By Jon Swartz, USA TODAY
SAN FRANCISCO — As lawmakers and regulators ponder sweeping changes to online privacy law, Facebook is working to shape its image on Capitol Hill and avert measures potentially damaging to its information-sharing business.
The world's largest social-networking site is increasing its Washington office, spending more on lobbying and meeting with lawmakers, congressional staff and privacy experts who question whether the company is adequately protecting the personal information of its 500 million users. Founder Mark Zuckerberg is also on a charm offensive to show he's on the right side of the debate.
Facebook recently hired its seventh Washington employee and plans to move into new, 8,000-square-foot office space in late April. It is also looking to hire a public policy expert.
They're all signs that one of Silicon Valley's most influential companies wants to cultivate influence in Washington and shape privacy policies that could define its business. And it hopes to do so much earlier than tech predecessors Google and Microsoft did.
"We need to be here to define ourselves before someone else does it for us," says Tim Sparapani, a former privacy expert for the American Civil Liberties Union who joined Facebook in 2009. "It's clear we need to be part of the new thinking of Washington — and early in the company's maturation process."
The moves also come as privately held Facebook is contemplating selling stock to the public next year.
Facebook is well-positioned in a new era of information sharing. To generate about $1 billion in annual advertising revenue, Facebook methodically innovates around strategies that involve getting its members to interact and voluntarily share personal information on the company's Web pages. It does not share users' personal information with advertisers and does not sell it to anyone, company spokesman Andrew Noyes says.
Facebook's beefed-up Washington presence coincides with promises from several lawmakers to seek greater protections of online users' identities and personal information, their online habits and the tracking, collection and sale of any of it. Among them:
•Sen. John Kerry, D-Mass., recently called for legislation to protect online privacy. "(There is a) need for legislation to ensure that all collectors of personally identifiable information respect fair information practice principles," Kerry said in a statement.
•Rep. Edward Markey, D-Mass., recently announced he would introduce a "do not track" bill for kids, to protect their online behavior from being tracked and their personal information from being collected or profiled.
"For many kids, the Internet ... is like online oxygen — they can't live without it," Markey says. "These services can offer an array of exciting and entertaining opportunities, but children growing up in the 21st century online need protection from dangers that can lurk (there)."
•Newly sworn-in Sen. Richard Blumenthal, D-Conn., also said he would introduce "do not track" legislation this year. "Congress should implement the closest possible Internet equivalent of the do-not-call list," Blumenthal said in a statement. Options may include an opt-in, requiring sites to obtain specific permission to track and sell data.
Regulatory actions loom
Facebook's beefed-up presence also dovetails with the possibility of new regulatory actions that add uncertainty to the outlook for Facebook and Google, both of which get most of their revenue from ads targeted at users.
The Federal Trade Commission and the Commerce Department are considering additional — and clearer — privacy safeguards on Internet companies that amass user data. The FTC announced last month that it favored a "do not track" option for Internet users.
Another concern: The Securities and Exchange Commission is looking into the booming trade in the privately held shares of Facebook, Twitter, Zynga and LinkedIn and others, according to reports in The New York Times and elsewhere. Facebook declined to comment.
"Privacy and making sure people have control over their information is, I think, one of the most fundamental things on the Internet," Zuckerberg said in a 60 Minutesinterview on Dec. 5.
"We have not had to come out strongly for or against anything," Sparapani says. "Do not track" and net neutrality, which holds that companies providing Internet service should treat all sources of data equally, "aren't ripe yet. We're here to share our views for those long-term critical questions and educate."
Even as lawmakers consider clamping down, many of them are Facebook users, including Markey and Blumenthal. Almost every candidate for the House and Senate used Facebook last year to reach voters, Noyes says.
"People are familiar with our technology and understand it. There is a keen interest," Sparapani says.
Facebook, Google and others are determined not to repeat the mistake Microsoft made in the 1990s, when the software company ignored politics until it was ensnared in an epic antitrust lawsuit.
Google's presence on Capitol Hill has increased dramatically in the past few years, reflecting heightened interest among tech firms in lobbying. Last year, it spent $4.03 million on its lobbying efforts, compared with $260,000 in 2005, according to U.S. Senate records. In Silicon Valley, only Oracle, at $5.1 million, spent more.
The top 10 Valley companies increased their lobbying expenditures to $26.4 million in 2009 from $12.4 million in 2005. Computer and Internet companies, in total, spent $86.9 million in 2010, says the Center for Responsive Politics' OpenSecrets.org database.
