“Mark Zuckerberg was dead wrong, and it was shameful for him to throw HTML5 under the bus because Facebook had an outdated and poorly written hybrid app,” Brightcove CEO Jeremy Allaire wrote in an open letter to tech and media leaders that calls for an end to the “religious wars” on mobile platforms.

Allaire’s gripe is that companies like Facebook and Apple are abandoning support for hybrid apps which are built with much of the same code used to display a website in mobile browsers. With the hybrid approach, publishers can rely on universal HTML5 code to get their apps out quickly on multiple platforms and devices while also using some native code for features that count.

Facebook recently eschewed the hybrid approach, claiming it offers a sub-par user experience. Allaire suggests that this is a smokescreen, and that Facebook and Apple have undercut the viability of HTML5 in order to develop their own private eco-systems.

Some might accuse Allaire of sour grapes since a turn to proprietary platforms threatens Brightcove’s App Cloud service which relies heavily on HTML5. But that doesn’t make his point his less valid.

The larger issue here is about standardization. Recall that for much of the 19th century, there were no standards for everyday items like screws or lightbulb threading. Imagine if a carpenter needed a special, proprietary screwdriver for every job site? Allaire makes the same point for the app economy:

Since 1994, our industry has created millions of jobs in the web development industry.  Proprietary native platforms are limiting the available labor in the app economy, hurting our productivity. [...] Every institution on the planet wants to invest in reaching users through apps on consumer devices, but we have a deep deep labor shortage because of these religious wars.

Allaire concludes by calling for an “ecumenical” approach to end the current sectarian approach to development. His letter also points to a Brightcove blog post that sets out a longer version of his thoughts.

Update: In response to a reader request below, here is the full text of the letter:

Subject: Ending the Religious Wars over Mobile Platforms – an open industry letter

Date: November 15, 2012 3:47:48 AM PST

To: undisclosed-recipients:;

Hi-

All of us are blessed to be participants in this marvelous and dynamic internet tech and app economy.  But we’re also cursed with internal strife and religious wars over mobile platform technology that are hurting our economy.  Since 1994, our industry has created millions of jobs in the web development industry.  Proprietary native platforms are limiting the available labor in the app economy, hurting our productivity.

Mark Zuckerberg was dead wrong, and it was shameful for him to throw HTML5 under the bus because Facebook had an outdated and poorly written hybrid app.

Hybrid apps as a bi-partisan solution to the religious mobile platform wars are too important to our economy.  Every institution on the planet wants to invest in reaching users through apps on consumer devices, but we have a deep deep labor shortage because of these religious wars.

Steve Jobs, god bless his soul, was also wrong — well, perhaps, just deceptive — with his Thoughts on Flash and public flogging of Adobe.  Killing support for Flash on iOS was not a benevolent move to save consumers from slow and crash-prone software, nor a resounding vote for open, HTML5 based content apps.   No, it was merely a flanking maneuver to protect Apple’s proprietary native app development model.  While Apple has gone on to deeply enhance the iOS native APIs, they’ve barely moved the needle on support for HTML5 inside of native apps.

Again, hybrid apps are essential to getting the technical economy highly productive, and that’s essential to getting the global economy more productive.

Adobe smartly acquired PhoneGap — a hybrid app development platform — to answer this corporate and industry need, but since then the technology has gone stagnant, with little innovation.

The industry needs better hybrid app platforms, and that’s what we’re doing.

On my blog, I have a lot more to say about all of this, how we got here, and what the industry and Brightcove is doing about it.  Take a look, it’s a quick read.

http://blog.brightcove.com/en/2012/11/bipartisan-solutions-ending-religious-wars-over-mobile-platforms

The industry needs all of us to make this happen.

