Facebook’s Greed Compromises Privacy and Ethics - Charlie Warner - MediaBizBloggers

Yesterday I bought $20 worth of lottery tickets because the jackpots for Mega Millions and Power Ball were both over $20 million. I don’t buy tickets when the jackpots are under this arbitrary amount because it’s no fun to fantasize about a net take of under $5 million (if you take a lump-sum pay-out instead of a 26-year payout, you divide the stated jackpot by four to adjust for taxes and the estimated lump-sum discount to be on the safe side).

Of course I could use a couple of million dollars, but any amount under $5 million is not enough to really lust for; it doesn’t get my greed juice flowing. The current Power Ball jackpot is $142, so dreaming about $35.5 million gets my dopamine gushing – all my grandchildren will be able to go to Ivy League colleges and I can buy without feeling guilty that Patek Philippe Perpetual Calendar watch I lust for.

I suspect that something similar happens in the media and, especially, with internet media startup companies. There was a time when people start working in media organizations that they were motivated by the idea of serving the public with news, information, and ways to connect, communicate, and build community. That’s the way was it was when many media companies were privately owned by families or controlled by a founder, such as when the Bingham family owned the Louisville Courier Journal or when founder William S. Paley ran CBS. A study in Journalism Quarterly showed that rates for advertising were lower in family-owned newspapers than in publicly owned companies such as Gannett. Family-owned newspapers were apparently more interested in serving the community than in maximizing profits, the goal of public companies.

Before Larry Tisch, a non-broadcaster and bottom-feeding investor, bought controlling interest in CBS in 1986, the notion of the CBS News Division making a profit was anathema. News was a public service supported by the Entertainment Division. It wasn’t until CBS was bought by Tisch and, for that matter, until GE bought NBC also in 1986, that the news divisions were considered profit centers. When they became profit centers, as necessitated by the culture of maximizing profit in publicly owned companies, the news divisions stopped providing balanced news and became entertainment. Similarly, when profit pressure enters the picture, newspapers and magazines often tear down the walls between marketing and editorial in order to produce more popular, more saleable inventory.

Fast forward to 2003. Mark Zuckerberg was dumped by his girlfriend at Harvard and had a few brews. He was alone and brooding in his dorm room, so to do something to take his mind off his pain, he wrote on his blog, “Let the hacking begin,” http://en.wikipedia.org/wiki/Facebook and created a program that eventually became Facebook. Mark got lucky and Facebook caught on; by 2006 it was the right platform at the right time. In that year legend has it that Zuckerberg turned down $750 million for Facebook, headquartered in Silicon Valley’s Palo Alto, because he felt it was worth $1 billion.

In 2008 Zuckerberg proudly announced in an annual meeting (referred to as f8) that Facebook’s mission was to "give people the power to share and makethe world more open and connected.” (Click here http://www.youtube.com/watch?v=Rm5B7j65S1c to see him say it on You Tube).

This statement was around the time Mark hired a Google executive, Sheryl Sandberg, as chief operating officer. According to the New York Times: "Ms. Sandberg, currently vice president for global online sales and operations at Google, joined the search giant in 2001 and helped develop its immensely lucrative online advertising programs, AdWords and AdSense. She will join Facebook later this month to work closely with Mr. Zuckerberg, a co-founder of Facebook, the company said Tuesday. A big theme of this hire is that there are parts of our operations that, to use a pretty trite phrase, need to be taken to the next level,” Mr. Zuckerberg said in an interview. Ms. Sandberg will help Facebook expand overseas and develop an advertising network that will help justify its carbonated $15 billion valuation, set last year when Microsoft invested $240 million for 1.6 percent of the company. She will also oversee Facebook’s marketing, human resources and privacy departments — essentially guiding how Facebook presents itself and its intentions to the outside world." Clearly Ms. Sandberg was hired to maximize revenue and profits.

When Facebook was worth $1 billion, Zuckerberg didn’t seem to feel he needed an experienced revenue and profit maximizing COO. The amount wasn’t enough to get his greed juices flowing; the mission was to connect people, not make him and his colleagues filthy rich.

But it seems that when Microsoft and Russian investment firm DST invested in Facebook and shot its valuation past $15 billion that Zuckerberg’s dopamine started gushing. And according to Silicon Alley Insider, http://www.businessinsider.com/facebook-valuation-soars-past-22-billion-on-private-market-2010-5 Facebook is now worth between $22- $33 billion, so Mark must be fantasizing about joining the ranks of Slim, Gates, and Buffett.

Which might well explain Sheryl Sanberg’s entrance on the scene as COO, a job in which she controls Facebook’s “marketing, human resources and privacy departments.” It doesn’t look like a coincidence that soon after her oversight of both marketing (maximizing revenue) and privacy that Facebook’s problems with privacy issues began to accelerate. Putting marketing and privacy under the oversight of a single executive is like tearing down the wall between the sales and editorial divisions in a newspaper or magazine – it undermines credibility and consumer trust.

More money for Facebook equals less privacy for its members. When Zuckerberg had a mission of connecting people, privacy was virtually sacrosanct, but when greed and Sandberg crept in, priorities, missions, and ethics became compromised.

Palo Alto, meet Wall Street – anything for a buck.

Until he retired in 2002, Charlie Warner was Vice President of AOL's Interactive Marketing division. Before joining AOL, he was the Goldenson Endowed Professor at the Missouri Journalism School where he taught media management and sales, and he created and ran the annual Management Seminar for News Executives. Charlie can be contacted at charleshwarner@gmail.com.

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