Facebook today altered their privacy settings to tame what they called “something of a Frankenstein monster” of a privacy control panel. Facebook’s claim is that the way new features had been added caused the number of privacy setting checkboxes to grow like weeds. That may be true.
However, Facebook also leaned on a phenomenon regarding opt-in and opt-out behavior (first brought to my attention by Dan Ariely, an expert in Behavioral Economics). In short, there was a discrepancy in the rate of participation in organ donor programs between European countries. After normalizing for cultural factors, it still didn’t make sense (Austria had a low rate of participation, while Germany’s was high). What he did was look at the enrollment form for each country. Austria asked people to check a box if they wanted in, Germany asked them to check if they wanted out. Turns out, if the decision is complex enough, people will opt for the default. Facebook’s default options worked in Facebook’s favor.
Facebook makes money by advertising to you – or, more specifically, by selling your attention to advertisers. The better Facebook is at guarantying your attention is worth an advertiser’s time, the higher a premium they can charge for your attention. The way they can do this is by analyzing your personal information. If you (and many of your friends) “like” a group about salty snack foods, the better the chance that you’ll follow an ad for Fritos. Actually, they don’t even have to do the analysis, they can sell the whole lot of data to Frito Lay to parse on their own and select the highest value demographic to present with ads.
This is part of Facebook’s revenue stream. While today’s changes help quell the outrage over privacy and prevent folks from leaving Facebook, I think Facebook is still hoping that the opt-in/opt-out effect leaves a large enough pool of sell-able data that they won’t feel a financial pinch.
If, however, people stay on the platform and uncheck too many boxes, that will have an equally negative effect on Facebook’s bottom line. It is a business after all; it takes money to keep servers running and employ programmers to fix bugs and deliver new functionality. If the bottom line is hit hard enough, Facebook may have to examine another break-even point.
What Facebook will realize (and, as a result, Facebook users as well) will realize is that Facebook has created a demand for privacy. People dove into the pool and started having fun before Facebook installed windows in the pool walls. I’m heavily invested in Facebook because it keeps me in touch with around five hundred friends. There is no other platform out there that allows me to do that. Someday, Facebook will ask what that’s worth to the user. How much would they have to charge users to make up for lost revenue from not sharing data? How much of that will the user be willing to pick up to maintain connections? At what price point would enough users leave so that it wouldn’t be worth it?
Privacy is a major concern for people today. It should be. We have less of it than we’ve ever had. How much would maintaining your privacy on a platform like Facebook be worth? Or, is Facebook a platform worth the price of your privacy? My guess is that we’ll find out soon.