Thanks,
Jeremy Allaire
Founder and CEO, Brightcove

(Image by WilleeCole via Shutterstock)

One of the first major complaints came in a piece in the New York Observer that accused the social network of being “broken on purpose.” Not long afterward, a blog called Dangerous Minds wrote a long polemic about how what the social network was doing was “the biggest bait-and-switch in history” — since users (including brands) were enticed to use the service on the understanding that they could use it to build up a giant fan base, and were now being charged for the right to reach those same fans. The cost to do this by paying for sponsored posts, the blog said, was just too exorbitant:

“We simply can’t afford to pay Facebook $2000 to $3200 a day and we can’t afford to do nothing, either. Their shockingly greedy business plan offers us no alternative and we’re not alone.”

Hiding valuable content or blocking spam?

In response to this criticism, Facebook explained — both in a post by one of its engineers and in comments to TechCrunch and Ars Technica — that the newsfeed filtering was designed to eliminate spam and noise, and that it was constantly being tweaked in order to show users things they were actually interested in, not just things that brands wanted them to see. The message seemed pretty obvious: don’t be spammy with your posts and lots of your users will still see them for free. And if you want to spam them anyway, you will have to pay for sponsored posts in order to do that.

This didn’t stop the criticism from flowing, however: one user wrote an open letter to Mark Zuckerberg, complaining about the moves by the social network and urging the founder and CEO to remain committed to his stated goal of “giving people the power to share and make the world more open and connected.” Actor George Takei responded to this letter with a Facebook post, saying he was devoting a chapter in his upcoming book to the issue. On Tuesday, Mark Cuban — who had been posting complaints on Twitter for days about Facebook’s behavior — unloaded to Dan Lyons at ReadWrite about the impact that the changes were having, and how he wasn’t going to stand for it any longer. The sports mogul and star of TV show Shark Tank said that he was shifting the focus not just of his own presence or that of the Dallas Mavericks but all of the other businesses in which he is an investor to other platforms, including MySpace:

“We are moving far more aggressively into Twitter and reducing any and all emphasis on Facebook. We won’t abandon Facebook, we will still use it, but our priority is to add followers that our brands can reach on non-Facebook platforms first. We have already pushed more to Twitter. The new Myspace looks promising.”

Filtering is necessary for Facebook, and for users

As Wired points out in a response to Cuban’s complaints — and App.net founder Dalton Caldwell also does a good job of explaining — this kind of criticism makes little sense, unless you assume that Facebook is supposed to be a utility of some kind, broadcasting the messages of its users far and wide without any kind of filtering whatsoever. The reality is that a proprietary platform like Facebook is very much a double-edged sword, and Cuban and Takei are feeling the sharpness of that alternate edge: yes, it reaches a lot of people, but it is also a business that faces significant financial pressure.

Do Cuban or any of Facebook’s other critics really think that Twitter or MySpace are going to be any different? Twitter started off as a much more open platform than Facebook — which is one of the reasons that users like me have responded so negatively to some of the restrictions it has been imposing on external services — but it is heading down the same inexorable path. In order to justify their multibillion-dollar market value, both companies have to find new sources of revenue, and traditional advertising just isn’t going to do it. Sponsored content is the future, whether we like it or not.

It’s one thing to excuse George Takei for not realizing the implications of this, but Mark Cuban is a notoriously sharp businessman who routinely criticizes entrepreneurs on his TV show for failing to understand how markets work. Facebook is a business, not a charity or a platform for social well-being — and it provides that platform free of charge, on the understanding that users agree to be marketed to in a variety of ways. The idea that it should somehow allow Cuban to spam all his followers with marketing content for nothing is nonsensical.

Not only does Cuban’s criticism not make much sense from a business standpoint, but as even social-media evangelist Robert Scoble points out, what Facebook is doing by trying to tweak its filtering algorithms is arguably in the best interest of users as well, since they are already being overwhelmed by noise and marketing spam. From that perspective, Facebook has to do what it is doing or it will suffer a lot more damage than some angry emails from celebrity users. We can argue about how it is filtering and the way it is communicating that to users, but the fact that it is doing so seems inevitable.

