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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 <ul><li>The Crisis: </li></ul><ul><ul><li>Tremendous pressure to generate revenue </li></ul></ul><ul><ul><li>Violations of Privacy </li></ul></ul><ul><li>Dilemmas: </li></ul><ul><ul><li>Ethical </li></ul></ul><ul><ul><li>Legal </li></ul></ul><ul><ul><li>Financial </li></ul></ul><ul><li>Solution: “reviewbook” TM </li></ul><ul><ul><li>Respects user privacy </li></ul></ul><ul><ul><li>Better targeted ads </li></ul></ul>

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Negative Press

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Pressure to generate revenue $150 M $300 M Facebook’s Revenue

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Violations of Privacy <ul><li>Beacon </li></ul><ul><ul><li>Why it was made </li></ul></ul><ul><ul><li>What it did </li></ul></ul><ul><ul><li>What happened </li></ul></ul><ul><li>Flawed Privacy Practices </li></ul><ul><ul><li>Wild-Wild-West Methodology </li></ul></ul>

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Ethical Dilemmas <ul><li>Invading Privacy </li></ul><ul><li>Violating the Duty of Care </li></ul><ul><ul><ul><li>Informed Consent </li></ul></ul></ul>

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Ethical Dilemmas: Invading Privacy <ul><li>3 rd Party information exchange </li></ul><ul><li>Highly deceptive </li></ul><ul><li>Beacon stores all information exchanges even if the user does not wish to publish information </li></ul><ul><li>Beacon launch was unannounced to users </li></ul>

8.
Ethical Dilemmas: Invading Privacy <ul><li>Traffic to Facebook’s “Privacy” Settings Page </li></ul>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)

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Ethical Dilemmas: Violating the Duty of Care <ul><li>Digital Immigrants </li></ul><ul><ul><li>Not born during the digital age (over the age of 28) </li></ul></ul><ul><ul><li>Often have poor understanding of the Internet and its capabilities </li></ul></ul>May 2007 User Distribution

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Ethical Dilemmas: Violating the Duty of Care <ul><li>Chose investors over other stakeholders </li></ul><ul><li>Did not care for its users in the most fundamental ways </li></ul><ul><ul><li>Contributing to society and human well being </li></ul></ul><ul><ul><li>Be honest and trustworthy </li></ul></ul><ul><ul><li>Respect the privacy of others </li></ul></ul><ul><ul><li>Honor confidentiality </li></ul></ul>

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Legal Dilemmas <ul><li>Potential legal liability </li></ul><ul><li>Interpretation of the Law </li></ul><ul><li>Law cannot keep up with technology </li></ul>

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Legal Dilemmas: Potential Legal Liability <ul><li>No current legal cases against Facebook </li></ul><ul><li>Legal reviews of Facebook </li></ul><ul><ul><li>MoveOn.org </li></ul></ul><ul><ul><li>EPIC.org </li></ul></ul><ul><ul><li>Center for Digital Democracy </li></ul></ul>

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Legal Dilemmas: Interpretation of the Law <ul><li>New York Law of Torts: </li></ul><ul><li>§ 652C Appropriation of Name or Likeness </li></ul><ul><li>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.” </li></ul>

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Legal Dilemmas: Interpretation of the Law <ul><li>California Online Privacy Protection Act of 2003 </li></ul><ul><ul><li>Requires commercial websites to post a privacy policy </li></ul></ul><ul><ul><li>Policy must state a list of the categories of third-parties with whom the operator may share such personally identifiable information </li></ul></ul>

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Legal Dilemmas: Law cannot keep up with Technology <ul><li>Law should not solely guide business practices </li></ul><ul><li>Facebook should set a precedent for other social networking sites </li></ul>

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Financial Dilemmas <ul><li>Jeopardizing user growth </li></ul><ul><li>Loss of potential revenue </li></ul>PRIVACY USERS

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<ul><li>Average Daily Visitors Worldwide </li></ul>Financial Dilemmas: Jeopardizing User Growth

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Financial Dilemmas: Loss of Potential Revenue

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Solutions: Recent action steps <ul><li>New privacy controls </li></ul><ul><li>Announced privacy policy on home page </li></ul><ul><li>Changed Beacon to opt-in </li></ul><ul><li>Public statements </li></ul>

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HCP Consulting Solution <ul><li>reviewbook TM : </li></ul><ul><ul><li>Facebook formatted application </li></ul></ul><ul><ul><li>User-generated review system </li></ul></ul><ul><ul><li>Increased revenue </li></ul></ul><ul><ul><li>No 3 rd party information exchange </li></ul></ul>

22.
Projected Revenue <ul><li>Premium : </li></ul><ul><ul><li>$4,500 per campaign x 2,000 campaigns = $9,000,000 </li></ul></ul><ul><li>reviewbook : </li></ul><ul><ul><li>Large box: $.004 x 5% users x 30 pages = $414,000 </li></ul></ul><ul><ul><li>Small box: $.003 x 5% users x 30 pages = $310,500 </li></ul></ul><ul><li>Banner ads: </li></ul><ul><ul><li>25.2 M users per day x 5 pages = 126 M </li></ul></ul><ul><ul><li>126 M x $.004 x 30 days = $15,120,000 </li></ul></ul><ul><li>Click-throughs: </li></ul><ul><ul><li>126 M x 2% x $.05 x 30 days = $3,780,000 </li></ul></ul><ul><li>Total monthly revenue $28,624,500 </li></ul>

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Solution: reviewbook TM <ul><li>Ethical: User-generated information </li></ul><ul><li>Legal: No 3 rd party exchange of information </li></ul><ul><li>Financial: More effective targeted ads </li></ul>

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Getting back to your roots <ul><li>Putting power back in user hands </li></ul><ul><li>Facebook is a tool with great avenues of making money </li></ul><ul><li>Mission driven </li></ul><ul><ul><li>Connecting people to people </li></ul></ul><ul><ul><li>Privacy </li></ul></ul><ul><ul><li>Profits </li></ul></ul>

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Questions/Comments ©2008