Facebook on cusp of big year in 2010

SAN JOSE, Calif. — For Facebook,
2009 was a year of extraordinary growth in which it transformed from a
fad to a phenomenon that now reaches more than 350 million users
globally and surpassed dot-com pioneer AOL in popularity within the United States.

But as the social networking giant gears up for more
expansion in 2010 — the latest sign being a deal to nearly triple its
office space in Palo Alto — the prodigal startup is also facing greater scrutiny, including a complaint filed with the Federal Trade Commission over its privacy policies.

Such controversies may be a chronic conundrum for Facebook, said Jeremiah Owyang, a Web consultant with Altimeter Group. To maximize its business potential, he said, Facebook
needs to encourage users to make more information available to
advertisers. But its popularity is based in part on the expectation of
users that they will control their data.

“Facebook is now a heavyweight,” said Owyang, suggesting that it has “moved up in weight class” to compete with the likes of Google, Microsoft, Yahoo and AOL.
Its reach spans more than the facebook.com site familiar to users,
where they can keep up with the doings of friends and family, and now
encompasses thousands of other Web sites that use its Facebook Connect
function and the communication features it offers.

For it to seriously challenge Google and other established Web giants in the business realm, analysts say, Facebook still needs to build out its advertising potential and develop other revenue streams beyond the sale of virtual goods.

In the meantime, Facebook is planning for
dramatic expansion in 2010. Only seven months after it consolidated
operations in a 150,000-square-foot headquarters in Stanford Research Park, Facebook recently leased 265,000 square feet of office space nearby, formerly occupied by Beckman Coulter, a medical diagnostics company.

And Mark Zuckerberg, Facebook’s
founder and CEO, recently said he anticipated the company’s payroll,
now exceeding 1,000 globally, would grow by 50 percent in 2010. The
expansion in work force is expected to be gradual, with Facebook moving some operations into new offices in the first part of the year, said spokesman Larry Yu.

But the growth will not be without challenges. Over
the years, the company has faced criticism over changes that, some
users say, compromise privacy. The latest came in a complaint filed by
the Electronic Privacy Information Center after Facebook required users to adapt new privacy protocols.

“We’ve had a tremendous response. Tech bloggers and security experts think we’re on to something important,” said Marc Rotenberg, executive director of EPIC.

The EPIC complaint, signed by nine other privacy and consumer-protection organizations, was triggered by changes Facebook instituted Nov. 19 and Dec. 9 that required users to use a “transition tool” that included a review of their privacy settings.

While Facebook portrayed it as a benign process that served to empower users, several technology experts complained. “I felt that Facebook was trying to trick me into loosening controls on my information,” wrote Princeton professor Ed Felten, a security specialist. The EPIC complaint is seeking to require Facebook to restore privacy safeguards.

Despite the complaints, the company’s business has shown no signs of slowing down. Facebook’s
recent adoption of a dual-class stock structure, which would protect
the voting power of current investors, has also stoked speculation that
it could pursue a Wall Street initial public offering of stock next year. But Facebook itself has sought to discourage speculation, and one of its investors, Digital Sky Technologies,
has been buying privately held shares from employees at valuations that
may discourage internal pressures for an IPO. Those deals, according to
recent reports, put Facebook’s value at $11 billion.

Still, an IPO next year is a possibility. “There is
a cohort of technology companies that could likely go public in 2010,
if they want to, and Facebook is near the top of the list,” said Paul Kedrosky, a venture capitalist.

Via McClatchy-Tribune News Service.