Facebook's New Headache: No One Wants To Give It Data

Facebook has a growing problem on the data front: People and business partners now resist handing over valuable information. Look at students making heavy use of privacy controls on the site or the one-way data sharing that Amazon (AMZN) negotiated. It's a bad sign for Facebook, which depends on advertising and the user data that brings reasonable ad rates.

The recent student data comes from researchers from Northwestern University and Harvard's Berkman Center for Internet & Society. Although thin in the sampling -- writing students at the University of Illinois-Chicago -- it is interesting that any group of students would greatly increase their frequency of adjusting Facebook privacy settings. For all we know, it could have been to make everything more accessible, but that seems unlikely. However, as the researchers noted:

Overall, our data show that far from being nonchalant and unconcerned about privacy matters, the majority of young adult users of Facebook are engaged with managing their privacy settings on the site at least to some extent. The frequency with which they adjust their settings and their confidence in doing so may vary, but most report modifying their settings.

Greater privacy concerns also mean a resulting greater control over what Facebook says it will share with applications and web sites. Facebook still offers ad targeting as a service, but that alone is still a restriction over the money it could make through more unrestrained information use. Another likely outcome of greater privacy concerns is users being less forthcoming in what they put on the site in the first place.

Even more troubling for Facebook is the deal with Amazon. The retailer can pull in data from users who log into their Facebook accounts through Amazon. That sends Amazon "information about themselves, their friends and products for which they and their friends have expressed a preference."

Forget the privacy aspects for a moment and look at something remarkable when you look at it through a business, not privacy, lens:

Information from Facebook accounts gets sent to Amazon. The company said it won't post anything -- including customers' Amazon.com account activity -- onto customers' Facebook Wall without their consent. And it won't share customers' private Amazon.com information such as account information, order information, or purchase history with Facebook or customers' Facebook friends.

I can see why Amazon would insist on the approach. It wants to avoid privacy issues with its own customers. Furthermore, once it makes data available to Facebook, how does it know that competitors won't be able to benefit in turn? It doesn't, and that's a big business problem.

Maybe Amazon reimburses Facebook for the information, but I suspect not. Why pay when Facebook as put its social graph into place and your customers authorize your access? Now that Amazon has shown the approach viable, I expect other companies to take the same approach. Eventually, Facebook becomes an information source where the data is pulled out but not replenished.

Related:

• Facebook Has 500M Users, But It Might Not Keep Them
• Amazon's Automated Gift-Suggestion Patent: A Firestorm Just Waiting to Catch
• Facebook's Biggest Obstacle: No One Trusts It