Investors & Advertisers Drive Facebook Deeper Into Privacy Quagmire

We warned you on the day Facebook filed for its initial public offering that, from that point onward, the company would be fixated on making investors and advertisers happy, in that order, even if it meant making users unhappy. So it has come to pass. How else to explain Facebook’s latest effort to bolster advertising revenue, which portends yet another wave of privacy concerns and alienated users?

Matching Email Addresses & Phone Numbers

The new ad program lets advertisers match email addresses and phone numbers from their own files with the information shared by users on Facebook, making it easier to target ads. That follows programs launched in the past few months that let advertisers target ads based on surfing habits on other sites and ads that follow users once they leave Facebook.

How effective are these initiatives? Effective enough for Slate to declare that Facebook is finally a place where politicians can win votes through advertising. Effective enough that shares of Facebook are, at this writing, up in a second straight day of trading.

That may sound like good news, especially if you’re part of the two groups of preferred stakeholders. But Facebook could be trading a short-term game for long-term regulatory problems, and the most recent push seems like a desperate bid to woo institutional investors who can prop up the company’s share price.

Regulators Ratchet Up The Pressure

Facebook’s plan to boost revenue by revealing personal information comes at a time when regulators in both Europe and the U.S. are clamping down in response to privacy concerns. The EU measures have more teeth than those proposed by the U.S. Federal Trade Commission, which primarily targets how information from minors is used.

“These new limits will seriously hamper the company’s focus on a market of half a billion people in the EU and hone its efforts on US consumers,” said Darren Hayes, a professor at Pace University’s Seidenberg School of Computer Science and Information Systems in New York. “This change will require that the company become more intrusive about collecting personal data.”

Hayes expects the FTC to push forward with its new rules and perhaps open new investigations into Facebook as early as next year. Government actions could end in hefty fines and diminished confidence in the company’s ability to grow revenue without flagrantly violating privacy. “If President Obama is re-elected, then the FTC will be relentless with these investigations,” Hayes predicted. 

How Much Is Privacy Worth To Users?

Of course, fines and regulatory pressure probably won’t stop Facebook’s latest efforts to target ads at the risk of privacy. The company has, after all, made an art form of pushing ahead with intrusive initiatives and weathering negative publicity related to its privacy policies. The ultimate regulation comes from users who will, sooner or later, either quit Facebook or accept privacy breaches as the price of using the service.

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