The NY Times in recent weeks has printed a series of articles on Facebook and the company’s collection of users’ personal data. The most recent story is here.
It is Facebook’s biggest conundrum. As the world’s largest social network, it faces intense scrutiny from consumers, courts and regulators worldwide over how it handles the data it collects from its 845 million users. But as a company preparing to go public, it is under pressure to find new ways to turn that data into profit.
The scrutiny is at its most intense in Europe. Regulators in Ireland, where Facebook has its European headquarters, have already demanded that it give users greater control over their information. A proposed Europe-wide law goes much further by requiring Facebook, along with every other online business, to expunge every bit of personal data at a consumer’s request.
In the United States, Facebook faces government audits for the next 20 years about how it collects and shares data, along with an assortment of lawsuits that accuse the company of tracking users across the Web. Even the White House stepped into the fray last week, demanding that Web companies give users more say in how their personal data is used.
Facebook is not the only company dealing with these issues, but it is especially vulnerable because its very business model relies on the fire hose of information that its users willingly share.
I agree that privacy is a thorny issue for Facebook, insofar as it is imaginable that users use the site less to protect certain privacies and thus provide Facebook less proprietary data.
So I appreciate the NY Times series, because it highlights an issue that will affect the pricing of Facebook’s IPO later this year: the legal and political obstacles facing the company intellectual property business model. However, I see much less attention being given an arguably more important issue: how good are Facebook’s data? If in fact the data help marketers know their audiences, to what extent?
The privacy issue speaks to how much data Facebook will collect, or be allowed to collect. The bigger question about Facebook’s value is how good the data are. We can conceive a future in which Facebook collects less data, but they are better and more useful. Or a future in which they collect more data, but they collectively add up to little knowledge-added. The argument is that Facebook’s price will be determined by how good the data prove to be, not how much of it they get to have.