Post and thumbnail images courtesy of Flickr users Cotidad and See-ming Lee

This idea struck me again as I was preparing for my talk with Tumblr founder David Karp at GigaOM’s RoadMap conference on Monday, which you can read about (and see a video clip of) here. I pulled together a lot of statistics about the size of the service, but it quickly became obvious that there wasn’t much point, since they would almost certainly be out of date by the time I hit the stage. Sure enough, Karp mentioned that Tumblr recently crossed the 20 billion pageview-per-month mark, up from the 16 billion that is mentioned on its website.

When you look at Tumblr’s size and growth, it’s easy to assume that you have somehow made a mistake and added too many zeroes: at the beginning of this year the network was at 15 billion pageviews, and a little more than a year ago it was at 10 billion. According to estimates from Quantcast, in the past year the site has almost doubled the number of monthly visitors it gets, from about 80 million to almost 140 million. There are more than 35 billion posts on the almost 80 million blogs that are hosted on the service, and it gets tens of millions of new posts every day from what Karp told me were its 160 million or so members.

When comScore looked at the amount of time that users spend on different sites earlier this year, Facebook was still far and away the leader, with about 400 minutes per month, but Tumblr and Pinterest were tied for second place, with about 90 minutes per month. Time spent may not be a great measure of actual engagement — since many users leave sites like Facebook or Tumblr open in a window for hours at a time — but those are still pretty compelling numbers. And there have been some indications that Facebook’s engagement levels are falling, or at least levelling off.

It’s not just the growth, it’s the level of engagement

Those are some of the number-based reasons for why Facebook should be interested in Tumblr. The other part of the argument is more anecdotal: It comes from watching how both of my teenaged daughters use the service, and the powerful hold it has over the way that they consume and share all kinds of content, especially visual content (including animated GIFs, etc.) — and the corresponding decline in the amount of time they spend on Facebook. For them, Facebook seems to have become something they feel they have to use rather than something they want to spend a lot of time on, much like email is for older users. When it comes to sharing info about their favorite TV shows or movies or likes and dislikes, they use Tumblr almost exclusively.

If I were Mark Zuckerberg, I would be more than a little worried about that phenomenon, just as the Facebook co-founder and CEO was apparently worried about the growth of Instagram, and the threat that it posed to Facebook’s dominance of the photo-sharing market and the mobile market — and the possibility that a competitor such as Twitter or Google or Apple might acquire it. As Om described it after Facebook announced the $1-billion purchase (which lost some of its value after Facebook went public and its share price fell):

“Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s achilles heel — mobile photo sharing.”

It’s true that Tumblr is not nearly as large a player in mobile as Instagram was, but it is clearly a huge and growing force when it comes to sharing and engaging with visual content of all kinds — in other words, it’s the kind of curatorial and creative market that lots of advertisers and brands are interested in appealing to. The sharing of that content is exactly what Facebook has tried to encourage with its “frictionless sharing” apps and features, but much of that has been awkwardly handled from a user point of view and it’s not clear what effect it has had on engagement.

The bottom line is that any service that is growing as rapidly as Tumblr, and sucking up a massive amount of the attention of younger users, is a potential threat to Facebook’s future growth. Theoretically, it could acquire Tumblr for something close to what it was willing to spend for Instagram — since Tumblr’s last financing round allegedly valued it at about $800 million — and then keep the network as a standalone entity, as it has with the photo-sharing service (which has continued to grow by orders of magnitude).

The only stumbling block is that David Karp and his backers may see the value of remaining independent and the potential for building something even larger than they have now.

Post and thumbnail images courtesy of Flickr user Gabriele Coletti

Seconds after Dorsey and Zuckerberg put up their news, it was picked up by casual readers who shared it and tweeted it. Technology media (including blogs) also picked up the news and published it as classic news posts. Some of us added analysis, but in the end both casual observers and publications were doing the same job — they were amplifying the news, spreading it across various mediums. There is a blurring of the line between what is news and what is a tweet, photo or a blog post. In other words, it is a kind of mosh pit of data and information — and that means the role of media is changing.

