News

net.wars: The creepiness effect

"Facebook is creepy," said the person next to me in the pub on Tuesday night.

The woman across from us nodded in agreement and launched into an account of her latest foray onto the service. She had, she said uploaded a batch of 15 photographs of herself and a friend. The system immediately tagged all of the photographs of the friend correctly. It then grouped the images of her and demanded to know, "Who is this?"

What was interesting about this particular conversation was that these people were not privacy advocates or techies; they were ordinary people just discovering their discomfort level. The sad thing is that Facebook will likely continue to get away with this sort of thing: it will say it's sorry, modify some privacy settings, and people will gradually get used to the convenience of having the system save them the work of tagging photographs.

In launching its facial recognition system, Facebook has done what many would have thought impossible: it has rolled out technology that just a few weeks ago *Google* thought was too creepy for prime time.

Wired UK has a set of instructions for turning tagging off. But underneath, the system will, I imagine, still recognize you. What records are kept of this underlying data and what mining the company may be able to do on them is, of course, not something we're told about.

Facebook has had to rein in new elements of its service so many times now – the Beacon advertising platform, the many revamps to its privacy settings - that the company's behavior is beginning to seem like a marketing strategy rather than a series of bungling missteps. The company can't be entirely privacy-deaf; it numbers among its staff the open rights advocate and former MP Richard Allan. Is it listening to its own people?

If it's a strategy it's not without antecedents. Google, for example, built its entire business without TV or print ads. Instead, every so often it would launch something so cool everyone wanted to use it that would get it more free coverage than it could ever have afforded to pay for. Is Facebook inverting this strategy by releasing projects it knows will cause widely covered controversy and then reining them back in only as far as the boundary of user complaints? Because these are smart people, and normally smart people learn from their own mistakes. But Zuckerberg, whose comments on online privacy have approached arrogance, is apparently justified, in that no matter what mistakes the company has made, its user base continues to grow. As long as business success is your metric, until masses of people resign in protest, he's golden. Especially when the IPO moment arrives, expected to be before April 2012

The creepiness factor has so far done nothing to hurt its IPO prospects – which, in the absence of an actual IPO, seem to be rubbing off on the other social media companies going public. Pandora (net loss last quarter: $6.8 million) has even increased the number of shares on offer

One thing that seems to be getting lost in the rush to buy shares – LinkedIn popped to over $100 on its first day, and has now settled back to $72 and change (for a Price/Earnings ratio 1076) – is that buying first-day shares isn't what it used to be. Even during the millennial technology bubble, buying shares at the launch of an IPO was approximately like joining a queue at midnight to buy the new Apple whizmo on the first day, even though you know you'll be able to get it cheaper and debugged in a couple of months. Anyone could have gotten much better prices on Amazon shares for some months after that first-day bonanza, for example (and either way, in the long term, you'd have profited handsomely).

Since then, however, a new game has arrived in town: private exchanges, where people who meet a few basic criteria for being able to afford to take risks, trade pre-IPO shares. The upshot is that even more of the best deals have already gone by the time a company goes public.

In no case is this clearer than the Groupon IPO, about which hardly anyone has anything good to say. Investors buying in would be the greater fools; a co-founder's past raises questions, and its business model is not sustainable

Years ago, Roger Clarke predicted that the then brand-new concept of social networks would inevitably become data abusers simply because they had no other viable business model. As powerful as the temptation to do this has been while these companies have been growing, it seems clear the temptation can only become greater when they have public markets and shareholders to answer to. New technologies are going to exacerbate this: performing accurate facial recognition on user-uploaded photographs wasn't possible when the first pictures were being uploaded. What capabilities will these networks be able to deploy in the future to mine and match our data? And how much will they need to do it to keep their profits coming?