Last night the Wall Street Journal published about a new Facebook “privacy loophole” that resulted in user information being shared with advertisers. The information that was often shared by Facebook was the username of the person who clicked on the ad as detailed by Ben Edelman. While Facebook has become the subject of security attacks in recent weeks and has come under fire for legitimate concerns, your username has always been for sale, and not by Facebook.

A number of companies in the “social media” space are in the business of selling your data to third parties. Interestingly enough, many of these companies already have the profile data of the majority of Facebook users. That information has been systematically collected through applications as well as public resources found through Google. Trust me, the advertiser who could have theoretically collected your username through ads (even though they probably didn’t realize this was possible), would have paid more for your data by purchasing Facebook ads than going direct to third-party data sales companies.

The irony of the recent Facebook privacy debacle is that Facebook is actually attempting to give users more control, while third-parties are simultaneously stripping users of it. Yes, Facebook has overstepped their boundaries with the new “Instant Personalization” program in my own opinion, however most of your data has been accessible as long as you’ve been on the site.

Most likely that information was shared through third-party applications, but even if you chose not to use those applications, new data sales companies will create profiles of you based on the data you placed across multiple social networks. While we could dive into more details about the business of data sales the main point is this: having your Facebook username shared with advertisers is the tip of the iceberg.

The best way to protect your information is to avoid posting online anything you don’t want public. While I support users’ right to privacy, it’s best to assume your data is already available to other parties the moment you put it online. While I think we’re in the midst of a greater debate over the future of user privacy on the web thanks to the latest Facebook changes, the users already had control the moment they put their information into the ether.

A Facebook Page and group which were called “Everybody Draw Mohammed Day!” have been pulled from Facebook following protests, and the eventual banning of Facebook in Pakistan. In turn, a number of Facebook users decided to join new versions of the groups, but I’d expect those to be pulled eventually as well. Administrators of the new groups are claiming “Free Speech”, however the Pakistani government doesn’t seem to view things in such a positive light.

Numerous controversies have sprouted up over the years over drawings of Mohammed, including a Danish cartoonist who sparked backlash in multiple Arab countries after drawing multiple cartoons of Mohammed for a book cover. The debate over whether or not images of Mohammed should be drawn have raged on for years, but when Pakistan banned Facebook due to groups which posted such pictures, the debate was reignited. One group, succeeded at attracting over 100,000 members and more than 11,000 photos of Mohammed.

While Facebook obviously hopes Pakistan will restore access to the site, it’s difficult for the company to constantly monitor groups which post Mohammed cartoons. Facebook most definitely has a team to filter through any offensive photos, however images depicting Mohammed have never been on the ban list. It will be interesting to see if Facebook decides to ban remaining groups and pages (like this one and this one).

For now it appears as though Facebook would prefer to block the groups for the purpose of cultural sensitivity rather than engage in a free speech debate. Do you think Facebook should have pulled such Pages and groups? One interesting note is that Facebook has yet to pull the large Facebook Page which calls for the death of Obama.

Less than 24 hours after we first covered Facebook’s decision to limit landing tabs within Facebook Pages to “authenticated” admins, the company has appeared to revert back to the original permissions, making landing tabs available for anybody. The change was rapidly criticized by more Page administrators who use landing tabs as an easy way to convert new visitors into fans.

While we’ve reached out to the company for clarification about whether or not this change back to the original settings is permanent, we still haven’t heard back from the company regarding their policy on the new “authenticated Pages”. We’ll be sure to update if we hear more from Facebook, however there’s no doubt that many Page administrators will be grateful that Facebook has stepped back from what would otherwise be a permanently damaging change.

Facebook’s motivation behind the change wasn’t exactly clear, however we speculated that it was to reduce spam and potentially increase revenue. For Facebook to make such a significant change without any formal notice, aside from an update to the developer forum, is pretty significant. At this point Facebook appears to have gone back to the original settings, enabling anybody to set a custom tab as the landing tab, however we’ll have to wait to hear back from Facebook to confirm that this change is permanent.

Facebook’s Public Policy Director, Tim Sparapani, spoke with Kojo Nnamdi today in Washington, D.C. and stated that the company would soon release simple privacy settings in the coming weeks. In addition to defending the company’s position for providing an extensive number of privacy settings (a position which is legitimate), Sparapani stated that there will be “simplistic bands of privacy that [users can choose from” in the “next couple weeks”.

