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What Everyone Seems to Miss In Facebook's Private or Public Debate…

By - January 04, 2011

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…is the core reason it makes sense for Facebook to be public: Accountability to its customers. The rest of this debate is simply financial folks arguing amongst themselves.

Facebook is the greatest repository of data about people’s intentions, relationships, and utterances that ever has been created. Period. And a company that owns that much private data should be accountable to the public. The public should be able to review its practices, its financials, and question its intentions in a manner backed by our collective and legally codified will. That’s the point of a public company – accountability, transparency, and thorough reporting.

If Facebook wants to stay private and not be part of the social mores which we’ve built that govern major corporations (flawed though they may be), well I think that would be a major strategic blunder, one that would ultimately doom the company. It’s fine for all sorts of companies to stay private, for all sorts of reasons. But a company like Facebook, with its unprecedented grasp of our social data, should be accountable to the public. If it isn’t, we’ll migrate our “social graphs” to a company that is.

If Zuckerberg doesn’t want to be a public CEO and deal with the realities of that, as this Reuters piece argues, well, he should find a CEO who is willing to do the job.

(If you’re not up on the debate, here’s a primer.)

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45 thoughts on “What Everyone Seems to Miss In Facebook's Private or Public Debate…

  1. Satya Budi says:

    Hi Zuckerberg, I am willing to be a CEO to do the job FACEBOOK, hahaha….

  2. Ayala Rahav says:

    You are absolutely right, but I think it goes much deeper than just changing a CEO and going public. Because accountability is key, Facebook remains private. Its business model does not stem directly from users as a data bank model but caters for 3rd party revenue streams, the situation cannot be reconciled. Only when a paradigm shift reverses relations between providers and users will take place and technologies and mindset will allow for pull based permission and data exchange context based food chains, proactively managed by users who become equal partners in the food chains created about them, will Zuckerbergs relinquish their power ,acknowledge and act with humility and accountability that comes with assuming the culture of reciprocity and respect of truly catering for individuals.

  3. James says:

    This is dead on. Of course, FB is within its legal rights to stay (semi-)privately held. But, it does risk user backlash at some point. It won’t always be a darling. Very soon, it will be seen as some evil empire. It’s inevitable. But, at least being publicly traded will aid in their PR efforts.

  4. Marcus says:

    The Goldman deal will not hold up if the SEC is anything but sleeping (again!). The creation of a partnership for the some purpose of investing in a specific pre-identified company at pre-identified terms is a fundamentally different animal than a VC partnership deciding to invest into a company after the LPs committed capital — and therefore clearly violates the SEC’s 499 shareholder guidance. Anyone not seeing this got carried away a bit… So the SEC, if it is up to it’s job, will soon require FB to file statements in which case they nay as well trade public.

  5. “social mores which we’ve built that govern major corporations”

    Oh Brother. I don’t think “flawed as they may be” quite cuts it.

    I appreciate your point, but implying that going public will somehow make our data safer from moral transgressions, or Facebook more accountable is laughable, no?

    You are one of the smartest guys I read, but a Facebook IPO does nothing for the users.

  6. Dan Farfan says:

    “Facebook is the greatest repository of data about people’s intentions, relationships, and utterances that ever has been created. Period.”

    Are you seriously considering “the public” Facebook’s “customers?”

    Well at least you threw in “Period.” so we’d know you were… “serious.” (ha)

    “And a company that owns that much private data should be accountable to the public.”

    “Should be,” “that much,” huh? Based on what? Can you cite any examples that set a precedent for this imaginary, less than poetic, far from specific principle you are so certain of? Apparently not since your argument went circular instead. (double ha)

    Let me help you sleep better at night. Your entire (2 minute) thesis is based on a supremely flawed premise. When 580,000,000+ users render information to Facebook (and their only real customers aka advertisers) it ceases to be private. When you check-in, it ain’t private. When you “like” and “poke” and “friend” and whine that Suzy wouldn’t kiss you after the dance, it ain’t private.

    If it’s a principle to modernize you seek, I suggest this one:

    “Knucklehead beware.”
    (Latin translation pending ;-)

    Dan

  7. selo says:

    FB is the best social network rigth now, whatever people said about it is just terrible thing.
    I’m agree in whatever mark said.

  8. Active says:

    Looks like Mark is a computer freak not a bussinessman. And i can relate to that. But Facebook is to big of a deal to just let it be. It became an important thing in our lives, where Mark likes it or not.

  9. oldfart says:

    flaw: being responsible to your shareholders as a public company is NOT the same as being accountable to your registered users in how you use their private personal info. your larger more powerful shareholders will mostly be large business entities who care about user privacy only in so far as it affects the bottom line. ‘shareholder value’ will not much equal accountable privacy management.

    think zuck has thot it thru now and is aware of this. hope he promises to ‘not be evil’.

