"It's clear that privacy issues are top of mind for Facebook, and yet we found serious privacy gaps in the way the site operates," Privacy Commissioner Jennifer Stoddart said in a report on an investigation into Facebook.
The report said Facebook violates Canada's privacy laws by keeping the personal information of people who have deactivated their accounts in its databases indefinitely.
It provides confusing information about privacy practices, for example showing users how to deactivate accounts but not how to delete them.
Facebook told the commissioner it needed to keep personal data for those who shut down accounts because about half of users reactivate accounts that they had deactivated.
The report said Facebook had strenuously objected to some of the commissioner's preliminary conclusions, and the company said on Thursday it would continue to work with her to address outstanding areas and to raise awareness of privacy controls.
Facebook has 200 million active users, including about 12 million in Canada -- more than one in three Canadians.
The report will set a precedent for other networking sites operating in Canada, and could influence practice in other countries. Stoddart said she believed Canada was the first to publish a formal privacy investigation of Facebook's practices.
Stoddart also said Facebook lacked adequate safeguards to prevent unauthorized access to users' personal information by third-party developers. There are more than 950,000 developers in 180 countries.
She said Facebook had resolved some issues and she gave it 30 days to comply with a series of "recommendations", and said she could take it to Federal Court to enforce the recommendations.
Facebook's chief privacy officer, Chris Kelly, told Reuters in San Francisco he did not expect this to be necessary.
"Given that we've had very productive conversations, I would be surprised if things move in that direction. Now, that being said, we don't believe that there is any violation of Canadian law here and we think that a court would find that, were either party to go in that direction," he said.
He also said Facebook did not want to end up with too many notifications interrupting users, and said any solutions should "reflect the fact that people come to Facebook to share information as opposed to hide it."
The investigation was launched in response to complaints by the Canadian Internet Policy and Public Interest Clinic (CIPPIC) at the University of Ottawa.
In a written statement, Facebook said it was "pleased that the Canadian federal privacy commissioner has dismissed the most of the inaccurate claims brought by CIPPIC, and that we were able to collaboratively resolve other issues raised in the complaint."
(Additional reporting by Alexei Oreskovic in San Francisco; editing by Janet Guttsman and Peter Galloway)
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-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
By Jeffrey Goldfarb
NEW YORK, May 4 (Reuters Breakingviews) - Goldman Sachs got its Facebook stake for a steal. That's if Renren is anything to go by. Shares in China's answer to the social networking giant priced at the top of their indicated range and then surged on their first day of trading. That left Renren valued at about 100 times last year's revenue. On that basis, Facebook is worth $200 billion. Goldman bought in at just a quarter of that. With some bubbly assumptions, the higher figure can almost be supported.
The conventional wisdom says otherwise, of course. Many technology watchers see excess already in Facebook's value, which has surpassed $70 billion based on private share dealing. There was added concern last week when Reuters reported that a group of shareholders was trying to offload $1 billion worth of stock in one of the largest sales to date. The Renren-implied valuation would also make Facebook worth more than search behemoth Google -- and not many investors can see their way to that conclusion.
Still, it's possible to make a case of sorts. Global advertising spending across all major media, including TV, magazines and Internet, should tot up to about $470 billion this year, according to ZenithOptimedia. Apply an estimated profit margin of 30 percent and a multiple of 15, and the present value of all those ads would be $2.1 trillion. If the world's consumers were, on average, to spend a tenth of their media time on Facebook, that could make its slice of the pool worth $210 billion.
Perhaps that sounds too generous given that Web advertising dollars aren't yet anywhere near commensurate, relative to usage, with TV or newspapers. But recent research from Nielsen found that Americans spend a quarter of their surfing time on social networking. That suggests plenty of pressure to close the gap -- and grow the whole advertising pot.
Admittedly it takes some suspension of disbelief to arrive at such an eye-watering valuation for Facebook. But Goldman and other investors must be using similar sleight of hand, at least to some degree, to rationalize their own investments in the company. At this point, it may make sense just to play along.
CONTEXT NEWS
-- Shares of Renren, one of China's largest social networks, surged by about 40 percent in afternoon trading to more than $19 apiece, giving the firm an estimated market value of about $7.6 billion, during their stock market debut on May 4. The company reported revenue of nearly $77 million last year.
-- Earlier this year, Goldman Sachs invested in Facebook, and made shares available to some of its clients, at a valuation of about $50 billion. U.S. investors were not allowed to buy in to the offering after media attention on the deal put it at risk of falling foul of U.S. private placement rules.
((jeffrey.goldfarb@thomsonreuters.com))
(Editing by Richard Beales and Martin Langfield)
REUTERS reuters.com
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GS said GKP was worth 160p, and that was a month before it hit 160p.
GS said that commodities are over priced, and down they go as belief sets in.
GS are the most powerful force on the Planet, controlling the price of many stocks, and before they make a statement, they will have positioned themselves to take advantage of the turmoil they create.
When GS come out with the next statement, they will have acquired what they want, and then release their statement, probably saying there has been an over correction.
GS have always played this game, so to ignore them can make a waterfall effect.
Mikey.
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