A reporter’s job for the longest time has been to find information and report it. This is what we have called news. Sitting in the media box at the baseball stadium and reporting scores and providing updates for a wire service was as much “news” as reporting on the Watergate scandal. And up until the end of the 20th century, the sources of distribution were pretty limited — radio, newspapers, magazines and television.

That in turn meant that newsmakers had to go to media outlets in order to share their message and get it amplified and reach those they wanted to reach — call them constituents or the target audience. With the rise of the social web, that has changed. Blogs, Tumblr, Twitter, Facebook, Instagram and other such platforms have made it easy for news makers to go direct to their constituents. So what is the role of today’s media person? In addition to reporting news, I think picking things to amplify is also important. Back in the day, news people made choice by deciding which stories to write. Today, we have to adopt a similar rigor about what we choose to share and amplify. In sharing (on Twitter or even re-blogging) we are sending the same message as doing an original news report. The easy thing is to share or reblog everything, but by being deliberate about it, we are essentially “editing” and telling the world: “this is how I see the world/this particular beat.”

One of the few people who has it figured out is John Gruber of Daring Fireball, who essentially has a very Gruberesque-view of the Apple economy. Similarly Jason Hirschhorn (formerly of SlingBox, MySpace and MTV), who operates the MediaReDefined email newsletter and a Flipboard channel, presents a very nuanced view of media industry by sharing what he thinks is relevant. They are not classical media people, but they are probably more prototypical of the “future media.”

Andrew Sullivan, a career journalist, is one media person whose link sharing, blogging and actual writings are pretty consistent with his world view and what he considers is important news. When Sullivan writes a longer report or a deeper analysis, you know it is important and worth paying attention. When Gruber has gone deeper, it has more than likely been worth paying attention to, whether you agree or disagree with them.

I am not saying we all have to be like them, but it is important to remember that in the future when Dorsey, Zuckerberg and Hastings are no longer an anomaly, the media person’s role is no longer just reporting news. Reporting through sharing and curation are going to be vital roles for us to play in the future.

British arch-satirist Armando Iannucci has announced that his target will be the hubris and hilarity in California’s technology scene. Talking to the UK Observer, he explained that his next project would not focus on his usual political playground:

“I’m thinking about the power of the internet,” said Iannucci. “Microsoft, Google, Facebook; you have these twentysomethings who have a way into billions of households. Where’s the power gone? The power is gravitating towards these companies.”
[…]
“I’m also interested in that personal thing of what it does to you when you’re 25 and you’re a multibillionaire and everyone in the world knows who you are,” said Iannucci.

For anyone worried about a series of hackneyed jokes about poking your friends or uncovering , don’t worry! Iannucci has good form.

He’s best known for The Thick Of It — a highly acclaimed, tremendously smart series that exposes the inner machinations of British government — and has recently transferred that to America with a run of Veep, his series starring Julia Louis-Dreyfus, on HBO.

According to the report, he’s already written a pilot of his show about the world of technology and social media, and is in discussions with the network about it.

In truth, Iannucci’s job should be fairly easy, because Silicon Valley has enough excesses and idiocies that it effectively satirizes itself.

From ostentatious parties to the increasing fixation with celebrity investors, there is no lack of material. Oh, and then there’s the hypocrisy. What about the likes of Eric Schmidt, who says only people with something to hide require privacy — and yet demands his girlfriends stay quiet? Or Mark Zuckerberg, who says most people don’t care that privacy no longer exists — yet makes billions from encouraging that shift in opinion.

All ripe for a slam or two, don’t you think? I’m sure you can think of more.

But even though a week in the Valley may provide him enough material for a 17 season run, Iannucci says his reason for targeting the technology industry isn’t because it’s easy — but because it’s real. Forget Westminster, or even the West Wing: the power today lies on the companies who command the net, he argues.

