What the Facebook FTC Settlement Means for Social Media

On Tuesday the Federal Trade Commission officially rapped Facebooks knuckles in a broad-reaching settlement on privacy, alleging the social network misled its users on what they were sharing and with whom. The settlement, which lays out a number of specific rules the service must now abide by, requires Facebook to be much more transparent about its privacy practices going forward.

The thing is, Facebook was already doing that. Sure, the requirement that the company must now submit itself to biannual review from a third-party oversight board for the next 20 years sounds heavy, but its really not. As Mark Zuckerberg said in his response to the settlement, Facebooks made a lot of mistakes with regard to user privacy, but its certainly learned from them, and its privacy controls now are stronger than ever. Itd be hard to see that third-party board finding much at fault with the Facebook of today, and, with Tuesdays ruling, thatll probably continue.

The effects of the settlement will likely have more to do with other social networks than the original one. The message from the FTC to social media is now clear: if you put the desires of advertisers before the privacy of users, you will be stopped. Just because youre sitting on a ton of personal information that would make marketers drool, it doesnt mean you can monetize it in any way you like.

While that sounds like a chilling message, its really just a long-overdue standardizing of the practice of opt-in. The smarter companies already know this: that customers who opt-in are more engaged and ultimately more valuable than customers who simply dont opt-out. Besides, when given the option, users tend to share whatever information theyre asked to share, so, even putting the ethics aside, theres little need for deception.

Opt-in i think is where everything is going, says Lou Kerner, a social media analyst with Wedbush Securities, a Los Angeles-based investment bank. Most people will opt-in to almost anything. A lot of younger people assume all the information is freely available anyway. And there are many people who think that using your data to see marketing thats actually relevant to you is a good thing.

Still, those dialog windows that pop up whenever a Facebook app wants to connect with your profile are vague at best. You typically see similar conditions (This app can access your profile information at any time, This app can send you emails, This app knows each and every piece of information youve ever shared with anyone, etc.) for most apps. It would be much more useful if those conditio! ns had s omething specific to the app youre dealing with, along with an example or two (Zynga poker wants to see your friends so you can play cards with them). Maybe Michael Richter, Facebooks new Chief Privacy Officer of Products, could give that a look.

Besides the clear move toward opt-in, another lesson social networks can learn from Facebooks FTC settlement is how to deal with government. While the FTC had some strong words for Facebook, going so far as to say it deceived users in the past, it also praised the network for being an innovator and changing the way society communicates. And in the end, the tangible effect of the agreement amounts to a slap on the wrist for the social network. Clearly, Facebook has learned to play nice with Washington, and any other service that deals with the perennial hot-button issue of privacy should take note.

I think its a hugely positive step, says Dmitry Shapiro, CEO of the social network Anybeat. But more important is consumers understanding of what these technologies are being used for. Weve been taught these past few years to just share everything, and I dont think consumers really know what can happen [with their data].

As far as Facebooks users are concerned, I doubt they will notice any change after todays development. Will there be complaints about Facebook with regard to privacy in the future? Of course. But the settlement provides a template for transparency, so when, say, Facebooks facial-recognition software fully blossoms, you wont start seeing your face in ads unless you opt-in. If Zuckerbergs statement is any indication, Facebook appears to have learned a thing or two after setting off so many privacy tripwires over the years. And if it hasnt, Uncle Sam is watching.

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