Facebook's Privacy Puzzle

The social networking behemoth needs to strike a balance between the needs of two groups of customers: those who use it and those who finance it

By Rick Wartzman

In his book The Facebook Effect: The Inside Story of the Company That Is Connecting the World, David Kirkpatrick describes how when Mark Zuckerberg was beginning to build his social-networking business, he would sit around on weekends and read the works of Peter Drucker. Now, it seems, would be a pretty good time for Zuckerberg to make sure he and his entire team brush up on Drucker's teachings about the customer.

In particular, the folks at Facebook would do well to consider Drucker's notions about how to juggle the needs of primary customers (in Facebook's case, its 500 million users, who have certain expectations when it comes to privacy) and supporting customers (the company's advertisers, who are eager to access and exploit as much customer data as possible).

"The primary customer is never the only customer, and to satisfy one customer without satisfying others means there is no performance," Drucker asserted. "This makes it very tempting to say there is more than one primary customer, but effective organizations resist this temptation and keep to a focus—the primary customer."

Creating a Community

On a basic level, Facebook has clearly figured out how to give its primary customers what they're looking for: a way to share messages, photos, videos, and other information with groups of friends. Indeed, that one out of every 13 people on the planet is on Facebook attests to the staggering power of the product.

It is an innovation that Drucker, even though he was computer shy, would have greatly appreciated. "People do need a community," Drucker wrote in his 1993 book Post-Capitalist Society. "They need it particularly in the sprawling huge cities and suburbs in which more and more of us live. One can no longer count … on neighbors who share the same interests, the same occupations, the same ignorance, and who live together in the same world. Even if the bond is close, one cannot count on family."

At the same time, Facebook also seems to be satisfying its other customers—the marketers hoping to target ads to those online. In an interview last week with Bloomberg, Facebook chief operating officer Sheryl Sandberg crowed that some of the Palo Alto (Calif.) company's biggest advertisers have upped their spending at least 10-fold in the past year.

A Clash With Advertisers

But increasingly, the needs of these two camps—users (who participate on Facebook for free) and advertisers (who pay the bills)—appear to be coming into conflict. Striking the proper balance can be tricky for all sorts of enterprises. A hospital, for instance, must decide "whether the patient or the physician is the primary customer," Drucker noted. And nonprofit organizations routinely run into a thicket of competing "customer" interests: those of funders, volunteers, and the people they serve.

At Facebook, tensions have been mounting steadily. In May, The Wall Street Journal reported that once someone clicked on an ad, data were being shared with the advertiser that could potentially reveal the user's name, age, hometown, and occupation, depending on how much public information the person had disclosed on his or her profile. After the story broke, Facebook said it was fixing the situation, while maintaining that its policy is never to share user information without the person's consent.

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