“Where’s the power gone?” he told The Observer. “The power is gravitating towards these companies.”

The shares, which traded as high as $45 right after Facebook’s IPO in May, have tumbled 7 percent this morning to a new low of $19.69. Here is a quick-round up of what the financial press is saying:

• Yahoo Finance lists those now eligible to sell, including Goldman Sachs and Reid Hoffman, but adds that it’s not yet possible to tell if any of these insiders actually did sell — or if the declining share price just reflects investors’ anticipation.

• WSJ Pro reports that short sellers are having a field day with the stock and that soon there might not be enough inventory available to short. ”It was a great short,” Rob Romero, portfolio manager at Connective Capital Management LLC, told the paper. “It’s still a good short, I think, looking at the valuation compared with other companies, such as Google and Apple.”

• The NYT’s Dealbook notes that internet start-ups have become damaged goods across the board. Investors, who were still bullish on such companies less than a year ago, have turned sour as valuation collapses at Groupon, Znyga and other one-time darlings.

Facebook is having a no-good, very bad day — and may have many more in the near future as more insiders become eligible to drip their stock into the open market. But in the long run, the company may prove appealing to value investors. As tech executive Adam Rifkin noted in a weekend post, “Facebook is the ant, Zynga is the grasshopper,” Mark Zuckerberg and his company have a number of qualities in common with other long-established tech companies.

Update: Facebook shares closed Thursday at $19.87.

FB data by YCharts

After growth slowed just in time for its IPO, Facebook must look overseas for a jump-start.

Target countries are easy to see. ”Now there are only five markets where Facebook is not the #1 social networking site,” a comScore spokesperson tells paidContent.

But cultural differences, government restrictions and incumbent local rivals will all make Facebook’s growth challenging. (Check out our broader take on Facebook’s international ambitions here.)

Here is our map for Mark Zuckerberg’s overseas adventure. Cool countries are those with already-high Facebook penetration, hotspots are thosse Facebook must crack to become a true global powerhouse…

