• by Augie Ray , May 20, 2010

It's no secret Facebook is facing a privacy backlash... again. Headlines are asking if Facebook is at a tipping point (it's not) and many are giving Facebook low grades for the way it has handled user privacy (it deserves those grades.)

Despite the headlines, Facebook isn't really facing an immediate problem with defections. There is little evidence significant numbers of people are defecting, and the affect of a couple high-profile deleters is minimal. Facebook's value to users isn't to connect with movers and shakers like Leo Laporte but with friends and family.

There is evidence the privacy storm is doing little to harm Facebook immediately. For example, Facebook has a net gain of 10 million active users since the new privacy changes were rolled out at the f8 conference. Plus, in my own informal survey on Forrester.com (with a very small sample size of 176 participants) demonstrated that just 4% claimed to have deleted their Facebook accounts due to privacy concerns.

What was most interesting to me about my small survey wasn't the absolute results but the way the results changed depending upon the way I promoted the survey. At first, I invited followers on Twitter to respond, and those early responses tended toward the concerned; early on, a higher percentage of folks reported deleting their accounts or changing their privacy settings. But later I shared my poll with my Facebook friends, which include many people not "in the business" of marketing, technology or social media, and as this group responded I noted a significant jump in other responses, primarily, "I've made no changes whatsoever in how I use Facebook."

It was evident that those of close to Facebook and social technologies are concerned, but the average consumer who just likes sharing photos and Farmville updates simply aren't as concerned. And until concern grows among Facebook's common users, the social network won't face fatal and imminent repercussions.

In my view, Facebook has reason to be concerned, but not because of the risk with an immediate migration out of Facebook; after all, where would people go to do the sorts of sharing they're now used (and addicted) to doing? News Corp has done little to innovate MySpace, so despite its best efforts to capitalize on the Facebook privacy situation, MySpace isn't really is not likely to recapture its past mojo.

Instead, the threat to Facebook is "death by a thousand privacy cuts." The accumulation of lawmaker concerns, high-profile deleters, organizations raising consumer awareness, and security bugs (such as those found in Yelp, an initial "instant personalization" partner for Facebook), can create a growing and important problems for Facebook. These include not just the risk of widespread abandonment of the platform by users but also:

Consumers tightening their privacy settings, resulting in less marketing opportunities and value for Facebook. Consumers opting out of future instant personalization partners (which now include just Yelp, Pandora and Microsoft's Docs.com). Consumers rejecting future Facebook programs, such as their promised geolocation check-in features. Actions by lawmakers and regulators (not just in the United States but elsewhere) to respond to privacy concerns of citizens. Encouragement for the development of open source competitors, such as Diaspora, which could someday pose an appealing alternative to consumers. And, perhaps most importantly, the potential loss of trust and interest among large brands. While a lot of attention is being given to consumers' concerns and a small number of "deleters," I am beginning to hear serious concerns from marketers about their association with Facebook's privacy issues (and, in an unrelated matter, the launch of Community pages that deflect attention away from official brand fan pages.)

Facebook is not a tipping point, but that doesn't mean it couldn't get there. How can Facebook positively impact their future without giving up the benefits of sharing? The answer isn't easy, but neither is it difficult. Facebook has to create a strong positioning on the issue of privacy, and this cause isn't helped when Mark Zuckerberg promotes his world vision that privacy is dead (regardless of whether he's right or wrong). Facebook also needs to adopt more transparency, giving consumers greater visibility into what is being shared and under what circumstances. Facebook also needs to improve its own complex privacy settings to ease the burden of managing ones' own privacy.

Finally, and most importantly, Facebook needs to proactively manage user expectations and enhance their knowledge around privacy. Gone are the days when it could announce a change, ignore the feedback, and unilaterally change privacy policies and settings. The time has long since come for it to listen, engage and collaborate with users. And, of course, changing the "instant personalization" to "near-instant personalization" by making the program opt-in instead of opt-out wouldn't hurt (but I'm not holding my breath on that.)