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Facebook CEO Mark Zuckerberg speaks during a question and answer session at the TechCrunch Disrupt conference in San Francisco, California, in this September 11, 2012, file photo. (BECK DIEFENBACH/REUTERS)
Facebook CEO Mark Zuckerberg speaks during a question and answer session at the TechCrunch Disrupt conference in San Francisco, California, in this September 11, 2012, file photo. (BECK DIEFENBACH/REUTERS)

Privacy flap shows Facebook’s users are also its biggest weakness Add to ...

It took a total non-crisis to show just how much of a crisis Facebook is in.

This week, the world’s most popular social network faced a small revolt from some users who complained Facebook had suddenly made some of their old private messages public. According to myriad complaints on Twitter and other sites, Facebook users believed the new Timeline feature – which lists a user’s public interactions on one page dating back to whenever they joined the network – now included direct messages that were initially sent in private. Facebook has slowly been replacing the traditional Facebook wall with the Timeline feature over the past few months.

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However, all signs indicate that Facebook didn’t make anybody’s private messages public.

Consider the implications of what seems to have happened here: A significantly large number of users saw their messages from a few years ago in the new Timeline format – messages that were posted, relatively publicly, on their friends’ and their own Facebook walls – and couldn’t believe that there was a time when they would have posted such things publicly. Instead, these users thought, the messages must have always been private correspondence, and it must be Facebook that screwed up and made them public.

Even after Facebook issued a categorical denial, plenty of users were still swearing up and down that their previously private messages had erroneously been made public. This means one of two things: either Facebook did indeed mess up and is denying it anyway (which is possible), or a lot of users have become so much more cautious with their privacy settings over these past few years that they can’t even fathom they ever made these kind of messages public in the first place.

If that latter scenario is true, it should scare every Facebook executive and investor.

Tech companies make mistakes all the time, and if they’re smart, they apologize, fix the error and move on. But if Facebook’s users are becoming more privacy-conservative, the social network has a much bigger problem on its hands.

Despite what the site’s front page may say, Facebook is not a free service. Its users don’t pay with money, they pay with personal information. And the reason Facebook was the most hyped Initial Public Offering in U.S. history – the reason Mark Zuckerberg is one of the richest people on Earth – is because Facebook turns around and leverages personal information to lure advertisers. Those advertisers want to know your marital status so they can sell you wedding dresses and dating site subscriptions; they want to know how old you are so they can sell you used cars and dating site subscriptions; they want to know where you live so they can sell you condos and dating site subscriptions.

This is how Facebook makes money. Everything about the company’s business model incentivizes it to try to convince you to make more of your information public.

But what if you are becoming less – not more – likely to do that? What if you’ve spent the past few months going through your photo album and deleting all those embarrassing college keg-stand pics so your new employer won’t see them? What if you’ve slowly but surely hiked up your privacy settings from “Anything Goes” to “Fort Knox”? What if you’re so much more concerned about privacy now that you look at messages you posted publicly just a few years ago and you think, “There’s no way those weren’t private”?

What if Facebook and its users have fundamentally opposing ideas of what the social network should be?

When Facebook’s founders first made the service available outside Harvard, where it began, it was a bit of a revolution – the iPhone of social networking. Additionally, you couldn’t even log in if you weren’t enrolled in a school of some sort, meaning what you posted on the site, even at the lowest security settings, was visible to a much smaller subset of the population.

But today, there are countless other tools for quickly and easily sharing everything on the Web. For many users, Twitter is now the outward-facing social network, where they deliberately want to be public with their thoughts (although they can easily make their Twitter accounts private if they wish). And unlike Facebook, Twitter only tries to make your user name, brief bio and (optionally) Web site and location public – and if you like, all that information can be fake.

Facebook, with its constant prodding for more and more information and its insistence that the information be accurate, has been re-categorized in many users’ minds as a kind of super-powered online address book, the service you turn to when you want to find out what that one kid from fifth grade is up to these days. And all those investors who bought in to Facebook a few months ago at a borderline-ludicrous valuation? They didn’t think they were buying an address book.

For decades, the tech industry has conceived all kinds of exotic business models – ad-supported this, “freemium” that, shareware, crowdsourced funding, you name it. Some have worked, some have imploded.

But as it becomes clearer and clearer that Facebook isn’t going to suddenly transform advertizing into a science with its massive stockpile of data (and make everyday investors filthy rich in the process), maybe the company should at least consider a more traditional business model: asking people to pay for stuff.

Would it really be all that difficult to create a premium version of Facebook that strips away ads, keeps personal information away from third-parties and costs five bucks a month? Bundle some content-providing apps in with the deal and call it Facebook Platinum, or something. Sure, a lot of people wouldn’t pay money for Facebook, and they can keep using the current version, but certainly some of its almost 1 billion users would like the option to pay with cash rather than privacy. After all, people pay eight bucks a month for Netflix.

If Facebook continues to – by necessity of its business model – urge its users to be more public with their information, and those users continue to head in the exact opposite direction, then the company’s long-term viability is at stake.

Follow on Twitter: @omarelakkad

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