1. China
”near 0% penetration”. Growth prospects: Poor — Zuckerberg can’t comply with online state censorship
#1	Tencent Qzone	Built on Tencent’s QQ IM network, Qzone lets users buy a 10-yuan-a-month “Canary Diamond” to decorate their zones with.
#2	Sina Weibo	Hit 300 million microblog users by delighting citizens with open info sharing. Now ready to introduce ads.
#3	RenRen	Billed itself as China’s “leading real-name” social net; now new regulations require all network customers use their real names.
The People’s Republic is the big prize. If it could piggyback China’s explosive broadband and mobile internet adoption, Facebook’s own growth would rocket. But that will be anything but easy. Currently blocked by China, the site claims ”near 0% penetration” there. It warned IPO filing readers: “We do not know if we will be able to find an approach to managing content and information that will be acceptable to us and to the Chinese government. In the event that access to Facebook is restricted, in whole or in part, in one or more countries or our competitors are able to successfully penetrate geographic markets that we cannot access, our ability to retain or increase our user base and user engagement may be adversely affected, we may not be able to maintain or grow our revenue as anticipated, and our financial results could be adversely affected.”That’s the reality of it. One problem for Facebook is China’s state authorities, which grant spartan online operating licenses to overseas players, especially powerhouses like Facebook. Another is the increasingly powerful indigenous players to which the market has been left. Social network growth has exploded, but most of the operators are native incumbent portals, with eye-popping user counts. Succeeding social networks, the rise of weibos (Twitter-esque microblog services) has gained mindshare for allowing quick dissemination of information in the country notorious for restricting information flow.But the Chinese market is also in flux. Local services complied with new regulations compelling them to remove apparently false and controversial information, and to force users to use their real names.Will Facebook controversially kowtow to measures Silicon Valley and Wall Street might find reprehensible? If so, it could be the easiest move it would make in China – the country has been the rocks on which many a western company has floundered. But consenting to Chinese restrictions on online free speech would be utterly at odds with Zuckerberg’s open ethos – so let’s continue to consider China off-limits.
2. Russia
21.2% of online population (comScore, March 2012). Growth prospects: Very good — Already gained good toe-hold.
#1	VK.com	Russia’s fourth-most-used website has around 120 million accounts, is popular (and controversial) for its integrated file-sharing – and bears striking resemblance to Facebook.
#2	Odnoklassniki	Russia’s Classmates site puts a Facebook shareholder in an awkward position – DST owns it.
#3	Facebook	Has grown fast since launching in Russia in early 2010.
Russians are the world’s most prolific social network users, according to comScore. Facebook has already grown fast there. The country puts the site in a strange position, since two competitors (Odnoklassniki and Mail.ru’s MyWorld) are backed by Facebook investor DST. Now that DST has exited through Facebook’s IPO, however, the stage is set for a clean fight. “The figures suggest that local social networks will not be able to hold onto their dominance much longer,” eMarketer said in February. “The real question may not be whether Facebook will overtake local social networks there, but when.” Market leader vKontakte’s popularity may decline if it complies with a court ruling that it breaches copyright by removing its file-sharing feature.
3. South Korea
27.2% of online population (comScore, March 2012). Growth prospects: Very good – Already hurting competition.
#1	Cyworld	Tried and failed to enter the U.S. and Europe but this isometric 3D chat world succeeds at selling virtual goods to users.
#2	Me2day	This local Korean microblog service, operated by the Naver portal, is popular with celebrities.
#3	Facebook	Its monthly users doubled to 12 million in 2011, Korea Herald reported.
In the country that has been enjoying high-speed fixed and mobile services for years, Cyworld has locked up mindshare since 1999. But Facebook is poised for big gains – last year, it robbed Cyworld of members, prompting the incumbent to invoke a corporate revamp to fight back, Korea Herald reported.
4. Japan
23.4% of online population (comScore, March 2012). Growth prospects: Moderate – Zuck must beat the Tweet.
#1	Twitter	Guess who? Japan’s top social network is Facebook’s Silicon Valley sparring partner, whose first non-English endeavour has paid dividends.
#2	Mixi	The site has gained a strong local mindshare by founding early, in 2000.
#3	Facebook	Japanese user base grew by 78 percent through 2011.
After Twitter overtook local network Mixi, Japan is a “Twitter nation”. There, successive global records have been broken for tweets-per-minute, despite Twitter being predominantly an English-language medium. So Facebook will have to fight its domestic competitor on foreign turf.
5. Vietnam
37.8% of online population (comScore, March 2012). Growth prospects: Uncertain – To block or not to block?
#1	ZingMe	A focus on games has given the native site the lead.
#2	Go.vn	This Facebook rival is some competitor – operated by state-owned Vietnam Media Corp.
#3	Facebook	Has apparently suffered from censorship after earlier growth.
Facebook has been blocked in Vietnam since 2009, but many citizens circumvent it with a few clicks, The Economist reports. The communist government’s on-off embrace of social networks comes against a backdrop requiring their compliance with censorship laws. Confusion reigns.

Here’s a plain english Q&A of what’s going on:

What did Facebook do that was so wrong?

The company placed files on users’ computers called cookies that told the social network which websites they visited.

Is that so unusual? I thought lots of sites do that

The problem is that Facebook appears to have tracked you even after you logged-out. Under the company’s own policy, it promised not to do that and thus violated the limits of your consent when it did.

How exactly did Facebook track me?

Many websites like CNN or Justin Bieber Zone have a “Like” button that acts like an extension of Facebook. The company collects data about your visits to those sites — including, it seems, when you are logged out. The unauthorized tracking reportedly took place across smartphones and tablets too.

Well, maybe this was an honest mistake?

