Over this past week, a lot of people were making hay over this recent ReadWriteWeb story, “Facebook’s Zuckerberg Says The Age of Privacy is Over.” Seems that some people were taking issue with Facebook founder Mark Zuckerberg’s suggestion that Facebook’s recent site policy changes, which generally encouraged more sharing or information, were in line with public expectations.  Most people put words in Zuckerberg’s mouth and accused him of saying that “privacy is over” or that he claimed he “is a prophet,” neither of which he actually said.  But let’s ignore the fact that some people made stuff up and get back to the point: What set people off about Facebook’s recent site changes and Zuckerberg’s rationalization of them?

I think it goes back to the fact that a lot of people want to have their cake and eat it too. “It is the paradox of the cyber era,” notes Washington Post columnist Michael Gerson: We are “a nation of exhibitionists demanding privacy.”  Indeed, that’s true, but there’s a good reason why this so-called “privacy paradox” exists. As Larry Downes, author of the brilliant new book, The Laws of Disruption, argues:

People value their privacy, but then go out of their way to give it up. There’s nothing paradoxical about it. We do value privacy. It’s just that we’re willing to trade it for services we value even more. Consumers intuitively look at the information being requested and decide whether the value they receive for disclosing it is worth the cost of their privacy. (p. 80)

That’s exactly right. When confronted with real world choices about privacy and information sharing, we often are willing to accept some trade-offs in exchange for something of value. But when we are asked about this process we are loathe to admit that we would willingly engage in such privacy-for-services trade-offs even if we do it every day of our lives.  As Michael Arrington of TechCrunch rightly points out:

the rest of us seem to be ok with Gmail. And our phone. That’s because the benefits of those products far outweigh the privacy costs. And people are going to be just fine with Facebook, too.

And he notes there are other examples of where people seemingly make these trade-offs every day, even if it seems illogical to others why they would do so.

The most articulate counter-argument to all this comes from Michael Zimmer, an assistant professor in the School of Information Studies at the University of Wisconsin-Milwaukee, who says:

Users want to be able to control what information they provide and to whom it is visible. That’s the essence of privacy, and it’s still very much in demand. That doesn’t make one a Luddite. It makes one a responsible user of information technology.

Well, I can generally agree with all that, but the question is what it means in practice.  After all, we’re all in favor of giving consumers more choices and empowering them to make decisions for themselves. Berin Szoka and I have again and again and again argued that:

In an ideal world, adults would be fully empowered to tailor privacy decisions, like speech decisions, to their own values and preferences (“household standards”).  Consumers would have (1) the information necessary to make informed decisions and (2) the tools and methods necessary to act upon that information. Importantly, those tools and methods would give them the ability to block the things they don’t like—annoying ads or the collection of data about them, as well as objectionable content—while also helping them find the information and content they desire.

But let’s be clear about something. Even as we move closer to this ideal state, there are still many citizens who will choose to never take advantage or privacy-enhancing tools and will never read a single privacy policy. But if you ask most of those people in a random survey, “Do you care about your privacy?” what do you think they are going to say? Well, it should be as obvious as what the answer would be to a poll question like: “Do you love your mother?”  Yes, of course we do!  But, again, how does that translate to real-world behavior? More importantly, what are the ramifications for public policy?

Last month, I sat on a panel about polls and privacy expectations at the Federal Trade Commission’s December 7th workshop on “Exploring Privacy.” I argued that, while privacy polls and surveys may offer us some interesting insights into how some in the public think about advertising and privacy in the abstract, ultimately, polls and surveys are no substitute for real-world experiments in which people make real choices, in real time, often with real money, and face many real trade-offs. [See Berin’s paper on this issue.]

I also argued that privacy is a highly subjective condition and that consumers are empowered with many real privacy controls such that they can make the privacy choices that are right for them. [See this ongoing series and this paper.] Moreover, it remains unclear what the harms are that privacy regulatory advocates are really trying to protect us against.  For these reasons, I argued that rational ignorance may often be at work since many consumers likely won’t feel the need to read privacy policies or take steps to “protect their privacy” online. Or, people just implicitly accept the fact that they are getting something of value even if it means they might also be sharing some information about themselves with others.

Which brings us back to Zuckerberg’s comments.  People expressed outrage — even if he didn’t say the things they accused him of saying — and many rushed to claim that privacy is still alive and well and worthy of protection, even if it means an onerous federal data regulation regime.  But I wonder… how many of those people left Facebook or changed their behavior in any other way after they expressed that outrage?  I suspect most people went right along with their lives and probably jumped right back on Facebook and starting sharing even more about themselves with the world.

