The Subscription Model: How Facebook Can Make Money and Still Respect Users' Privacy (Updated)

If consumers -- and maybe Facebook -- have learned anything over the social network's latest privacy imbroglio, it should be this: there's no such thing as a free lunch.

Three weeks after it announced its social plug-ins -- which embed your Facebook friends' surfing behavior into sites all over the Web -- and the more controversial "instant personalization" which automatically shares users' Facebook data with a (for now) limited number of sites, the furor against Facebook is only growing, and it's going to lead Facebook to a choice: whether to keep expanding user data so it's less and less private (and theoretically, more and more monetizable), or to leave well enough alone and not completely buy into the belief that advertising is the be-all and end-all of its revenue-generating hopes.

As you'll see below, though, there are other ways for Facebook to make money, if it just can get over the idea that user data is its for the exploiting, using, and that users are OK with that.

Yes, Facebook controversies are about as common as houseflies, but this time it's different. Here's why:

• There's a growing chorus of voices within Facebook's own industry, asking it to take privacy more seriously, and whether it's true or not, a perception, even in social media circles, that the company actually has an evil streak. (Anecdote: Mahalo's Jason Calacanis, who has been an outspoken detractor of Facebook founder Mark Zuckerberg, explained the definition of "a new catch phrase": "Your'e Zucked!" on his blog this week. (Definition: "When someone either steals your business idea or screws you as a business partner.") To the extent that Facebook users are Zuckerberg's business partners, you could say that we're all zucked.
• By one count, fifteen consumer advocacy groups have complained to the FTC and Congress about Facebook's latest expansion of how personal data can be shared, and Sen. Chuck Schumer (D-NY) has also asked the FTC to investigate, in addition to teaming with four other senators to complain directly to Facebook.
• The Q&A session earlier this week on The New York Times' Bits Blog between Facebook vp/public policy Elliott Schrage and readers. That has become noteworthy because it uncovered the huge disconnect between the company and some users. It is now widely seen as a PR blunder because Schrage's answers, in a number of cases, simply weren't plausible, particularly when he claimed that everything on Facebook was opt-in. One sample reader comment: "When I joined Facebook, there was no such thing as Instant Personalization. Mark Zuckerberg promised privacy. Then one day, I logged back in and found my Instant Personalization box already checked. I found personal information exposed that we were told in writing was private. How is that opt in? I will never trust Facebook again."
• But the most telling sign that this time is different lies in what Facebook just might be doing about it: it's holding an all-hands meeting today on privacy, although, as of right now, it seems to be downplaying its importance.

But here's the thing: many of them want Facebook in their lives, but not at the increasingly dear cost that Facebook is asking them to pay: making more of their data public. If you read message boards, comments, and so forth from Facebook users, you'll see it -- a clear passion for the service, running alongside true distrust of it. So here's a suggestion: offer a subscription model to those who want the experience, but don't want their data to leaking out into a broader sphere. As my fellow industry observer, Allan Hoving put it to me on, yes, Facebook this morning:

Facebook should just say everything users post is public; and to monetize, offer the choice of a free version based on sharing their info with marketers, or a paid version with no ads. Black or white, no fussing with settings or updates. Done.

(UPDATE: Facebook spokesperson Andrew Noyes gave the following statement to ComputerWorld about what went on at the meeting: ""We had a productive discussion where comments were made and questions were asked and answered." We also hear that oxygen was inhaled.)

(For alternative takes on Facebook's latest moves, read my colleagues Ben Popper and Chris Dannen. Also, another colleague, Erik Sherman, suggested a few weeks back that users receive benefits for opting-in to having their data shared.)