After blogger Nik Cubrilovic called out Facebook for stalking its users, the company awkwardly suggested that the tracking of logged-out users was a “bug” or a narrow technical measure. That claim hasn’t stood up well. Cubrilovic and German regulators soon called BS and suggested Facebook was doing this deliberately for more than a year. The lawsuit also points to a Facebook patent application for cookies that follow users after they log out.

So where did this lawsuit come from?

There are actually more than a dozen cases across the country. They were recently consolidated into one lawsuit in San Jose, California.

Why are the lawyers asking for $15 billion?

It’s a great way to grab headlines during a week the press is already in a Facebook frenzy. The $15 billion itself is loosely based on the Wiretap Act which lets people sue for $10,000 if someone records their conversation without permission. The lawsuit also cites studies that claim an individual’s web history is worth $52. There are also state law penalties. And so on. The lawyers had to pick some number so they chose $15 billion.

Will Facebook actually have to pay that $15 billion?

The short answer is no. The Wiretap Act was written with telephone conversations in mind so it’s no slam dunk that a court will decide the law should apply the same way to computer cookies (Google, HTC and Samsung are facing similar lawsuits under the same legal theory). At the same time, some judges have ruled that Facebook-style “privacy invasions” aren’t worth anything in dollar terms because no one has been harmed.

In this case, however, a judge would likely conclude that Facebook’s behavior (if the allegations are true) was egregious enough to find liability under at least one of the plaintiffs’ 11 claims. But if other tech related privacy suits are anything to go by, the case will settle long before a trial.

I’m on Facebook. Will I get some of that money?

Doubtful. While the class action aspires to cover everyone who was on Facebook from May 2010 to September 2011, a cash payout is unlikely. As noted above, judges have a hard time putting a dollar value on this type of privacy breach. When there has been a privacy settlement in other tech-related cases (like Google Buzz or Facebook Beacon), the money has been divided up between lawyers and non-profit groups that act as privacy activists.

What does Mark Zuckerberg have to do with all this?

The lawsuit paints the Facebook CEO as a creep who has a long history of using his hacking skills to steal people’s personal data. The complaint opens by reproducing this email exchange:

The lawsuit also lists a chronological history intended to show that Zuckerberg and his company have long displayed a systemic disregard for user privacy. This is, of course, just a legal tactic that doesn’t necessarily prove that Facebook is any better or worse than other tech companies on privacy issues. Facebook, which told Bloomberg the complaint is baseless, would likely add that this was an accident that shouldn’t detract from the fact it provides a popular free service to millions of people.

Are lawsuits the best way to solve the privacy problem?

Probably not. But since the government often has a hard time understanding (let alone regulating) the tech industry, the lawsuits can be an effective way of raising awareness and forcing companies to take care about how they handle consumer data.

Here’s the complaint itself:

Facebook Wiretap Act Complaint Copy

• Facebook gets a reality check on IPO day
• Facebook buys Karma app
• Infographic: A look back at Facebook’s revenue and valuations
• Facebook IPO: Tracking the price
• Facebook IPO: Here is the best of the web
• Why 900M isn’t the only number that matters to Facebook
• Place your orders: Facebook IPO shares set at $38
• How recent digital media IPOs have fared
• Why 900M isn’t the only number that matters to Facebook
• 10 startups that couldn’t have done it without Facebook
• Are Facebook Credits the key to the social network’s future?
• VCs simply love the Facebook Mafia
• Will Facebook adapt to mobile or will mobile adapt to Facebook?
• Facebook’s biggest problem is that it’s a media company
• Weigh in on Facebook’s future prospects
• Facebook brings bigger pics and posts to mobiles
• A preacher, 500 startups, and a dream to change it all
• Facebook’s delicate balance between profits and privacy
• Boy in the Hood(ie)
• Facebook sets price for biggest-ever US IPO
• Facebook’s monthly rent is $1M+, and other gems from S-1 update
• Facebook just revealed its Kryptonite: mobile
• Facebook has nothing to fear, except itself
• It’s here: Facebook files for $5 billion IPO

Much more in our Facebook IPO archives.

