Nowadays, It seems like everyone has a Facebook page. Chances are that you are one of the one billion people who log on to Facebook once a month.
Thanks to David Fincher’s 2010 drama The Social Network, everyone knows the story of how this company has grown. Starting in a Harvard student’s dorm room in 2004, the site’s popularity grew exponentially. By the time it hit 900 million members in May of 2012, Facebook had made an enormous transition by becoming a publicly traded entity. However, a highly anticipated market opening overvalued Facebook’s stock prices. Despite selling 82 million shares in its first 30 seconds on the NASDAQ, Facebook stock has fallen to approximately $21 per share after a $43 opening.
Fitting with its notoriety as a revolutionary company in the social media arena, Facebook has inevitably been one to push the envelope, particularly when it comes to the privacy of its users. While Facebook provides friends with 24/7 access to each other’s timelines, photos, and other information, the need to increase advertising revenue has resulted in Facebook offering its advertisers access to user information. This has resulted in lawsuits accusing Facebook of violating users’ privacy rights, but these cases have nearly always been dismissed.
A new civil action suit, however, has forced Facebook into a settlement. Perhaps to sweeten their IPO for potential stockholders, Facebook introduced a new type of ad called Sponsored Stories. Sponsored Stories basically turn the act of pressing the Facebook “Like” button into a potential commercial endorsement. CEO Mark Zuckerberg has rationalized the use of these ads based on his idea that a “trusted referral influences people more than the best broadcast message.” The suit against Facebook argues that the company did not provide users with enough warning that they would be used in these types of ads, nor did it provide an option to opt-out of the advertisements.
In mid-October, a settlement was reached that has the potential to alter the direction of advertising in social media. Under the new settlement offered for U.S. District Judge Richard Seeborg’s approval, Facebook is proposing that a $20 million pot be split between the class-action attorneys and the 125 million U.S. Facebook users who appeared in a Sponsored Story without their consent. This would amount to a $10 award for all class members who were used in Sponsored Story advertisements.
Other privacy issues have plagued Facebook as well. In September, the company chose to disable the European versions of its facial-recognition software, which stored data from past images of users and suggested their friends tag them in newly uploaded images. These problems are not native to only Facebook. New features such as Window’s “Do Not Track” default setting on Internet Explorer 9 have been introduced in order to appease their users’ desire for revamped privacy options. Social media companies such as Twitter and Facebook, however, face special challenges. They must find the perfect balance between user privacy and appropriately placed, targeted advertisements.
Unfortunately, we cannot yet know how this settlement will affect the actual Facebook experience. The language of the settlement calls for a change to Facebook’s terms of services that would notify users about their potential use in Sponsored Stories. A judge, however, could simply require Facebook to include an option to opt-out of the advertisements, or to discontinue the use of these ads altogether. In an increasingly mobile marketplace, Facebook must find a way to re-strike the privacy/revenue balance that they once had while still satisfying their new stockholders. If the company cannot do this, there is potential for smaller startups to fill the void of adequate privacy settings in the digital and social media. Furthermore, there is potential for another Harvard, Yale, or even UGA dorm room to be the newest crucible for revolutionizing social media as we know it.