About Face(book)

December 5, 2007: 1:55 PM ET

From Fortune's David Kirkpatrick:

"The press rarely grants an autumn reprise for those it loved in the spring," once wrote the great New York Times columnist Russell Baker. How true in the case of Internet-darling-turned-reviled-evildoer Facebook.

Facebook, the popular social networking site, has ridden the hype curve up and down in recent months, reaching a low Tuesday over claims that a month-old advertising system violates members' privacy. CEO Mark Zuckerberg took a big step Wednesday toward silencing naysayers - one of whom was my own colleague Josh Quittner - when he issued a contrite apology and made a key change to the new advertising feature, dubbed Beacon.

"We've made a lot of mistakes building this feature," acknowledged Zuckerberg, "but we've made even more with how we've handled them. We simply did a bad job with this release, and I apologize for it."

A little history: When Facebook, the popular social networking site, announced its strategy to host applications created by outsiders in May, the world and the press was dazzled - none more than me. Facebook found itself on the covers of magazines and the lips of Silicon Valley.

Then, in October, Microsoft (MSFT) bested Google (GOOG), winning the right to invest $240 million for 1.6 percent of Facebook and a new contract to display ads on the site. The deal valued Facebook at $15 billion. Meanwhile, the number of active members, 24 million in May, has soared to 57 million. Suddenly, Facebook was king of the hill.

Aiming to capitalize on its newfound acclaim and scale, Facebook announced its bold new advertising strategy in November. But Zuckerberg made a few strategic errors. First, he showed a touch of hubris when he intoned portentously to ad executives in New York during the announcement: "Once every 100 years, the way that media works fundamentally changes."

Much worse, one part of the new Beacon ad system had not been fully thought through. It automatically alerts a member's friends when she buys a new product or rents a movie. But the features intended to allow the member to control this alert system were hard to find and insufficient.

Journalists dug up unfortunate cases, like the wife who was automatically informed by Facebook of the ring her husband bought her as a Christmas present. Consumer and privacy watchdog groups began darkly criticizing Facebook's "disregard" for members' privacy. Meanwhile, a group called "Petition: Facebook, stop invading my privacy!" has 68,000 members, which isn't much for a service with 57 million users but enough to send a clear signal that people are upset.

The blogosphere - and in its wake, much of the mainstream press - went wild with derision. Here was Baker's maxim come to life. We built them up and now we were going to bring them down.

Though Facebook has progressively taken measures to address the problems, the 23 year-old Zuckerberg until now had said nothing about the latest brouhaha. He broke his silence Wednesday with an apology to members and a fresh promise not to broadcast a member's buying habits without her explicit approval. In a key move, he also allowed members to turn off Beacon.

Still, questions linger, including how much member information is pinging around the Net without permission or knowledge. If Zuckerberg stays attuned to these and any other ongoing concerns, the controversy will go away and Facebook will be as strong as ever. After all, that's what happened when he wrote a letter of apology last year after a much bigger on-service protest erupted over a new Facebook feature that tells friends what other friends are doing on the site.

At first, the outcry over the Newsfeed feature was fierce. But then Facebook tweaked the feature, Zuckerberg apologized, and protesters realized they were making much ado about nothing. Newsfeed became one of Facebook's most popular features. It's also become part of the essential infrastructure for the viral dissemination of third-party Facebook applications created since May.

Until now, Zuckerberg's silence has fueled press anger over Beacon and Zuckerberg's apparent rigidity, including from my Fortune colleague, Josh Quittner, who argues Facebook may be dead.

Facebook is not anywhere near dead - and there's zero chance it will be anytime soon, no matter how boneheaded some of its recent actions may have been. It would be virtually impossible for a new, as-yet-unheard-of service to come along and quickly steal Facebook users.

For all Facebook's own successes, former social networking superstar MySpace, now owned by News Corp. (NWS), remains larger than ever by most measures. It takes a lot of work for a member to create a useful Facebook (or MySpace) network. They won't flee lightly.

And while Zuckerberg may not have listened to them until now, Facebook has several "old hands" in the management suite to help guide the young company. Chief operating officer Owen Van Natta and privacy boss Chris Kelly are both in their late 30s. Chief financial officer Gideon Yu is 36 years-old and Vice President for Sales Mike Murphy is 45. All are industry veterans.

Facebook remains a seminal part of today's technology landscape. It's changing the way many people around the world use the Internet. For me personally, it's the first Web service to come along in a decade since MyYahoo where I routinely spend at least half an hour daily.

Josh ends his post by saying, "Facebook has turned all the people who rooted for it into a lynch mob. In the space of a month, it's gone from media darling to devil." He's right about that. But it may say more about the press - and today's blog-led penchant for sensationalism - than it does about Facebook

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