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BUSINESS PROBLEM-SOLVING CASEFacebook Privacy: What Privacy?In less than a decade, Facebook has morphed from a small, niche, networking site for mostly Ivy League college students into a publicly traded company with a market worth of $226 billion in 2015. Facebook boasts that it is free to join and always will be, so where’s the money coming from to service 1.4 billion worldwide subscribers? Just like its fellow tech titan and rival Google, Facebook’s revenue comes almost entirely from advertising. Facebook does not have a diverse array of hot new gadgets like Apple does, a global network of brick-and-mortar retail outlets like Walmart does, or a full inventory of software for sale. All Facebook has to sell is your personal information and the information of hundreds of millions of others with Facebook accounts. Advertisers have long understood the value of Facebook’s unprecedented trove of personal information. They can serve ads using highly specific details such as relationship status, location, employment status, favorite books, movies, or TV shows and a host of other categories. For example, an Atlanta woman who posts that she has become engaged might be offered an ad for a wedding photographer on her Facebook page. When advertisements are served to finely targeted subsets of users, the response is much more successful than traditional types of advertising. A growing number of companies both big and small have taken notice. In 2014, Facebook generated $12.4 billion in revenue, 88 percent of which ($7 billion) was from selling ads and the remainder from selling games and virtual goods. Facebook’s revenues in 2014 grew by 58 percent over the previous year, driven mostly by adding new users and showing 40 percent more ads than a year earlier. That was good news for Facebook, which is expected to continue to increase its revenue in coming years, but is it good news for you, the Facebook user? More than ever, companies such as Facebook and Google, which made approximately $66 billion in advertising revenue in 2014, are using your online activity to develop a frighteningly accurate picture of your life. Facebook’s goal is to serve advertisements that are more relevant to you than anywhere else on the web, but the personal information it gathers about you both with and without your consent can also be used against you in other ways. Facebook has a diverse array of compelling and useful features. Facebook’s partnership with the Department of Labor helps connect job seekers and employers; Facebook has helped families find lost pets; Facebook allows active-duty soldiers to stay in touch with their families; it gives smaller companies a chance to further their e-commerce efforts and larger companies a chance to solidify their brands; and, perhaps most obviously, Facebook allows you to keep in touch with your friends, relatives, local restaurants, and in short, just about all things you are interested in more easily. These are the reasons so many people use Facebook—it provides value to users. However, Facebook’s goal is to get its users to share as much data as possible because the more Facebook knows about you, the more accurately it can serve relevant advertisements to you. Facebook CEO Mark Zuckerberg often says that people want the world to be more open and connected. It’s unclear whether that is truly the case, but it is certainly true that Facebook wants the world to be more open and connected because it stands to make more money in that world. Critics of Facebook are concerned that the existence of a repository of personal data of the size that Facebook has amassed requires protections and privacy controls that extend far beyond those that Facebook currently offers. Facebook wanting to make more money is understandable, but the company has a checkered past of privacy violations and missteps that raise doubts about whether it should be responsible for the personal data of hundreds of millions of people. There are no laws in the United States that give consumers the right to know what data companies like Facebook have compiled. You can challenge information in credit reports, but you can’t even see what data Facebook has gathered about you, let alone try to change it. It’s different in Europe: you can request Facebook to turn over a report of all the information it has about you. More than ever, your every move, every click, on social networks is being used by outside entities to assess your interests and behavior and then pitch you an ad based on this knowledge. Law enforcement agencies use social networks to gather evidence on tax evaders and other criminals; employers use social networks to make decisions about prospective candidates for jobs; and data aggregators are gathering as much information about you as they can sell to the highest bidder. Facebook has admitted that it uses a software bug or code to track users across the Internet even if they are not using Facebook. A recent Consumer Reports study found that of 150 million Americans on Facebook, ever day, at least 4.8 million are willingly sharing information that could be used against them in some way. That includes plans to travel on a particular day, which burglars could use to time robberies, or Liking a page about a particular health condition or treatment, which insurers could use to deny coverage. Thirteen million users have never adjusted Facebook’s privacy controls, which allow friends using Facebook applications to transfer your data unwittingly to a third party without your knowledge. Credit card companies and similar organizations have begun engaging in weblining, taken from the phrase redlining, by altering their treatment of you based on the actions of other people with profiles similar to yours. Employers can assess your personality and behavior by using your Facebook likes. In one survey, 93 percent of people polled believe that Internet companies should be forced to ask for permission before using your personal information, and 72 percent want the ability to opt out of online tracking. Why, then, do so many people share sensitive details of their life on Facebook? Often it’s because users do not realize that their data are being collected and transmitted in this way. A Facebook user’s friends are not notified if information about them is collected by that user’s applications. Many of Facebook’s features and services are enabled by default when