As Facebook’s founders and earliest investors moved this week to sell stock in the social media giant and reap billions, they filed a public disclosure that offered insight into the company’s view of the relationship between profits and privacy.
“Simply put: we don’t build services to make money; we make money to build better services,” CEO and founder Mark Zuckerberg wrote.
This may sound like a strange angle when you’re encouraging people to buy stock in your company, but Facebook has a point: Focusing on users first is the company’s only hope to make money for potential investors.
Facebook’s business model is driven by advertisers who leverage users’ personal data to market their products more effectively; it only works as long as users find value in Facebook’s ability to connect with others with ease. Selling user information funds the social experience and so far, Facebook’s users have gone along with it, though not without bumps and bruises along the way.
By going public, Facebook may be inviting pressure to push the envelope on privacy and prioritize the needs of advertisers. But Zuckerberg, who took great pains to retain control of the company even as it moves toward public ownership, might keep the company in line with its mission—whether you believe his claims that Facebook exists to empower people through new tools for social interaction, or simply the cold hard fact that social networks can’t succeed without people.
Judging from the filing, the company is well aware of the dismal fates of other social networking sites—MySpace, Orkut, and perhaps Google+—that have faded away as their users moved on, either in dissatisfaction or out of boredom. Facebook hopes that creating new ways for users to engage with their personal network will keep them around. That, in turn, implies long-term success.
Facebook preaches patience to potential shareholders. That patience may be tested on Facebook’s widely-used mobile app, which currently offers no advertising. Investors may desire the immediate returns and argue for placing ads directly, but the company needs to integrate advertising without overwhelming the user experience, something that’s harder to do on an iPhone than a laptop.
The company suggests that much of its expected $5 billion investment will go toward bringing in talent dedicated to solving problems like this one. Facebook has shown the capacity for this kind of innovation, from the introduction of the wall to the “like” button and, more recently, the Timeline. But beyond merely delighting users, the next generation of Facebook evolution will need to serve the company’s real customers, its advertisers, by pushing people to share and engage more without freaking them out.
That raises the question of how Facebook will handle that ever-growing goldmine of personal data. While user information has already been monetized to varying degrees, the company lags behind rivals like Google in leveraging that data and can be expected to do more to gain revenues from what it knows about you. Still, Facebook’s privacy issues are likely independent of it being held publicly.
“They’re in the business of making money, and they do that by exploiting all the private data that you and I dump into Facebook every day,” Brian Blau, a technology analyst with Gartner, told PC World. “I don’t think there’s any difference if they’re public or private.”
Increased scrutiny into the company’s privacy practices may temper some concerns, but as Google’s recent changes to its privacy policies suggest, internet companies, no matter their trumpeted good intentions, will act to protect their core businesses regardless of user concerns.
Google has cast its evolution as a way to improve the user experience, and any similar adaptions Facebook deploys will be couched in this language as well. And while money may drive these changes, users are becoming increasingly aware of the costs and benefits of relinquishing their personal data to access web apps like Facebook. Zuckerberg said in 2010 that privacy is no longer considered a social norm, and while not everyone agrees with him, our definition of what is personal or public is clearly blurring in the internet age.
In this sense, Facebook has always been a public company, built not just by it’s coterie of investors, but by its stakeholders—the social network’s 845 million users. That’s why there is always an uproar when the company releases new products, and why there will be an uproar when they inevitably replace Timeline.
Though privacy concerns and the need to increase advertising earnings will grow as Facebook becomes a public company, its leaders believe it can walk the line. Doing the right things to keep its users engaged, even at the cost of their own privacy, will reward its investors handsomely.
Photo via (cc) Flickr user Andrew Feinberg