  10. Very interesting, I have just written a Social Media Training blog post about whether Facebook will Float, I thought you might be interested and feel free to add your own opinion.

  11. coconutz says:

    John has been reading Atlas Shrugged over the weekend.

    Completely support and feel compelled for Congress to pass Social Network Accountability Act for Betterment of World Citizens.

    Zuckerberg should be stripped off his powers, and a people-elected Committee on Social Networks can make qualified and unbiased decisions.

  12. Good for U. I think its one of the most informative post in this theme. Lookin’ forward.

  13. LIAD says:

    Why should FB be penalised for it’s success.

    Legally it doesn’t need to be a PLC as far as I’m concerned – end of story.

  14. Gil Press says:

    Did Google going public changed anything in what it tells us about what it knows about us or what it plans to do with that information?

  15. Alex says:

    I think you are confusing financial accountability with accountability to the public. A public company has no more obligation to the public than a private one. Philip Morris was a public company when it was doing nothing but sell cigarettes. All the additional rules applied to a public company have to do with financial reporting. Zuckerberg would go to jail if he misrepresent the company’s earnings but not for misusing the data that was gathered on facebook.

  16. Robby says:

    Can you please cite examples of and explain why you think publicly-owned companies are necessarily more responsible and transparent with their non-financial data?

  17. Vince says:

    This is an amazingly flawed argument. Public companies are NOT accountable to their customers (by securities rules and regs), only their shareholders. Securities laws in the US (as they’re intended to be enforced) aim to insure that the market skews towards being a level playing field and that, in the case of public companies, all information is known to all participants at the same time.

    Your only rights as a Facebook customer are spelled out in their terms of service and other agreements you agree to by using the service. You have NO right to review its practices, its financials, or question its intentions beyond canceling your account. By all means, vote with your dollar, or your mouse click, but get off your high horse, please.

    Where the deal with Goldman stinks has been spelled out in numerous other articles, and its more than “financial folks arguing amongst themselves. A specific class of investor (those with $2MM to invest in the fund) are being given special treatment, thus skewing the market towards a less level playing field. And that skew, is ultimately detrimental to the principles of liberty and a free market. Its the SEC’s responsibility to regulate this though, not Facebook’s.

  18. Eric Hair says:

    It is publicly controlled, the day everyone deletes their account is the day FB dissolves. They’re valueless without their users.

    And your “rights” don’t extend beyond your initial choice to use FB or not.

  19. What about being a publicly traded company makes the company accountable to the public? Rather, they’re accountable to their shareholders.

    And even if they were, which public? The US public? The Germany public? Perhaps, eventually, a Chinese public?

    This seems to be be a very thin argument.

  20. Nick Lamothe says:

    Going off of what commenters are saying about publicly traded companies being accountable to shareholders, not the public:

    Would a board of shareholders actually further endanger our information? Shareholders seek dollars, and would need to distribute our information in mass quantities to achieve.

    Maybe this is already happening, but either way I can’t see the business men in suits with cigars refusing to “abuse” our information when they see how much value it holds when sold.

    Great conversation piece!

  21. RosarioM says:

    You are incredibly misinformed. Maybe do some research before posting or write about what you know. Clearly this topic is not it.

    1. Users are not FB’s customers. Their advertisers are. At most, the users are content providers.

    2. Users can protect themselves against FB by deleting their account. How does FB being mismanaged or going bankrupt affect the user financially? Maybe for companies like Zynga, but not the users. So if there is no financial protection needed for the user (who gets the service for free) why does FB need to disclose how it runs it’s business?

  22. Tim says:

    hilarious. you don’t even know who FB’s customers are.

  23. John says:

    Wow, a lot of comments saying “you don’t know what you’re talking about.” OK, I’m not a public company analyst, but I do know that shareholders own Facebook, not its customers. However, a public company is way easier to “own” as a customer – but one share and you have some rights. Truth is, a public company discloses a lot more information about its business than a private one. And that provides journalists and private citizens a lot more accountability, is my point.
    I’d argue that Facebook views its customers as its users, but I’ll let someone from Facebook confirm that.

  24. Tom says:

    My comment for NYT article re Goldman ‘investment’:

    There are certain ‘inventions’ that will inevitably arise in some form or another given the development of the ‘landscape’ that makes that possible. They can almost be considered forgone conclusions… they are emergent properties of the technologies that make them possible.

    And some of them (especially in NEW landscapes) have a tendency towards concentration (a natural total or near monopoly).

