of a few interesting things all at the same time.

Historical Precedent

First, Facebook has gotten too big for everyone's comfort.  But we've seen this before.  Microsoft was a novelty until they became dominant on the desktop.  Google was fascinating until they owned search.  And now Facebook has social media on lockdown.  All of these great companies were loved until all of a sudden, they were too big to love.  Just wait until Apple gets there, because it *will* happen in the mobile device category once Apple products are offered by all mobile carriers.

Facebook - The "For Profit" Utility

As Facebook has come to own the social media space, it has asserted itself as a for profit business although it is also at the same time a utility as others have pointed out. But when in doubt, the perceived profit maximizing approach wins out.  This involves an IMO inevitable rewriting of the terms of service to allow for more aggressive use of data.  Again, this is not new.  How many times have you received bank statements or innocuous terms of service updates from your favorite web sites?  It happens because, much like software, businesses don't anticipate how they'll use data in advance.  In other cases, businesses can't get away with using data as a small company but they really want to do so as they become an important utility.  Are you listening LBS providers????? 😉

But back to this case, I think it is pretty obvious that Facebook wants to use data more aggressively to grow their business more rapidly.  I don't necessarily blame them for this — most of us would do the same if we were in the same position.

While I'm empathizing with Facebook, let me also add that privacy is complicated when you have a platform as immersive as Facebook.  There are an infinite number of possibilities when you consider the various classes of friends you have, the types of content you share, etc.  It's even worse when you assume that users will need to set privacy themselves.  Most users want something easy and effective.  Facebook privacy settings are not easy and they are not effective — although the tools are more or less available to every user.

What Facebook Could've Done Better

That said, rewrites of Facebook's privacy policies have taken place wayyyy too often.  It's happened so often, it's hard to give them the benefit of the doubt now.  It's a paradox of Web 2.0 — agility is respected and almost expected of any promising company today.  But if you're too cavalier & too big, it's seen as irresponsible… ESPECIALLY when a chat transcript surfaces calling the earliest adopters "dumb f*cks".

Not cool, Mark.  Even if it was said years ago and in a different context, it's too smug.  It's arrogant.  Overall, it gives people the impression that users are not respected, their wishes are not represented, and they're valued more or less for their data.  Use of that data is paramount while security of that data is in some way secondary.  This is why a number of pundits have left Facebook.  It's largely symbolic right now — many of these folks do quite fine on the blogosphere, Twitter, and elsewhere.  But there are some cracks in Facebook's foundation — I don't think anyone can deny that.

User lock-in is significant but Facebook has alienated a lot of people with its handling of the privacy issue.  It's worse because most of the data that drives Facebook is provided by its users, many of whom log in to Facebook every day.  So something must be done because this one likely won't just blow over like all the other encroachments of our privacy that have taken place in the era of the Web.

Where We're Headed

Diaspora got a lot of coverage for their funding of an open source social network.  And maybe somebody buys Diaspora right now while they're cheap & helps market the service to ultimately make it viable competitor in the social media space.  But I personally think this story got a lot more play than it should because of two sexy words "open source".  Very few "for profit" entities act altruistically.  Heck, very few non-profits act altruistically either for that matter.  ;-)

The real winners here in the short-term are Facebook's competitors:  Twitter, myYearbook, maybe Orkut, and to a lesser extent MySpace.  But the window to act effectively is small and execution is key for any of these to make a dent in Facebook.  My guess is that none of these can do lasting damage to Facebook by being the "good guy" alternative on the privacy issue.  At the end of the day, a lot of people care about privacy but not enough to make an inconvenient change to a Facebook competitor.

Although I think Facebook is as vulnerable as they have been, there is also not a viable alternative out there today.  So I think Facebook will be fine.  They'll capitulate a little and announce a few changes.  They'll more or less try to make people forget about the issue altogether.  Competitors will remind people of the privacy question, but they'll sound increasingly desperate as the tactics don't work.  All the while, Facebook will continue to grow and become that much harder to ignore.