Facebook Moves to Standardize and Own Customer IDs

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At the same time, the changes may help companies that are looking to profit from Facebook's data hoard. On Dec. 2, Internet portal Yahoo! (YHOO) announced a partnership with Facebook that will let users of the social network identify themselves on Yahoo sites and share articles, photos, and other content with friends. In a part of the agreement that was not announced, Yahoo also intends to tap Facebook user data to place display ads more relevant to individuals on its own pages, according to a source familiar with the plan. In theory, this means advertisers will soon be able to pay Yahoo to get ads in front of specific demographic groups, such as women from California, as long as those users have shared their Facebook credentials with the site.

Cox says most services on the Web become more useful when the providers know something about the users. More than 80,000 sites are currently using Facebook Connect. When people sign in to YouTube with Facebook Connect, the video site prompts them to watch clips and shows that their friends enjoyed. CNN invited online viewers of President Barack Obama's inauguration to identify themselves, using Facebook Connect, and then chat with others watching the ceremony.

a "default identity repository?"

Other Web-connected devices such as Apple's (AAPL) iPhone and Microsoft's (MSFT) Xbox gaming console have begun powering applications by using Facebook Connect, letting friends play games and catch up with each other, even while they're away from the PC. This is just the tip of the iceberg, says Facebook's Cox. With a greater variety of devices connecting to the Internet, from TVs to GPS units in the car, Facebook sees potential to work with manufacturers on designing experiences oriented around people, instead of information. "If you as a user could expose your information in a way you are comfortable with, and that was safe, you would have much better experiences with these devices," Cox says. Think of getting in your car and telling the GPS to give you directions to a person, rather than a specific address.

Taking on the role of a universal identity manager for all aspects of the Web comes with responsibilities that Facebook may not be ready to assume, says Kaliya Hamlin, co-founder of the Internet Identity Workshop. "I'm incredibly concerned about the fact that Facebook is becoming the default identity repository," she says. "Fundamentally, Facebook is a business. Their business is about monetizing the people in their network." As Facebook pushes to increase its revenues, expected to hit $500 million in 2009, it's likely to find ways to profit from this data, such as by selling it to advertisers.

Facebook says it doesn't want to be the only keeper of online identity standards. Recordon says competition from companies such as Google will help push everyone to come up with ways to protect privacy while also helping people maintain their identities. "Innovation is important," he says.

Then again, so is making money. The more information Facebook can share exclusively with advertisers and partner Web sites, the more revenue it stands to generate. "When they start allowing brands and agencies to customize audiences, it is a no brainer that it becomes the single biggest piece of their business," says Andy Monfried, CEO of social ad network Lotame.

In the long run, profit may prove more alluring than privacy. That's why "it's just too soon to let Facebook determine the future of identity on the Web," says OpenID's Messina.

Douglas MacMillan is a staff writer for BusinessWeek in New York.

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