Photo courtesy of SeanPavonePhoto / Shutterstock.

There’s been a lot of attention paid to Facebook’s business model recently, especially with the news that General Motors has killed a $10-million advertising campaign devoted to the giant social network — not exactly a great sign of confidence in advance of the world’s most eagerly anticipated IPO. And GM’s move is only the latest indication of discontent, as other advertisers are also questioning their spending. What all of these moves reinforce is that while Facebook may look like and function like a social network for the majority of its users, on the business side it looks almost exactly like a traditional media company, and that is both good and bad.

Like Twitter, the content within Facebook may be generated entirely by users, but the business model is all about advertising, just like any other media entity. According to the social network’s latest S-1 securities filing, advertising accounted for more than 80 percent of its $1-billion in revenue in the most recent quarter. And while some of that represents experiments with “social advertising” such as Sponsored Stories and other features, much of it is essentially run-of-the-mill banner and display advertising — not all that different from what you would find on a newspaper or magazine website, or any blog network.

In some ways, Facebook ads are actually worse than regular ads

That helps explain why Facebook’s advertising isn’t exactly setting the ad world on fire: in fact, according to at least one study, clickthrough rates for ads on the social network are actually lower than the already abysmal clickthrough rates for regular Web advertising (for what it’s worth, Ford says that it is more than happy with its spending on Facebook, unlike General Motors).

Facebook actually has an even bigger mountain to climb than newspapers or other media entities do when it comes to advertising, since the social nature of the network could actually interfere with the effectiveness of traditional ads. Sir Martin Sorrell, chairman of WPP Group, has said that he isn’t even sure advertising can work within an environment like Facebook, which is inherently about social connections and conversation. As angel investor and blogger Chris Dixon notes, ads on Facebook are like putting billboards in a park:

When people use Facebook, they are generally socializing with friends. You can put billboards all over a park, and maybe sometimes you’ll happen to convert people from non-purchasing to purchasing intents. But you end up with a cluttered park, and not very effective advertising.

As Dixon points out, what made advertising such a spectacular business for Google was that people who are searching for things are already part-way down the road toward wanting to buy something — in other words, they are further along the spectrum of “purchasing intent.” And at least the readers of newspaper websites and other media entities are theoretically interested in information about the world, current affairs, even entertainment. Many Facebook users are simply there to socialize, share photos, etc. How does that translate into a receptive environment for advertising?

Facebook needs to start diversifying its revenue sources

Facebook is also hamstrung to some extent when it comes to the options that other media companies are experimenting with, such as subscriptions or paywalls. Not only has Mark Zuckerberg promised repeatedly that Facebook would always remain free, but it’s not clear that users would pay anyway — although the network is reportedly experimenting with a new feature that would allow users to promote their posts.

Those are the downsides of Facebook as a media company. But despite incidents like the GM announcement, investors are likely to focus more on the upside, and there is arguably plenty of it: for one thing, Facebook has close to a billion active users, and even in an age where advertisers want to target specific segments or groups as much as possible, scale still matters — particularly for major brands. So a lot of advertisers are probably going to stick with Facebook simply because it is one of the biggest games in town.

Not only that, but as Jon Steinberg of BuzzFeed pointed out on Twitter, what other option do advertisers have — to go back to video pre-rolls and banner ads? If the future of advertising is social, then hitching your wagon to the largest social player in the world is probably a better bet than trying to figure it all out on your own. And there is at least the potential for Facebook to disrupt the ad market in some interesting ways, such as an “open graph”-powered ad network that could extend its reach throughout all the millions of sites that use Facebook’s platform.

As Dixon notes, Facebook also has a number of other emerging business models, such as an e-commerce platform driven by Facebook Credits. These are embryonic at best, however, and so for the moment Facebook is still overwhelmingly reliant on advertising — and as every other media company is painfully aware, that sword cuts both ways.

Post and thumbnail images courtesy of Flickr user Olaf Gradin