Facebook Seeks Friends in Washington as Concerns Increase About Privacy

Facebook Inc. is expanding its Washington office and consulting with privacy advocates as lawmakers question how well the world’s largest social- networking site protects the personal information of users.

The company is looking for a public-policy expert and a deputy press spokesman, following the June hiring of Marne Levine to head its Washington office. Levine is a former top aide to Larry Summers, director of President Barack Obama’s National Economic Council. The new hires would bring Facebook’s Washington team to eight, up from zero three years ago.

Tighter privacy rules being discussed in Washington might limit the ability of companies such as Facebook and Google Inc. to tailor ads to users of their sites and curb sales growth. Google reported a 23 percent increase in sales to $20.9 billion, almost all from advertising, for the first three quarters of this year. Facebook revenue may double to $1.4 billion this year, two people familiar with the matter told Bloomberg News in August.

“A lot of people think Facebook could become bigger than Google, but privacy could be the real Achilles heel for this company,” said Sunil Gupta, a professor at Harvard Business School whose research areas include new media. “Privacy will be a huge issue, both in Washington and overseas.”

Photographer: Jason Alden/Bloomberg

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Photographer: Jason Alden/Bloomberg

The Facebook Inc. web page is seen on an Apple iPad.

Congress, the Federal Trade Commission, and the Commerce Department are considering how to impose additional privacy safeguards on Internet companies that amass user data, and the White House in October established a task force of more than a dozen federal offices to address privacy concerns.

Do Not Track

The FTC yesterday called for a “do-not-track” option for Internet users to allow them to block monitoring of their online movements, used to compile profiles for marketers.

“Some consumers are troubled” by the tracking, the agency’s staff said in a report. “Others have no idea that any of this information collection and sharing is taking place.”

Privately owned Facebook, based in Palo Alto, California, says it has more than 500 million users worldwide, including more than 150 million in the United States. It channels communication among subscribers who approve access by people considered “friends,” and helps advertisers target consumers based on user demographics and interests.

The company says it gives users the ability to determine how much information they share, and that Facebook policies prohibit revealing details that identify individuals to third parties.

“When we talk with policy makers about Facebook, it’s about how users have control over information,” Levine said in an interview.

‘Privacy Time Bomb’

Facebook triggered an outcry in April after it added a feature that automatically connected users to three outside websites unless they specifically opted out of the service. The sites -- Yelp.com, Pandora and Docs.com -- tailor visits from Facebook members based on their user information. After complaints from privacy groups and lawmakers, Facebook in May introduced simpler privacy settings and said it was reducing the amount of publicly available user information.

In October, Facebook said some third-party software applications on its platform had transferred user ID numbers in violation of company policy. The company said it suspended some application developers for six months, and that it was taking steps to prevent user information from being passed to outside companies.

“Facebook is a ticking privacy time bomb, no matter how much they spend in lobbying,” said Jeffrey Chester, executive director of the Center for Digital Democracy in Washington, which has urged the FTC to address privacy issues at Facebook and other online marketers.

Facebook Everywhere

Even as lawmakers consider clamping down on Facebook, many of them are users. The company started to woo members of Congress in 2007, when its first Washington employee, Adam Conner, then a 23-year-old congressional staffer, was hired to teach elected officials and their staffs how to use the site.

This year, almost every candidate for the House and Senate used Facebook to reach voters, according to Washington-based spokesman Andrew Noyes.

“Facebook is everywhere on Capitol Hill, in the personal and professional lives of members and staff,” said Seamus Kraft, director of new media and press secretary for the House Committee on Oversight and Government Reform. That familiarity hasn’t translated into a consensus on how to protect privacy rights, he said.

The co-chairmen of the House Privacy Caucus, Texas Republican Joe Barton and Massachusetts Democrat Edward Markey, sent a letter to Facebook Chief Executive Officer Mark Zuckerberg on Oct. 18 questioning the company’s privacy safeguards. Facebook’s response, a 13-page letter dated Oct. 29, explained that the sharing of user IDs is part of the way Internet browsers work and that it is developing technical solutions to further protect its users.

Data Breaches

The response didn’t satisfy Barton, who is seeking to become chairman of the Energy and Commerce Committee in the new Republican-controlled House.

“It seems like not a month goes by without the discovery of a data breach of one kind or another,” Barton said in an e- mail. “My committee and its subcommittees are going to take a hard look at the reliability of Internet privacy policies.”

Senate Commerce Committee Chairman Jay Rockefeller, a Democrat from West Virginia, has said he intends to draft Internet privacy legislation and in October fired off questions to Facebook and News Corp.’s MySpace. He pressed Facebook to explain how it enforces its privacy policy and what penalties it levies on violators.

So far, privacy concerns haven’t stopped Facebook’s growth. Founded by Zuckerberg in 2004 when he was a sophomore at Harvard University, Facebook surpassed MySpace as the world’s biggest social network two years ago and last year pushed aside AOL Inc. as the fourth most-visited site in the U.S., according to researcher ComScore Inc.

Lessons Learned

Facebook executives say they have learned from the experiences of companies like Google, Microsoft Corp. and Apple Inc., which have been caught up in regulatory and legislative issues.

“We were in Washington comparatively earlier in our growth cycle,” said Tim Sparapani, a former privacy expert for the American Civil Liberties Union who became Facebook’s Washington lobbyist in March 2009. “We have the benefit of having seen those companies and their experiences in Washington and learning from them.”

In addition to Sparapani, Conner and Levine, Washington staffers include Noyes, a former technology reporter for the National Journal, and Corey Owens, formerly of the Constitution Project, a Washington-based privacy group. The company also has former FTC commissioner Mozelle Thompson as an adviser on a range of issues including privacy, Noyes said.

Moving Quickly

“Relative to the history of some other tech companies, Facebook is now moving fairly quickly,” said Ed Black, president and chief executive officer of the Computer and Communications Industry Association, which lists Facebook as a member.

Aside from privacy, the Washington team is seeking to spend time on issues such as net-neutrality rules, which it favors for landline and wireless networks, as part of the Open Internet Coalition.

Facebook’s Washington contingent is still dwarfed by Google, which has about 40 people in its Washington office, including 10 registered lobbyists.

Facebook spent $221,390 on lobbying activities in the first nine months of this year compared with $169,700 in the same period last year, according to federal disclosure reports. Google reported spending $3.92 million in the first nine months of this year. Facebook hasn’t registered a political action committee, while Google’s PAC gave $208,000 to federal candidates in the past two years.

Justin Brookman, senior resident fellow of the Center for Democracy and Technology, who has met with Facebook officials on privacy matters, says the company is learning from its missteps. After previewing a new ‘Places’ feature, which allows users to reveal their locations, with groups including CDT, the company received “as good a review as Facebook has gotten from the privacy community,” Brookman said.

He said that CDT receives a “small amount” of funding from Facebook -- $35,000 out of a total budget of $4 million -- which doesn’t prevent it from criticizing the company when it has privacy problems. He cited the instance when CDT faulted Facebook for its Beacon feature tracking users elsewhere on the Web without their explicit permission, which Facebook ended in 2009 after two years.

Talking to privacy groups helps companies like Facebook identify concerns ahead of time, said Berin Szoka, a privacy advocate who is setting up a Washington organization focused on the issue. “Google has really pioneered this kind of engagement, but Facebook has caught up fast.”

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net.

To contact the editor responsible for this story: Larry Liebert in Washington at lliebert@bloomberg.net.

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