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Reflections on Facebook: Is Privacy the Next Big Thing?

Posted By David Brousell, May 29, 2012 at 1:23 PM, in Category: Transformative Technologies

I'm often asked to give people an idea of what's ahead, what's around the corner, so to speak, based on my understanding of the key social, economic, business, and technology trends shaping our industry.

The stock answer is usually some combination of factors such as globalization, changing demographics, and technologies that are affecting all manufacturers. By looking at where production is increasingly occurring, the expectations of people consuming products, and tech developments such as cloud computing, mobility, and social networking, one can pretty easily extrapolate what might be in the years ahead.

I can say with great certainty that production will continue to grow in China and the other BRIC countries. I can say with great certainty that people will increasingly buy more products online. And I can say with great certainty that computing will occur more and more in the cloud, mobility will accelerate as devices become more intelligent, and billions more people will become connected via social media in the years ahead.

That's the great benefit of straight-line thinking. It is also why it is almost certain to miss the next big thing.

In the last couple of weeks, I've been thinking a lot about Facebook's initial public offering -- not necessarily the still-unsettled financial results, but what the milestone of this company going public means in a larger sense for connecting people, for information about them, for what's open and what's private, for the business of social networking itself. And make no mistake about it: Facebook is now truly a commercial enterprise, subject to the same market forces as any business.

Wherever the stock price settles, the valuation of the company will still be large – and impressive. What's even more impressive is that Facebook had, at the time of the filing of its prospectus, 901 million monthly active users, or MAUs, as Facebook calls you and me.

What started as a way for college students at Harvard to rate girls has become a huge commercial business channel for all types of organizations looking to understand and influence your brand perceptions and buying behavior. In fact, a substantial majority of Facebook's revenue comes from advertising. Its future prospects as a business -- now a public company that must provide returns to shareholders -- will increasingly depend upon its ability to be attractive to advertisers.

"Facebook was not originally created to be a company," says Mark Zuckerberg, Facebook's CEO, in a letter in the prospectus. "It was built to accomplish a social mission -- to make the world more open and connected….

"Today, our society has reached another tipping point. We live at a moment when the majority of people in the world have access to the Internet or mobile phones -- the raw tools necessary to start sharing what they're thinking, feeling, and doing with whomever they want. Facebook aspires to build the services that give people the power to share and help them once again transform many of our core institutions and industries."

One of those "core institutions” that Facebook is already transforming is that of intermediary between buyers and sellers, the role performed by many different business-to-business and business-to-consumer media companies.

It is estimated that Facebook's "audience" will reach 1 billion users sometime late this summer, a huge market by any standard. You are a valuable commodity to Facebook -- and a value that is related to your purchasing power and your connections.

The Facebook audience creates enormous amounts of information about itself in the form of personal information, preferences, downloads, and the like -- the type of information desirable to purveyors of any product or service so they can better target their selling efforts. What's interesting, though, is that according to studies by International Data Corp., more information is being created about people than they are creating about themselves.

That, of course, is the currency in which Facebook trades. But what of its "social mission"? Will this mission continue to hold sway as Facebook increasingly has to function as any other commercial, public business, serving not only users but Wall Street and shareholders as well?

It will be an interesting balancing act for the young company to perform, even as its inherent momentum allows it to continue on its "social mission" somewhat on auto-pilot. That mission -- to make the world more open and connected -- should continue to have many positive consequences politically, economically, and socially. Closed, oppressive societies may become more open and tolerant. Businesses may be able to reach previously unreachable buyers with great efficiency, offering products and services they want and need. People may feel better about themselves by establishing new connections with other people, or re-establishing connections with long-lost friends and associates.

But we must also be increasingly aware of the risks associated with the great electronic connectivity wave brought to us by Facebook, other forms of social media, and by information and communication technologies in general. The medium can be used for ill just as quickly, perhaps even more quickly, than it can for good. As individuals and in our businesses, we must raise our guard against privacy violations, identity and intellectual property theft, financial fraud, and cyber-attacks in many forms.

Facebook itself has been sued and challenged many times by individuals alleging privacy violations as well as states concerned with the issue. In February, for example, the owner of the Baltimore Orioles, who is also an attorney, filed a federal lawsuit against Facebook for allegedly tracking users who ventured off the Facebook Website. And in California this month, a class-action suit was filed that combines 21 privacy cases involving tracking. The California suit seeks $15 billion in damages.

Regardless of where these suits end up, Facebook's IPO conveniently signals us that it is time to re-think what "open" means and how much about ourselves we should be sharing on worldwide networks. Where is the boundary line between what could be open and what should not?

It would be easy to say that the next big thing is that social media will become even bigger and more pervasive (and it will), with Facebook reaching 2 billion MAUs in a short period of time. But the next big thing may, in fact, be counter-intuitive.

I think we are now entering a period when people will be placing a higher value on their privacy and everything that goes with protecting themselves and their property. As the social media market matures, we should all expect a series of market adjustments and corrections.

A higher value on privacy may indeed be one of them.

Written by David Brousell

Global Vice President, General Manager and Editorial Director of the Manufacturing Leadership Council

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