Tuesday, February 17, 2009

Facebook's Data Grab

Facebook’s aggressive change to its terms of service this week has a created a brouhaha of massive proportions.  A normally acquiescent user base that is loath to privacy controls has become irate over changes made to the user agreement. At the heart of the controversy is strengthened language declaring Facbook’s ownership and license to your information.  The new terms of service grant the company a “perpetural wordwide license” to make use of your personal content.  It omits a clause from the previous TOS stating that deactivating one’s account is tantamount to revoking the license granted to Facebook.  As of this morning, a movement in opposition of the new user agreement had amassed over 30K members, growing at an astounding 100 new members per minute.  

The issue has even received attention from Mark Zuckerberg, who posted on the topic in an effort to quell the uproar from users.  Zuckerberg explains, “Our philosophy is that people own their information and control who they share it with.  In reality, we wouldn't share your information in a way you wouldn't want.”  Newsflash: Philosophy differs from legalese.  The TOS is an affront to user rights and ownership over their original content.  While Zuckerberg has attempted to make the language more palatable, the legal reality is that users no longer control the use of their content while using the service and after deactivating their accounts. 

The change in the terms of service and the outcome of the user revolt is significant because it emanates from a growing concern for Facebook--how to monetize users and justify what was once a $15 billion valuation for the company.  With a valuation of that magnitude, Facebook would sell for nearly 50 times 2008 revenue, a preposterous multiple.  The company is under pressure from financiers to monetize their 50 million active users and over 40 monthly billion pageviews.  With a business model where data is their primary asset, expect user information to be more tightly guarded by the company.  As business models develop that involve demographic profiling, targeted advertising, selling user profiles, and cookie-sharing emerge, the company must solidify its hold on the only unique asset it owns—user information.  


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