Social and Online Media Need Privacy Plan Now

Privacy isn’t just Facebook’s problem. In fact, the whole consumer Internet and media industry had better get its collective act together on the privacy front or get ready to face serious consumer backlash and, perhaps worse, government regulation.

For the second time this year, Facebook is at the center of a privacy controversy. Many apps on the network have been transmitting Facebook user IDs to third parties, some of which are data aggregators or miners that create profiles of users or groups and sell them to marketers. This user ID leakage was the same problem Facebook “fixed” in May.

Although wiser heads pointed out that both times represented fairly common practices online, and that personal email addresses are potentially much more dangerous in terms of identifying and exposing consumers, the stuff hit the fan. “Is Facebook evil or merely incompetent?” asked one critic. Has it “lost control of its platform?” wondered another.

Consumers Care — At Least They Say They Do

Regardless of their behavior as consumers, many say they care about privacy. A Zogby poll showed that 87 percent of respondents were concerned with the security of their personal information online, and 80 percent were bothered by advertisers tracking them. In another survey, 96 percent said online companies shouldn’t be allowed to share or sell personal information to third parties without permission — though nearly half admitted they don’t read privacy policies. And if they’re annoyed enough, consumers will take action: The Federal Trade Commission says that 200 million phone numbers have been registered in its Do Not Call registry that clamps down on telemarketers.

What’s at Risk for the Industry?

Social media companies should be wary of potential government regulation. If legislators were to impose strict rules on information sharing or opt-in practices, the usefulness for consumers and companies of social graphs could be drastically reduced.

And then there’s advertising.

Alcohol advertising on television, for instance, is self-regulated; it’s the TV networks’ own standards that kept booze off the non-cable airwaves until recently. It’s not illegal to promote liquor, just the networks playing it safe. In contrast, advertising on kids’ TV shows is a matter of law, as is the tobacco advertising ban that’s been in place since 1971.

Members of Congress are questioning Facebook on its current snafu. They’re the same ones that went after the “zombie cookies” highlighted by the Wall Street Journal. Even before that, online privacy bills had been proposed in the House, and European regulators are passing fresh proposals around the European Commission. I doubt the online media industry wants to rely on congressmen understanding the nuances between zombies and other cookies — a ban on cookies would completely destroy ad targeting and optimization.

How Should the Industry Respond?

The online media industry needs to rev up its lobbyists (Google spent $1.2 million on lobbying this quarter; Facebook $120,000), explain what’s going on to legislators and to the public, and seriously consider self-regulation. Additionally, social media companies should:

  • Explain what they’re already doing with consumer information, and not just on developer blogs. These stories need to be on home pages and in ad campaigns.
  • Go after real bad guys publicly. Facebook, for instance, is suing spammers.
  • Use the publicized information outlined in the first two points to create a set of best practices and an audited seal of approval.
  • Use an organization like the Online Publisher’s Association — rather than the Internet Advertising Bureau or the Direct Marketing Association — as a hub for public campaigns. It would be better PR coming from the publishers, who shouldn’t be afraid to play the “democracy needs a viable press, and the press needs viable advertising” card.

It would be too hard for Facebook to “give up on privacy” and expose all existing posted information everywhere, with the idea that its users would gradually move that info into a new, “private Facebook.” Longer-term, we may see consumers evolve private and public identities, but the industry can’t count on that right now.

Question of the week

How can social media solve its privacy problem?
Relevant Analyst
P1040724

David Card

VP Research Gigaom Research

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