Lyons: How Google & Facebook Violate Your Privacy

Google recently introduced a new service that adds social-networking features to its popular Gmail system. The service is called Buzz, and within hours of its release, people were howling about privacy issues—because, in its original form, Buzz showed everyone the list of people you e-mail most frequently. Even people who weren't cheating on their spouses or secretly applying for new jobs found this a little unnerving.

Google backtracked and changed the software, and apologized for the misstep, claiming that, gosh, it just never occurred to us that people might get upset. "The public reaction was something we did not anticipate. But we've reacted very quickly to people's unhappiness," says Bradley Horowitz, vice president for product management at Google.

It's hard to imagine Google could have been so clueless. Google's coder kiddies may be many things, but stupid isn't one of them.

Same goes for Facebook. In December, Facebook rolled out a new set of privacy settings. A spokesman says the move was intended to "empower people" by giving them more "granular" control over their personal information. But many viewed the changes as a sneaky attempt to push members to expose more information about themselves—partly because its default settings had lots of data, like your photo, city, gender, and information about your family and relationships, set up to be shared with everyone on the Internet. (Sure, you could change those settings, but it was still creepy.) Facebook's spokesman says the open settings reflect "shifting social norms around privacy." Five years after Facebook was founded, he says, "we've noticed that people are not only sharing more information but also are becoming more comfortable about sharing more information with more people." Nevertheless, the changes prompted 10 consumer groups to file a complaint with the Federal Trade Commission.

Maybe it's a generational thing. People my age (nearly 50, a.k.a. "the olds" in blogosphere parlance) would probably rather part with a few bucks than with our personal information. Younger people don't have as much money, and don't care as much about privacy. So they're happy to go along with the deal being offered to them by Google and Facebook.

What's happening is that our privacy has become a kind of currency. It's what we use to pay for online services. Google charges nothing for Gmail; instead, it reads your e-mail and sends you advertisements based on keywords in your private messages.

The real holy grail is your list of friends. With that information, marketers can start sending more targeted messages. If you like a certain movie, or album, or mountain bike, your friends will probably like those, too. So they'll be good targets for ads for those products. Of course, your friends are not going to buy everything you do. It's not pinpoint accuracy. But the data helps marketers "narrowcast" their advertising. And it sure beats buying commercials on TV or splattering ads all over the Internet.

The genius of Google, Facebook, and others is that they've created services that are so useful or entertaining that people will give up some privacy in order to use them. Now the trick is to get people to give up more—in effect, to keep raising the price of the service.

These companies will never stop trying to chip away at our information. Their entire business model is based on the notion of "monetizing" our privacy. To succeed they must slowly change the notion of privacy itself—the "social norm," as Facebook puts it—so that what we're giving up doesn't seem so valuable. Then they must gain our trust. Thus each new erosion of privacy comes delivered, paradoxically, with rhetoric about how Company X really cares about privacy. I'm not sure whether Orwell would be appalled or impressed. And who knew Big Brother would be not a big government agency, but a bunch of kids in Silicon Valley?

The problem with buying things with your privacy is you really don't know how much you're paying. With money, five bucks is five bucks. But what is the value of your list of friends? If it's not worth much, your membership on Facebook may be the deal of a lifetime. If it's incredibly valuable, you're getting massively ripped off. Only the techies know how much your info is worth, and they're not telling. But the fact that they'd rather get your data than your dollars tells you all you need to know.