Given that the company has come under significant pressure over the past couple weeks over new programs, including the highly controversial “Instant Personalization” program, it’s not surprising to hear Sparapani announce these features. What’s even more significant is that from the sounds of things, these “simple” privacy settings sounds as though they’ve most likely been in the works for a short period of time.

What I’m still wondering is why Mark Zuckerberg or any other executive haven’t made a formal announcement stating that they are listening. While representatives of the company’s communications department have stated that the company is listening and will effectively do the right thing, no formal statement has come from Mark Zuckerberg.

Perhaps this is a test of Mark’s ability to delegate some of the communication to the general public, however I’m pretty sure that most people want to hear that the company is listening from Mark’s own mouth (or at least a blog post under his name). While we are still waiting to hear from the company about the potential for making changes to the “Instant Personalization” program, just knowing that they are looking to simplify the privacy settings further is definitely reassuring.

If you want to listen to the full interview with Tim Sparapani, you can listen to it here. Do you find Facebook’s announcement of impending changes reassuring? Do you think the changes will be sufficient?

Despite the numerous rounds of funding that Facebook has become widely known for over the past couple years, things were not so easy at the beginning. Right from the get go, Mark Zuckerberg and his family had to lend the company over $60,000 in order to cover costs after Eduardo Saverin, one of the company’s initial partners locked up the company’s bank accounts. Even with the company constantly on the edge of going broke, it has managed to stay afloat through numerous rounds of funding.

One of the most significant of those rounds was from Accel Partners, who invested $12.7 million and resulted in Jim Breyer having a Facebook board position. The valuation of the company at that time was placed at almost $97 million, and outrageous valuation for a company that was so young (just over a year old at this point). However even with a lot of cash in the bank, the company continued to burn through it at a rapid pace. As David Kirkpatrick writes, in the soon to be released book “The Facebook Effect“:

For all the promise Thefacebook’s unique data held for advertisers, most of the ads that were selling on the site at that point were generic banner ads. Facebook had contracted with serveral ad networks, which were posting ads willy-nilly. None of it was generating very much revenue. The company was steadily burning through the money it had raised from Accel. By year-end, it had $5.7 million left from the $12.7 million it had raised. Thefacebook had not yet become a real business.

A number of rounds later (including Microsoft’s monumental investment of $240 million at a $15 billion valuation), Facebook was still burning through cash thanks to insanely fast growth. When Sheryl Sandberg first joined Facebook as COO of the company in 2008, she was tasked with monetizing the site. Hopefully as quickly as possible. David Kirkpatrick writes about Sandberg renewing the focus on advertising as the primary source of revenue:

The matter was hardly academic, because Facebook needed the money. It was burning through the $375 million it had raised from Micros, Li Ka-shing, and the Samwer brothers faster than anybody had expected. Some of Zuckerberg’s allies in management had already concluded it had been an error not to accept a lower valuation, which would have allowed Facebook to raise a lot more money because so many more investors would have been willing to buy.

While costs continued to soar, the opportunity for Facebook was significant. As Wired effectively articulated in 2009, the company has a significant opportunity to take on Google in a major way. As Kirkpatrick confirms:

For all Google’s success, it operates almost entirely within a relatively small sector of the overall advertising industry. Only 20 percent—at most—of the world’s $600 billion in annual advertising spending is spent on ads aimed at people who alreadyk now what they want, Sandberg’s researchers discovered. The remaining 80 percent, or $480 billion a year, was up for grabs as more and more ad spending shifted to the internet.

As we’ve covered over the past few years, Facebook ended up launching “Engagement Ads” as an opportunity for brands to have conversations with their customers. Through advanced targeting, Facebook enables these advertisers to reach their exact target market, dramatically more effectively than any other online ad network before them. Despite the focus on increased revenue, Facebook took it’s last round of funding from DST, helping the company to make it to a point where it had become “cash flow positive“.

As Facebook now has revenue from Credits and its branded engagement ads, it appears that Facebook is safe from having to raise more money. However it’s still unknown how well Engagement ads are performing. Regardless of Facebook being properly positioned to reap the benefit of the shift of brand advertising dollars from offline to online thanks to the immense amount of time users spend on the site, and the unprecedented targeting opportunity, the rate of the shift in dollars to Facebook is unknown.

Whether or not the shift is happening quickly, it appears as though Facebook now has time to test out their business model. With user growth possibly slowing (despite it racing toward 500 million), costs of operations no longer growing exponentially, and with the company’s new data centers in the works, Facebook now has a solid runway no matter how fast they move toward 1 billion users.