they are launched without notifying users, and a study by Siegel+Gale found that Facebook’s privacy policy is more difficult to comprehend than government notices or typical bank credit card agreements, which are notoriously dense. Next time you visit Facebook, click Privacy Settings and see whether you can understand your options. Facebook’s value and growth potential is determined by how effectively it can leverage the personal data it aggregated about its users to attract advertisers. Facebook also stands to gain from managing and avoiding the privacy concerns its users and government regulators raise. For Facebook users who value the privacy of their personal data, this situation appears grim, but there are some signs that Facebook might become more responsible with its data collection processes, whether by its own volition or because it is forced to do so. As a publicly traded company, Facebook now invites more scrutiny from investors and regulators because, unlike in the past, its balance sheets, assets, and financial reporting documents are readily available. In August 2012, Facebook settled a lawsuit with the Federal Trade Commission (FTC) in which it was barred from misrepresenting the privacy or security of users’ personal information. Facebook was charged with deceiving its users by telling them they could keep their information on Facebook private but then repeatedly allowing it to be shared and made public. Facebook agreed to obtain user consent before making any change to that user’s privacy preferences and to submit to biannual privacy audits by an independent firm for the next 20 years. Privacy advocate groups such as the Electronic Privacy Information Center (EPIC) want Facebook to restore its more robust privacy settings from 2009 as well as to offer complete access to all data it keeps about its users. Facebook has also come under fire from EPIC for collecting information about users who are not even logged on to Facebook or may not even have accounts on Facebook. Facebook keeps track of activity on other sites that have Like buttons or recommendations widgets and records the time of your visit and your IP address when you visit a site with those features, regardless of whether you click them. Although U.S. Facebook users have little recourse to access data that Facebook has collected on them, users from other countries have made inroads in this regard. In Europe, 40,000 Facebook users have already requested their data, and European law requires Facebook to respond to these requests within 40 days. Government privacy regulators from France, Spain, Italy, Germany, Belgium, and the Netherlands have been actively investigating Facebook’s privacy controls as the European Union pursues more stringent privacy protection legislation, In June 2015, Belgium’s data-protection watchdog sued Facebook over privacy practices such as how Facebook tracks users across the web through Like and Share buttons on external websites. In January 2014, Facebook shut down its Sponsored Stories feature, which served advertisements in the user’s news feed highlighting products and businesses that Facebook friends were using. Sponsored Stories had been one of the most effective forms of advertising on Facebook because they don’t seem like advertisements at all to most users. However, this feature triggered many lawsuits, attempted settlements, and criticism from privacy groups, the FTC, and annoyed parents whose children’s photos were being used throughout Facebook to sell products. Although Facebook has shut down one of its more egregious privacy-invading features, the company’s Data Use policies make it very clear that, as a condition of using the service, users grant the company wide latitude in using their information in advertising. This includes a person’s name, photo, comments, and other information. Facebook’s existing policies make clear that users are required to grant the company wide permission to use their personal information in advertising as a condition of using the service. This includes social advertising, by which your personal information is broadcast to your friends and, indeed, the entire Facebook service if the company sees fit. Although users can limit some uses, an advanced degree in Facebook data features is required. Ad-based firms like Facebook, and hundreds of others, including Google, justify their collection of personal information by arguing that consumers, by virtue of using the service, implicitly know about the data collection efforts and the role of advertisers in paying for the service and must, therefore, believe they are receiving real economic value from ads. This line of reasoning received a blow when in June 2015, researchers at the Annenberg School of Communication at the University of Pennsylvania found that 65 percent of Americans feel they have lost control over their information to advertisers, 84 percent want to control their information, and 91 percent do not believe it is fair for companies to offer discounts or coupons in exchange for their personal information without their knowledge. In June 2015, Facebook held its first ever privacy conference as part of a growing effort to convince users it really is concerned about privacy and aware of public criticism of the firm. It has hired more than 50 privacy experts focused on Facebook’s privacy practices. Critics asked Facebook why it doesn’t offer an ad-free service—like music streaming sites—for a monthly fee. Others wanted to know why Facebook does not allow users just to opt out of tracking. But these kinds of changes would be very difficult for Facebook because its business model depends entirely on the unfettered use of its users’ personal private information, just like it declares in its data use policy. That policy declares very openly that if you use Facebook, you don’t have any privacy with respect to any data you provide to it.Case Study Questions1. Perform an ethical analysis of Facebook. What is the ethical dilemma presented by this case?2. What is the relationship of privacy to Facebook’s business model?3. Describe the weaknesses of Facebook’s privacy policies and features. What people, organization, and technology factors have contributed to those weaknesses?4. Will Facebook be able to have a successful business model without invading privacy? Explain your answer. Could Facebook take any measures to make this possible?
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