As many are already familiar, Facebook just admitted it was responsible for a PR effort to plant negative stories in the press about Google and its cavalier attitude toward user privacy. Google was quick to point out that Facebook has come under fire for this very same issue. But behind this recent back-and-forth, is the hot button issue of privacy protection, and California’s first-of-its kind proposal - SB242 - to regulate social media sites, beginning with mandating new privacy policies.
Facebook may have brought this renewed interest in industry regulation upon itself when, in December 2009, it made all private data available to the public with no prior notification to subscribers, and more recently for its plans to disclose users’ home addresses and mobile numbers to third party application developers.
State Senator Ellen Corbett, sponsor of SB242, says "You shouldn't have to sign in and give up your personal information before you get to the part where you say, 'Please don't share my personal information.'" Under the California proposal, it would be required for a “social networking Internet Web site to establish a process for new users to set their privacy settings as part of the registration process that explains privacy options in plain language, and to make privacy settings available in an easy-to-use format
”. In other words, Facebook and other companies would have to allow users to establish their privacy settings at the creation of an account instead of after joining, or risk paying a steep fine. This seems reasonable enough, so why is Facebook, along with a coalition of industry associations and internet companies (including Google, Twitter, Zynga, Match.com, and Skype) so opposed to making the privacy settings more transparent to users?
Here’s a summary of the group’s oppositions 
(By author Liz Gannes):
- Asking users to make privacy choices at the outset–the group calls this “privacy shrink wrap”–will result in bad and overly broad decisions. The Federal Trade Commission recently said that it is best practice to ask users to make privacy decisions on an item-by-item basis so they can understand the context.
- Users are already setting their privacy settings themselves, and don’t seem to have had problems with social networks failing to remove content after it’s been requested.
- Many social networking companies are based in California, and implementing these practices would significantly impact their businesses at a time when the state’s economy is in shambles.
- SB 242 is unconstitutional because it interferes with freedom of speech and interstate commerce. Quote: “By hiding from view all existing users’ information until they made a contrary choice, the State of California would be significantly limiting those users’ ability to ‘freely speak, write and publish his or her sentiments on all subjects.’”
Facebook’s business model and revenue stream relies heavily on data mining its users’ personal information and repackaging and selling that information. Limiting user participation in this process would greatly affect Facebook’s bottom line. Google and other companies have the same concerns, which creates the odd arrangement of Facebook and Google fighting it out in the press, but allying with one another to stop this legislation.
So the bigger questions are:
- How much privacy is someone willing to give up in order to use a social networking site?
- How does a social marketing site ethically use someone’s personal information for marketing purposes?
The California legislation intends for Facebook to be completely up front about how it plans to use someone’s personal information so a user can make an informed decision to decline or accept the terms of service. Some users may welcome demographically targeted ads and games, while some may prefer to use the service solely for keeping in contact with friends and family. As data mining and micro-targeted advertising becomes a larger and larger share of online revenue, this issue will become more and more prominent for all parties concerned.