    The peer-to-peer networking offered by Facebook is one such form.

    Like with search before… where Google wasn’t the first to enter the field… once a certain tipover point is reached… dominance becomes self-reinforcing.

    So it is with Facebook… there were (and are) others… but a tipover point may have been reached. Though I wouldn’t count on it… (and believe its not the case, at least without some missing needed capabilities and broader focus than data collection for advertisers and governments and as a marketing tool).

    Because while Facebook has many wonderful features… (Yes, I do have a Facebook account)…

    I don’t think it gets to the heart of the requirements for peer-to-peer association and empowerment in an absolutely critical new landscape. Sometimes missed potentials are not regained.

    Examples from the past:
    Telephone and television… and reaching even farther back… the creation of money and the mechanisms of ‘credit creation’… (which many of us here see as a very troubled technology.)

    Because of cultural inertia and a natural need for stability… patterns laid down by the first players to gain dominance in such new landscapes become extremely difficult to dislodge.

    Sometimes this can be for the best… usually not.

    Many of televisions initial potentials for civic engagement and localization of political participation were lost… and in fact turned upside down… by its solidification in community unfriendly ways (in this country at least). The INERTIA of certain technology implementations becomes extremely difficult to dislodge even when obviously faulty.

    (I’m 61 and for my whole life people have been pointing out… and its scarcely disputable… that the public airwaves could make campaigning a whole lot cheaper… and candidacy available to more than just the ‘pre-approved’ candidates. Yet media costs and the money quest continues to be a thorn in the side of honest politics and good governance… hmmm… I wonder who’s interest THAT serves?)

    In a way, Facebook and other such sites are trying to address… and/or even bridge a very difficult gap mankind has to address as ICT quickly goes global. In evolutionary terms its essentially instantaneous.

    THERE IS A FUNDAMENTAL SCALING ISSUE IN HUMAN SOCIETIES ASSOCIATED WITH NATURAL HUMAN COMMUNITY SIZE (Dunbar’s Number), THE ALTRUISM PROBLEM (there’s an unavoidable discontinuity between biological and intellectual altruism) AND COGNITIVE LIMITS (the “attention economy”).
    In short… our personal networks are smaller than the social organism of which we are a part. This is both unavoidable and problematic.

    Social Networks & The Social Organism: Healing the Breach
    http://culturalengineer.blogspot.com/2009/05/social-networks-social-organism-healing.html

    THE DEVELOPMENT OF THE WEB IS THE MOST FUNDAMENTAL CHANGE IN PEER-TO-PEER RELATIONSHIP SINCE THE MOVE TO SETTLED EXISTENCE!

    The Internet landscape is being rapidly carved up into private fiefdoms.

    I strongly, even urgently (at considerable personal sacrifice; I’m without support or connections) have been pointing out that at least one corner (a critical corner in my opinion) should be reserved to the Commons… to ALL of humanity.

    The Commons-dedicated Account System:

    A self-supporting , Commons-owned neutral network of accounts for both political and charitable monetary contribution… which for fundamental reasons of scale must allow a viable micro-transaction. Such a network ideally should maintain its own cloud and bank. Accounts may be created and/or maintained with zero balances and/or only momentary balances during a pass-through transfer (I believe the monetization model requires no burden on the actual transaction.)

    Gov 2.0 and New Economies – Designing the Social Contract
    http://culturalengineer.blogspot.com/2009/09/gov-20-and-new-economies-designing.html

    Political Fundraising: Act Blue, Facebook and the Missing Network Imperative
    http://culturalengineer.blogspot.com/2010/08/political-fundraising-act-blue-facebook.html

  25. Jeffrey says:

    Enron was public, wasn’t it? Pamalat was public, wasn’t it? Etc, etc…. So going public is not a solution….

  26. Andy says:

    I suspect that the future of Facebook won’t be as simple as going public or staying private. The platform itself has transcended a mere product to become a massively important communications platform that wields tremendous influence.

    Think about it: if Google were to disappear today, what would happen? We could still find other search engines, email providers, or what have you. But what would happen if Facebook were to disappear today? It has become so ingrained into the culture so quickly that to consider it a company like Google, Wal-Mart, or Phillip Morris is to vastly underestimate it’s influence.

    I don’t have an answer for what kind of company Facebook is, but it certainly isn’t a company that fits into the past paradigms.

  27. dasmoove says:

    John, you’re off your rocker.

    Being a publicly-traded company, with the disclosures that that entails, has nothing to do with reporting to the general public. It has everything to do with liquidity for investors and cheaper and easier access to capital for the company. The fact that the general public also has access to the company’s disclosure reporting is only a by-product of those purposes.

