Is Facebook Incompetent, Ignorant, or Simply Arrogant?

Harvard Business School professor Sunil Gupta asks the above question in the wake of the giant social networking company's latest flap over user privacy. According to the Wall Street Journal, FB has violated the privacy of millions of users by transmitting identifying information to advertising firms and Internet tracking companies.

"Mark Zuckerberg has repeatedly played down this issue by suggesting that people want to share their private information with the world," Gupta writes in this OpEd piece at HBS. "The reality suggests otherwise. An increasing number of Facebook users are adults over 35 who are very concerned about privacy. In addition, the majority of Facebook users now come from abroad, where privacy concerns are even more critical than in the United States."

Gupta's colleague Benjamin Edelman agrees that a customer backlash may be brewing. Edelman says his own research on Facebook has yielded a pattern of privacy abuse and unfulfilled promises to repair the damage. "Users are increasingly skeptical of Facebook's privacy promises. The next time Facebook says 'Trust us,' sensible users will likely say, 'No way.'

But a different take is offered up by professor Mikolaj Jan Piskorski, who has looked deep into user behaviors on FB, MySpace and other social sites. He thinks Facebook is not threatened by the latest privacy issue, and even says that social network users "could care less about what company knows their Facebook user ID or their friends' names." Users are much more concerned about privacy restrictions around the photos they upload.

Facebook fans face a potentially bigger threat to their privacy: their own friends. HBS marketing professor John Deighton asks, "How upset should (Facebook users) be if their privacy is invaded? They choose to put their lives on display to their friends, with no certainty that their friends will respect the confidentiality of their disclosures, and in fact a fair degree of certainty that some of the disclosures will be passed along."

What do you think? At what point do Facebook's 500 million users start to abandon the platform? Is this situation ripe for some disruptive innovation by a competitor?

Here is some interesting related reading from other BNET bloggers:

(Image by Flickr user by opensourceway, CC 2.0)