Until today, I hadn't put much thought into Facebook, but I knew enough to know that its core asset consists of the social networks amongst its members.
Its business model, therefore, is to monetize the relationships you have with your friends.
Put another way, it sure seems like a creepy company. More than creepy, in fact.
This week, Facebook announced one of its first initiatives to monetize your social network. It is planning a service that will allow "friends" to target other "friends" with advertising.
This is a stupid idea. Friends don't let friends drive drunk, and friends don't foist ads on other friends. Facebook's plan is likely to fail, and I think this scenario illustrates why.
More importantly, Facebook's announcement exposes its Achilles heel: the desire for personal privacy.
(The NYT and Info/Law have more on the legal issues of this particular plan.)
Just about every major company, and certainly all ambitious companies, are in business to make money, first and foremost. As they gain market dominance -- and monopoly status -- there becomes is less and less opportunity to restrain their power.
No matter how innovative companies like Facebook may be, the day will come when their innovations becomes unwelcome.
Just look at Microsoft (which just bought 1.6% of Facebook for $240 million) and what it did with its desktop PC monopoly.
The difference is, Microsoft's monopoly simply meant most people were stuck with an inferior and costly operating system. (I use Vista, by the way, and am not a Mac OSX diehard.)
That was bad, but nothing approaching the potential for abuse at Facebook.
In exchange for hosting your social network, Facebook seeks to exploit that network to make money.
In and of itself, this isn't a problem; Facebook is offering a service that has value, and has a solid business model for turning a profit on that service.
The brilliance of the company's business model is that its customers must be honest about themselves to get any value from the service; it's impossible to remain anonymous and get any value from Facebook.
As a result, Facebook is building a database of the relationships between its users -- the social network. It is building the single most comprehensive database on who knows who and what they do together.
I don't think I'm being paranoid when I wonder why anyone would feel comfortable giving a single for-profit company this much knowledge about their own lives.
Don't get me wrong, I'm not making a case for banning Facebook. Rather, I'm calling into question the wisdom of using the service Facebook offers.
The first thing that Facebook does when you sign up is ask for access to your e-mail service.
Why?
The service looks at your e-mail traffic and your address book to determine who your friends are, and whether or not they are already on Facebook. At first, it might seem like a great idea; if they are on Facebook, it connects you with them, and if they aren't, you can invite them to join.
The truth is, however, that you are giving Facebook far more value than Facebook is giving you, and Facebook will, in the end, use the information it gathers about you and your friends in ways that you cannot currently possibly contemplate.
It's just the way companies operate.
There's no way to definitively predict how Facebook will ultimately use their database of social networks.
It might be something innocent, like the creepy advertising scheme announced today.
And it might be something frightening, like what Yahoo! has already done in China. Imagine if the Chinese government had access to social networking data?
To me, it seems so obvious that people ought not trust Facebook, yet people are more than happy to hand over extraordinary amounts of information about themselves and their friends to a faceless corporation.
It's only a matter of time before they regret their decision.
Facebook has a privacy policy, which I suppose is a good thing. Among other things, it states:
Facebook may also collect information about you from other sources, such as newspapers, blogs, instant messaging services, and other users of the Facebook service through the operation of the service (e.g., photo tags) in order to provide you with more useful information and a more personalized experience.
Facebook may use information in your profile without identifying you as an individual to third parties. We do this for purposes such as aggregating how many people in a network like a band or movie and personalizing advertisements and promotions so that we can provide you Facebook. We believe this benefits you. You can know more about the world around you and, where there are advertisements, they're more likely to be interesting to you. For example, if you put a favorite movie in your profile, we might serve you an advertisement highlighting a screening of a similar one in your town. But we don't tell the movie company who you are.
We may use information about you that we collect from other sources, including but not limited to newspapers and Internet sources such as blogs, instant messaging services, Facebook Platform developers and other users of Facebook, to supplement your profile. Where such information is used, we generally allow you to specify in your privacy settings that you do not want this to be done or to take other actions that limit the connection of this information to your profile (e.g., removing photo tag links).
We reserve the right to change our Privacy Policy and our Terms of Use at any time. Non-material changes and clarifications will take effect immediately, and material changes will take effect within 30 days of their posting on this site. If we make changes, we will post them and will indicate at the top of this page the policy's new effective date.
In other words, you don't really have control over your personal information.
You are handing a large chunk of your identity as a human being to a company which hopes to "take over the world" -- according to its CFO. [h/t Bubblegenerationblog]
Trust me, no matter how well-intentioned Facebook might be, one day, perhaps not immediately, but eventually, you will regret giving the service access to your network of friends.
Now, I'm not saying a social networking service is a bad thing, not even one that is run for a profit.
For example, a social networking service that charged a small fee -- like online dating sites -- but gives you complete control over your personal data and pledges to do nothing with it, would be far less troublesome than Facebook.
It's also possible a not-for-profit version of Facebook could work, funded either by advertising or user donations. Think of it as a Craigslist of social networking sites -- a service which promises to safeguard all personal data, including relationships you may have with your friends.
It shouldn't be hard to fund such a service with "dumb" ads or some other simple revenue model.
Whether a for-profit or non-profit site emerges, in either case, the core principle would be that the service exists for its subscribers, and that the social networks that develop in the service are for the use of its subscribers only.
Facebook, on the other hand, sees the social network that you and your friends have just told them about as their core asset -- their way to get rich.
And in doing so, they will exploit it -- mercilessly.