Still, high-tech was dwarfed last year by pharmaceutical companies (which spent $182.4 million in 2010), electrical utilities ($146.7 million) and insurance firms ($116.8 million), according to OpenSecrets. The top individual spenders, according to OpenSecrets: the U.S. Chamber of Commerce ($81.1 million), PG&E ($44.8 million) and General Electric ($32.1 million).
Tech firms have historically been sluggish to forge relationships with the federal government. Microsoft reluctantly built a lobbying presence in D.C., to take on the antitrust battle, after 20 years of neglecting Washington. Google did not assemble a stout policy team until 2008, chiefly to lobby the Federal Communications Commission in last year's $20 billion spectrum auction.
Conversely, 7-year-old Facebook went to Washington early in its history (2007) to shape its image. "Everyone learned from Microsoft," says Facebook's Noyes.
Facebook spent $221,390 on lobbying activities in the first nine months of 2010, up 30% from the same period last year, according to federal disclosure reports. Google spent $3.92 million from January to September of 2010.
In talks with policymakers, "It's about how users have control over information," says Marne Levine, vice president of global public policy for Facebook. Levine joined Facebook in June to head its Washington office. She previously worked for Larry Summers, former director of the White House National Economic Council for President Obama.
"We're interested in legislation," she says. "But what is more important is how to increase (Facebook's) adoption in countries (in Europe and Asia), user control of information and how to create a safe online experience."
Although Facebook had a modest lobbying operation since 2007, the outcries of legislators and consumers to Facebook's decision a year ago to revamp privacy settings spurred Facebook to increase its lobbying efforts, some privacy experts say.
"They thought they didn't need to lobby, then they got in trouble and hauled in front of angry lawmakers and were threatened with lawsuits," says Justin Brookman, director of consumer privacy at the Center for Democracy & Technology, a non-profit, public-interest organization devoted to keeping the Internet open.
"Privacy has gone from an obscure topic to something that consumers care about," says Chris Babel, CEO of TRUSTe, an online privacy service.
Federal law governing communication privacy was enacted in 1986, before widespread use of smartphones and the Internet, and before the advent of social networks.
A new USA TODAY/Gallup Poll finds that nearly seven out of 10 Internet users don't think advertisers should be allowed to target them based on their Web-surfing habits.
So far, privacy concerns haven't stopped Facebook's growth — in part, because its members willingly share information about themselves on the site as they see fit.
Its 2010 revenue is expected to double, to more than $1.2 billion, according to two people familiar with Facebook's figures. Because Facebook is a private company, they are not authorized to speak on the record.
Although Facebook says it does not reveal any personally identifiable information about users to advertisers, some privacy advocates claim third-party companies that develop the quizzes and trivia games found on the site are given too much access to users' data.
"No one's going to say Facebook hasn't stumbled along the way," Sparapani told The Washington Post in an interview. "For a cautious lawyer, it's terrifying to think we could be blamed for some silly application."
The lobbying game
Increasingly, the parlor game for tech companies in Silicon Valley has as much to do with regulation and legislation as with technology and innovation. And like Facebook, some of tech's biggest players have ratcheted up their presence in Washington. Among them:
•Google. In six years, the search engine giant has transformed from almost no presence in Washington to a staff of 25 and has become the king of tech spenders on lobbying.
"Google went from zero to 60 (mph)," says Fred Humphries, vice president of U.S. government affairs at Microsoft.
Google has centered its lobbying on antitrust, "do not track" and net neutrality. At the same time, it is the subject of a European Union antitrust probe. Google had no comment for this story.
•Microsoft. Since it set up shop in Washington in 1998, the software giant's presence in the nation's capital has swelled to 26 people. It added three the past year.
As it has grown, so have its areas of interest, says Humphries. He says that entails areas of keen interest to large companies, such as health care, trade, immigration and China.
"Facebook is similar to us," Humphries says. "When we started off, we focused on innovation and technology — and not necessarily regulation."
•Hewlett-Packard. The venerable tech firm spent $3.6 million on lobbying efforts in 2009, compared with $380,000 in 2005.
"The growing public interest in privacy, together with the massive personal data storage that Facebook and other companies have, must make privacy their No. 1 regulatory and legislative topic," says Michael Fertik, CEO of ReputationDefender, an online identity protection company.
And how is Capitol Hill's newest lobbying force doing? "Facebook is in the right place (with its lobbying efforts)," Microsoft's Humphries says.
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