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05.25.10

The Real Reason Facebook Changed Its Privacy Rules

The social media giant unveils new privacy settings today, the latest in a series of moves meant to stifle growing criticism. Peter Lauria on how they all point to one goal: avoiding government scrutiny.

Facebook, aware that it needs to show that it cares about its users and responds quickly to their concerns, will today unveil new tools that give them greater control over how their information is shared and used.

This move, though, isn’t really aimed at any of his social network’s nearly 500 million users. Rather, it’s aimed squarely at just 535 individuals; the senators and congressmen who shape policy. Think of the missive as Facebook’s answer to Google’s “Don’t be evil” mission statement. Essentially, Zuckerberg is saying to lawmakers, “Hey, we’re not evil, either.”

Zuckerberg is too smart to cut off a potential revenue stream for Facebook by publicly declaring that it will never charge.

Today’s announcement, presumably a reversal of the Facebook policy making the default setting for user information, follows CEO Mark Zuckerberg’s op-ed on Monday which appeared, curiously, in The Washington Post. Think about it: the majority of Facebook’s users aren’t reading The Washington Post, and if Zuckerberg wanted to reach them he could directly message them through the website (he’s done that just four times since Facebook’s inception, though, suggesting that he doesn’t really want to commiserate with his users). Absent that, The New York Times would’ve been a more viable outlet for reaching a mass audience of Facebook users given its international scope. And if Zuckerberg wanted to reach the financial community, The Wall Street Journal or Financial Times would’ve been a better place for the op-ed.

Choire Sicha: Mark Zuckerberg, Movie Villain“We approached The Washington Post through the standard process and they agreed to publish Mark’s op-ed,” says Andrew Noyes, Facebook’s public policy communications manager. “It should be no surprise that the editors were interested in running his commentary, given the recent interest in Facebook by policymakers, consumer advocacy groups and others. The Washington Post was an ideal platform to let important audiences know that we’ve been listening to their concerns and we’re responding.”

But the point of the piece had nothing to do with privacy or consumer concerns—that was just the basis for it. It had more to do with the fact that, like Google’s dominance in search, as Facebook continues to grow and control social networking lawmakers are increasingly concerned about it getting too powerful. What better venue to signal to policymakers that Facebook isn’t some big, faceless, heartless corporation than in the pages of The Washington Post, a paper whose readership is largely limited to those inside the Beltway and whose chairman, Donald Graham, not coincidentally, happens to be a close adviser to Zuckerberg as well as a Facebook investor and board member?

“We’re headed for a policy decision on privacy and the way information is shared over social networks,” says Drew Lipsher, partner with digital media venture capital firm Greycroft Partners. “Mark’s piece was the beginning of a positioning effort on Facebook’s part on how they want to shape the debate.”

Or, as a source who has negotiated deals with Zuckerberg less diplomatically put it: “As Facebook grows and tries to get into other areas, it can’t have policymakers standing in the way.”

In the op-ed, Zuckerberg shrewdly uses language that downplays Facebook’s power and portrays it as run by a couple of fresh-faced, idealistic kids grappling with a startup company in the throes of an adolescent growth spurt. He writes that Facebook was built just six years ago “around a few simple ideas,” one of them being that “a world that’s more open and connected is a better world.” In evolving from “a simple dorm-room project,” Zuckerberg adds that the company’s “intention was to give [users] lots of granular controls; but that may not have been what many of you wanted. We just missed the mark.”

Of course, Zuckerberg doesn’t believe Facebook missed the mark at all—the social network’s core philosophy of “radical transparency,” as noted in David Kirkpatrick’s new book, The Facebook Effect, is rooted in its 26-year-old CEO’s moral position that users only have one true self and hiding that self, be it via another identity or a privacy control, lacks integrity. Nowhere in his op-ed, for instance, did Zuckerberg apologize for the way it shared users’ information. Quite the opposite, in fact, he seemed irked at having to explain simple ideas like opt-out features that for a digital native like himself are as easy to understand as Lego’s.

“To get people to this point where there’s more openness, that’s a big challenge,” Kirkpatrick quotes Zuckerberg as saying. “But I think we’ll do it. I just think it will take time. The concept that the world will be better if you share more is something that’s pretty foreign to a lot of people and it runs into all these privacy concerns.”

That’s where the leeway part comes into the equation. The new privacy features, which Facebook executives plan to personally demonstrate to members of Capitol Hill, are simply little nuggets designed to restore trust and give users the illusion of control.

“Privacy is a critical issue for a minority of users, and if consumers actually knew what most sites do with data, they’d be mortified,” says Ross Levinsohn, the former president of News Corp.’s Fox Interactive Media and now managing director with media and technology investment firm Fuse Capital. “But in an open world, if you volunteer data, expect it to be compromised.”

While the new features will give users greater control over their information what they won’t do is fundamentally alter Zuckerberg’s worldview that the default setting for information, personal or otherwise, should be public. They are a balm meant to show the government that Facebook is a responsible company that respects the rights of its users and can handle privacy concerns without formal legislation.

But if the new features aren’t enough, and the outcry from users and the government grows louder, well then Zuckerberg does have leverage he can use—namely making people pay for their profiles. Though Zuckerberg said in the op-ed that Facebook will always be “a free service for everyone,” he does have a well-documented history of reversing himself. Or finding a loophole that allows him to change positions without contradiction.

First Facebook said it wouldn’t share user data with advertisers, for instance, and then it introduced Beacon, a service that sent information from external websites to Facebook allowing marketers to better target their ads (the outcry over Beacon was so loud that Facebook shut it down after two years). Then Facebook said it wouldn’t charge application developers like gaming company Zynga or take a percentage of revenue generated from their apps. But instead of allowing app developers to have their own currency, Zuckerberg launched Facebook Credits, its own currency system, and takes a percentage of any revenue generated from it by those very same developers.

“The core functionality of the service will always be free,” says Noyes. “There are things you do on the site, like purchasing in-game currency from developers and sending virtual gifts that cost money, but connecting and sharing with your friends will always be free.”

For now.

Zuckerberg is too smart to cut off a potential revenue stream for Facebook by publicly declaring that it will never charge. It is a business, after all, and businesses need to make money to survive. Zuckerberg said that Facebook will always be free, but he didn’t say what percentage of it would be free. Though he’s never discussed it publicly, sources say they can envision Facebook becoming a tiered service in which some functionality, such as a basic profile page, remains free, but fees are added on as users request more privacy features or apps or fewer advertisements, for example.

“For Facebook to stay free, users have to allow some of their information to be used by the company to make money,” says Lipsher. “Without that, it might not be able to remain free and open to the public.”

That, not privacy, is what this latest Facebook dustup is all about.

Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, Black Men, and Media Magazine, and he's appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.