Maybe Obama should invite Google CEO Eric Schmidt and Microsoft CEO Steve Ballmer over to the White House for a beer to settle the two companies’ differences!

http://www.youtube.com/v/Q0umKaGxkkE While he’s at it, Obama might want to invite Apple CEO Steve Jobs, too, since the common cause Apple and Google once made against Microsoft now seems to be giving way to increased rivalry between the two titans of Internet cool. Or how about Facebook CEO Mark Zuckerberg, given Facebook’s growing challenge to Google? Yahoo!’s Carol Bartz seems to get along much better with everyone than the boys in the group, so she’d probably help Obama keep things under control. The Internet industry’s war-of-all-against-all is reminiscent of Tom Lehrer‘s classic 1960s satire “National Brotherhood Week”:

Facebook sparked a major user uprising when it amended its terms of service earlier this month to grant the social networking site greater licensing rights over user-submitted content. The implications of Facebook’s amended Terms of Use were originally uncovered by The Consumerist this past Sunday in a story entitled, “Facebook’s New Terms Of Service: ‘We Can Do Anything We Want With Your Content. Forever.'” The title pretty much sums up what the controversy was all about: under Facebook’s amended Terms of Use, even after a user deletes his Facebook account, Facebook would retain its license to distribute nearly all types of user-submitted content including photos and videos.

Predictably, news of Facebook’s expanded licensing rights made many users angry, with several Facebook groups against Terms of Use modifications popping up, attracting thousands of members overnight. As is often the case with juicy reports like this one, news of the Facebook fiasco spread throughout the blogosphere rapidly, eventually making its way to major tech sites and even the main page of CNN.com. By yesterday afternoon, a snapshot of Mark Zuckerberg‘s face was plastered on Fox News Channel, next to an excerpt of an entry he posted to Facebook’s blog in defense of the social networking site’s new terms.

Facebook’s explanation of its new terms seemed reasonable enough: even after a user quits Facebook, material that user has posted on friends’ walls and other messages the user has sent to others may remain available. Facebook also noted that its perpetual license only allowed the site to use material in accordance with departed users’ privacy settings (presumably at the time of their departure). Under the new terms, therefore, Facebook would still be required to respect albums marked as private–and ensure they stay that way.

But the seemingly stark contrast between Facebook’s attempts to justify the changes to its terms of use and, well, the actual language of terms themselves left many observers dissatisfied. In theory, if a user who had a Facebook photo album open to her entire network were to delete her account, Facebook would retain license to make those photos available to members of her network in perpetuity. And depending on how you parse the amended terms, Facebook could even use your profile pic in ads for the social network long after you terminated your Facebook account.

Would Facebook actually do any of these things? Probably not. As Zuckerberg pointed out, Facebook “wouldn’t share your information in a way you wouldn’t want.”  Taking this a step further, I think that even if Facebook saw a chance to earn a quick buck or two by selling departed users’ images, such a move would undoubtedly spur user backlash orders of magnitude more severe than anything the site has experienced before. Instead of thousands of users in arms, there’d be millions, and a mass exodus of users would be a very real possibility. Despite Facebook’s awesome success in the social networking arena, there are lots of robust alternatives to Facebook out there that would love nothing more than to provide a home to disaffected Facebook users. Facebook’s execs know all of this, which is why I highly doubt the site would ever commit any of the violations that some have speculated might be possible under the new terms.

Of course, none of these assurances–however comforting they may be–would hold up in court. Even though Facebook probably wouldn’t ever misuse its license to user content, it could under its new terms. That fact alone is unsettling to many users.

All these concerns were rendered largely moot this morning when Facebook announced that it had decided to revert to a previous version of its Terms of Use, thereby nullifying the changes responsible for the uprising. Facebook’s move isn’t especially surprising, nor is it unprecedented. Back in late 2007, Facebook unveiled an advertising service called Beacon that tracked the buying habits of Facebook users for advertising purposes. Beacon allowed your friends to see your purchasing habits, sparking privacy concerns and media scrutiny. After a few weeks, Facebook gave in to pressure and began allowing users to opt-out of Beacon entirely by changing their privacy settings.

The peaceful resolution of the latest Facebook fiasco further hammers home an argument that many of us TLFers have made time and time again: especially on the Web, companies have little choice but to listen to their users, and firms often find that they can’t get away with unsavory practices that might have flown under the radar in another era without spurring user backlash and, worse still, bad PR. As Bob Garfield aptly put it, when disputes between consumers and businesses arise in age of the Internet and the blogosphere, ” the Herd Will Be Heard.”

If Facebook had not relented, there’s a chance government would’ve gotten involved. Yesterday, the Electronic Privacy Information Center had announced it was “readying a complaint” against Facebook with the Federal Trade Commission. And even if that complaint hadn’t gone anywhere, chances are some member of Congress would have seen it fit to “investigate” social networking practices and send Facebook a detailed questionnaire about its content licensing policies.

But as the user uprising and Facebook’s quick reaction illustrate, markets are perfectly capable of resolving many kinds of disputes quickly and efficiently. Regulators are the dinosaurs of the digital era. Even if the FTC had acted on EPIC’s planned complaint, any regulatory ruling probably would not have emerged until long after the fiasco had been resolved–either by Facebook relenting, or by users ditching Facebook for a competing social network.

We’ll never know what would have happened had Facebook held firm, but if history is any guide, keeping regulators at bay may well have been a wise move on Facebook’s part.