    Now, if the US GOVERNMENT was to create laws requiring more disclosure of how Facebook (or Google, etc.) uses the information it gathers, that is a different story. And one I am in favor of.

    But that has nothing to do with going public or staying private.

  28. ben says:

    John, really, the only reasons people are saying you don’t know what you’re talking about is because you seem to think that Facebook being public would have any sort of user-privacy-driven impact on its data policies, and you naively imagine that Facebook’s users are its customers.

    Other than having any sort of understanding about how public listing of a company works, and how the business/customer relationship works, I’m sure you’re very well-informed about this issue and you know lots, and if “everyone else seems to miss” some stupid nonsense that you made up, well, that’s our loss.

  29. Alan says:

    I’m not sure how you come up with core reason Facebook becoming a public company will be: “Accountability to its customers.”

    If Facebook becomes a public company, the accountability will be to SHAREHOLDERS. Shareholders and customers are not the same thing.

    If anything, going public will make them less accountable to their customers. They are going to look at monetizing ANYTHING and EVERYTHING they can to increase the bottom line.

    Do you think that means they are going to be more or less evil company? I’m not saying they’re either at the moment, but the potential for abuse is huge.

  30. Wilson says:

    I’m sorry but like many others who’ve posted this argument simply makes no sense. Leaving aside the confusion over just who Facebook’s customers are (advertisers versus users), just how does trading shares make a company accountable to its customers or the public? At least this day and age, yes, I’m aware of Smithian and such arguments as to how a larger pool of investors creates a more communal responsibility, but we’re not seeing that by any stretch nor – much much more central to this article – does the public see any difference or have any concern over public versus private companies. Google being public has by itself created no perception differences for the public in measuring the ability of Google to meet perceived social and privacy obligations versus the ability of Facebook to do so. And most users/consumers certainly won’t care or perceive any meaningful difference in FB going public. And rightfully so, for no data suggests companies are more accountable (BP?? Enron?????).

  31. Lui says:

    How can anyone think Facebook will be a better company by going public? I mean what’s the whole goal of wall street?
    That if you buy a share on monday, you need to make a significant profit by friday… How can any company be run in such way that would not affect customer service or do what’s right instead of what will make the most money?
    I hope Mark understands that money is not everything and the only way to continue growing Facebook is if he continues to only implement his ideas and the ones around him.

  32. John says:

    I wonder about the huge delay of Facebook going public.. what do they need a whole year for?

  33. getsdro says:

    Mark is just understand well on computer and or social networking but not in a business.

  34. Completely support and feel compelled for Congress to pass Social Network Accountability Act for Betterment of World Citizens

  35. mexe says:

    This is dead on. Of course, FB is within its legal rights to stay (semi-)privately held. But, it does risk user backlash at some point. It won’t always be a darling. Very soon, it will be seen as some evil empire. It’s inevitable. But, at least being publicly traded will aid in their PR efforts

  36. jackson says:

    I also agree facebook has to much of our information to be so private i mean who knows what they can use against someone or company for that matter if they really wanted to

  37. Deborah Lee says:

    The beauty of these blogging engines and CMS platforms is the lack of limitations and ease of manipulation that allows developers to implement rich content and ‘skin’ the site in such a way that with very little effort one would never notice what it is making the site tick all without limiting content and effectiveness

  38. I am using Facebook for local bussiness an it is great and really profitable. Thank for for Zuchenberd for this Idea.

  39. Thanks for article. I am ready to be Facebook CEO :D

  40. Facebook have two diffeent side negatif and positif. I don’t like uses facebook just for fun. It is makes boring.

  41. apit says:

    included me..lol

  42. guest says:

    The intention of your article is clear, but your logic is deeply flawed.
    Response to a few things

    1) “accountability to its customers”
    We are not facebook’s customers.
    We are its product, which they sell to their real customers, the advertisers and data buyers.

    2) “the point of a public company – accountability, transparency, and thorough reporting”
    The obligations of this sort of a public company is mainly about fiscal accountability to its shareholders. It has nothing to do with any ethical obligations in handling our private data.

  43. General News says:

    Let me help you sleep better at night. Your entire (2 minute) thesis is based on a supremely flawed premise. When 580,000,000+ users render information to Facebook (and their only real customers aka advertisers) it ceases to be private. When you check-in, it ain’t private. When you “like” and “poke” and “friend” and whine that Suzy wouldn’t kiss you after the dance, it ain’t private.

  44. The creation of a partnership for the some purpose of investing in a specific pre-identified company at pre-identified terms is a fundamentally different animal than a VC partnership deciding to invest into a company after the LPs committed capital

  45. So helpful and so useful post. Thanks for such informative post. Good job.

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