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What scares Facebook: Privacy and phones

Mark Milian, CNN
Facebook CEO Mark Zuckerberg wants his apps to be on all phones, but they don't make money yet.
Facebook CEO Mark Zuckerberg wants his apps to be on all phones, but they don't make money yet.
STORY HIGHLIGHTS
  • Facebook lists perceptions about privacy and mobile usage as future risks
  • Facebook filed to go public on Wednesday under the stock symbol FB
  • Privacy outcries have long plagued the social networking company

(CNN) -- Like a good friend, Facebook says it doesn't want to invade our privacy or hang out with folks who spend all their time looking at a cell phone.

Privacy has long been a sensitive issue for Facebook. The word was mentioned 35 times in its filing to the U.S. Securities and Exchange Commission on Wednesday to sell company stock on the public market.

Facebook lists users' concerns over privacy as a risk to its business because it could prompt them to curb their usage of the social network. Perhaps more surprising, Facebook also says in the prospectus that as more people access the service from an application on their phones or tablets, the company could face problems.

A business is required to spill many of its secrets in an initial-public-offering filing. In Facebook's document, which totals nearly 200 pages, the company lists potential risks, intimate financial details and updated statistics on the website's growth. Facebook had 845 million people regularly using the site as of the end of last year.

Not surprisingly, the overall tone of the document is optimistic, but Facebook reveals its concerns, especially over mishandling of user information. For example, the filing says that if Facebook improperly discloses personal data or if hackers access data, its reputation is expected to take a hit.

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Facebook usage -- and therefore, the company's finances -- could dip if the users become concerned with their privacy options on the site, the company notes in several bullet points within the filing. Facebook writes that it must avoid adopting "policies or procedures related to areas such as sharing or user data that are perceived negatively by our users or the general public."

Facebook has grappled for many years with public outcries over substantial changes to its design and features related to privacy. The reaction to Beacon, a scrapped service that published what users were buying from online retailers, and News Feed, which surfaced more data from other parts of the site, were especially contentious.

This issue can become amplified because Facebook provides a platform to vent, even about Facebook, Rebecca Lieb, a media analyst at tech consulting firm Altimeter Group, said in a phone interview Wednesday shortly after the filing was made public.

"People will hate on Facebook within Facebook," Lieb said. "I don't think it's anything new for Facebook. They've backed down on privacy issues before. Zuckerberg has eaten crow."

But Facebook CEO Mark Zuckerberg has had less time to digest what the trends toward mobile usage will mean for his fast-growing company. Facebook's apps are dominant on most mainstream mobile platforms, but the company makes no money directly from them because they don't show advertisements.

In the IPO filing, Facebook listed growth in usage from phones and tablets in place of computers as a risk. Reading between the lines, Facebook is perfectly happy to let users check in from their phones at the bus stop as long as they keep using the site just as often from PCs.

"That was the first thing in the prospectus that was in flashing red lights for me," Lieb said. Access from mobile devices, she said, "will eventually put a serious dent in desktop use."

On the desktop version of Facebook, the company has begun inserting ads into users' homepage News Feeds from brands they or their friends have "Liked." In the public document, Facebook points out that the company is considering making a push toward mobile advertising.

"We currently do not show ads or directly generate any meaningful revenue from users accessing Facebook through our mobile products, but we believe that we may have potential future monetization opportunities such as the inclusion of sponsored stories in users' mobile News Feeds," Facebook's prospectus says.

Making money from ads shown on a phone is something the rest of the tech industry is struggling to figure out as well. Apple, Google and many start-ups are squaring off in mobile ads. Facebook is not necessarily behind in its efforts, Lieb said.

In the letter from Zuckerberg contained in the filing, the founder mentions mobile developments as an opportunity.

"We live at a moment when the majority of people in the world have access to the Internet or mobile phones," Zuckerberg writes, calling them, "the raw tools necessary to start sharing what they're thinking, feeling and doing with whomever they want."

But perhaps users should brace for a day when they have to scroll past a mini ad for soda before seeing what their friends are up to.

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