With Facebook IPO, time to friend privacy

Facebook's IPO, or initial public offering, will lead to shareholder pressure on the firm to squeeze profits out of users' personal data. Google, too, faces more scrutiny as it mines user data even more. Privacy watchdogs need to be on the alert.

Robert Galbraith/Reuters/File
CEO Mark Zuckerberg speaks at Facebook headquarters in Palo Alto, Ca., in 2010. Facebook is expected to submit paperwork to regulators for a $5 billion initial public offering in what is expected to be the largest IPO ever to emerge from Silicon Valley.

If Facebook’s 800 million users were a country, it would be the world’s third largest. That is worth keeping in mind as the social media giant moves to sell stock for the first time in an initial public offering (IPO).

In going public, Facebook will be under fierce shareholder pressure to make big profits from its largest asset: the personal information it collects from 1 in 9 people on Earth. Private data, such as a user’s taste from pizza to friends, will be aggregated and then monetized by selling ad space targeted to each user.

Facebook isn’t a novice in the struggle of Internet companies to balance privacy and profits in data mining. The company often updates its lengthy privacy policies. Facebook can’t afford a rush to the exits if it blunders big time.

Last November, however, the Federal Trade Commission (FTC) forced Facebook to submit to 20 years of independent privacy audits after it crossed a line. And in a new feature called Timeline, Facebook will compile all of a user’s past history into one, searchable place. The feature is compulsory.

Google, too, is coming under scrutiny especially in Europe, where privacy concerns are stronger, over its aggressive tapping of each user’s digital trails.

It just announced a plan to gather personal data across more than 60 services – Gmail, searches, YouTube, Google apps, etc. – and sell ads targeted to these user profiles. The only way a user can opt out is to stop using Google.

Users do have choices on the Web, of course. The freedom to go elsewhere is the very nature of the Internet. Microsoft, for example, is now advertising itself as an alternative to Google in better honoring privacy. Twitter, too, is a good option for retaining one’s privacy.

Congress seems stymied in writing new laws that would guard Web privacy. It must balance the Internet’s huge economic benefits against better protection of consumers. A recent Commerce Department report called on Congress to pass laws that would give more choice and control to consumers over the Internet or cellphone information being collected about them.

Even the Supreme Court is highly divided in how to protect privacy in an age of fast-changing technologies. In a ruling last month against police placing a global positioning system (GPS) device on a suspect’s car, the justices all agreed in the decision but differed widely in their reasoning.

Some justices prefer to leave open the question of what is a “reasonable expectation of privacy.” Justice Sonia Sotomayor, however, wondered if users of technology really know their privacy options. “I would ask whether people reasonably expect that their movements will be recorded and aggregated in a manner that enables the Government to ascertain, more or less at will, their political and religious beliefs, sexual habits, and so on,” she wrote.

Justice Samuel Alito pointed to a great divide among Internet users – those who don’t care about privacy and those who do. “New technology may provide increased convenience or security at the expense of privacy, and many people may find the tradeoff worthwhile,” he wrote.

So far, mere threats of enforcement by government have pushed Internet companies to self-regulate. Such a strategy has worked well in other industries. In coming days, the FTC is expected to issue a privacy report that calls for more voluntary regulation among companies in how they gather and sell consumer data.

FTC Commissioner Julie Brill urges the industry to develop a one-stop place for consumers to see the masses of information about them. “Data brokers need to get cracking now to put something like this into place,” she says.

Government must walk carefully in imposing rules that would warp the Web’s future or turn out to be wrong. In 1979, when phones were stationary objects, the Supreme Court ruled that dialed numbers are not private information. Now with mobile phones that can be used to track a person’s travels, the court might rule otherwise.

And more than a century ago, President Teddy Roosevelt banned Kodak cameras – then a new invention – from use in Washington D. C. parks. He worried about people’s privacy. The ban didn’t last long.

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