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Reconciling the Competing Stakeholder
Interests of Facebook
Prepared for the Executive Directors of Facebook
Consultants: Mai Hoang, Paul Johnson, Dan McCarty, Laura Molinari, Lily Tang
Coordinator: Brett Klein
Privacy & Profits
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Overview
The Crisis: • Tremendous pressure to generate
revenue• Violations of Privacy
Dilemmas:• Ethical• Legal• Financial
Solution: “reviewbook”TM
• Respects user privacy• Better targeted ads
3
Negative Press
4
Pressure to generate revenue
$150 M $300 M
Facebook’s Revenue
55
Violations of Privacy
Beacon•Why it was made•What it did•What happened
Flawed Privacy Practices•Wild-Wild-West Methodology
6
Ethical Dilemmas
Invading PrivacyViolating the Duty of Care• Informed Consent
77
Ethical Dilemmas: Invading Privacy
3rd Party information exchangeHighly deceptiveBeacon stores all information exchanges even if the user does not wish to publish informationBeacon launch was unannounced to users
88
Ethical Dilemmas: Invading Privacy
Facebook announces that it will open profiles to search engines in October(encourages users to adjust their privacy settings)
New Ad platform launches(including Facebook beacon)
Traffic to Facebook’s “Privacy” Settings Page
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Ethical Dilemmas: Violating the Duty of Care
Digital Immigrants
• Not born during the digital age (over the age of 28)
• Often have poor understanding of the Internet and its capabilities
May 2007 User Distribution
1010
Ethical Dilemmas: Violating the Duty of Care
Chose investors over other stakeholdersDid not care for its users in the most fundamental ways• Contributing to society and human well being• Be honest and trustworthy• Respect the privacy of others• Honor confidentiality
11
Legal Dilemmas
Potential legal liability
Interpretation of the Law
Law cannot keep up with technology
1212
Legal Dilemmas:Potential Legal Liability
No current legal cases against FacebookLegal reviews of Facebook• MoveOn.org• EPIC.org• Center for Digital Democracy
13
Legal Dilemmas: Interpretation of the Law
New York Law of Torts:§ 652C Appropriation of Name or Likeness
New York’s well-known statute creates both a misdemeanor and a civil cause of action for “[a]ny person whose name, portrait, picture, or voice is used within this state for advertising purposes or for the purposes of trade without the written consent first obtained.”
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Legal Dilemmas: Interpretation of the Law
California Online Privacy Protection Act of 2003
• Requires commercial websites to post a privacy policy• Policy must state a list of the categories of third-parties
with whom the operator may share such personally identifiable information
1515
Legal Dilemmas: Law cannot keep up with Technology
Law should not solely guide business practices
Facebook should set a precedent for other social networking sites
16
Financial Dilemmas
Jeopardizing user growthLoss of potential revenue P
RIVACY
USERS
17
Financial Dilemmas: Jeopardizing User Growth
Average Daily Visitors Worldwide
1818
Financial Dilemmas: Loss of Potential Revenue
1919
Solutions:Recent action steps
New privacy controlsAnnounced privacy policy on home pageChanged Beacon to opt-inPublic statements
20
HCP Consulting Solution
reviewbookTM:•Facebook formatted application •User-generated review system•Increased revenue•No 3rd party information exchange
21
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Projected Revenue
Premium:• $4,500 per campaign x 2,000 campaigns =
$9,000,000
reviewbook:• Large box: $.004 x 5% users x 30 pages =
$414,000• Small box: $.003 x 5% users x 30 pages =
$310,500
Banner ads:• 25.2 M users per day x 5 pages = 126 M• 126 M x $.004 x 30 days = $15,120,000
Click-throughs:• 126 M x 2% x $.05 x 30 days = $3,780,000
Total monthly revenue $28,624,500
2323
Solution: reviewbookTM
Ethical: User-generated information
Legal: No 3rd party exchange of information
Financial: More effective targeted ads
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Getting back to your roots
Putting power back in user handsFacebook is a tool with great avenues of making moneyMission driven• Connecting people to
people• Privacy• Profits
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Questions/Comments
©2008