Did Facebook Just Forgo a Big Revenue Stream?

In case you’re not actively reading Techmeme, Facebook CEO Mark Zuckerberg reversed course on the changes in the service’s Terms of Service. Recently, Facebook had altered its terms in such a way as to have a perpetual claim on the content uploaded by its members.

Overnight, Zuckerberg wrote about the change in terms:

A couple of weeks ago, we revised our terms of use hoping to clarify some parts for our users. Over the past couple of days, we received a lot of questions and comments about the changes and what they mean for people and their information. Based on this feedback, we have decided to return to our previous terms of use while we resolve the issues that people have raised.

The move is a smart one for Facebook. It was getting a lot of grief for the earlier change.

That is, unless it just scotched it revenue model…

Facebook’s Nefarious Revenue Plans

From what I’ve seen, people really were worried Facebook had plans to take all this user content and commercialize it. See Mona’s post (BTW – she’s great, subscribe to her for a fun view of technology and life in general). Alexander Van Elsas wrote a similarly dark view of Facebook’s intentions. And the discussion on this thread in FriendFeed shows that as well.

Strapped for a way to make money, Facebook had latched on to this idea that it could take its members’ content and commercialize it.

* Cue the dramatic music *

Assuming this is true, how much of a valuation hit did Facebook just take? Investors must be pissed!

Read the TOS a Little More Closely

One small issue. Did anyone check out the actual language in the earlier revision of the TOS? As the Consumerist reports, it included this language:

You hereby grant Facebook an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to (a) use, copy, publish, stream, store, retain, publicly perform or display, transmit, scan, reformat, modify, edit, frame, translate, excerpt, adapt, create derivative works and distribute (through multiple tiers), any User Content you (i) Post on or in connection with the Facebook Service or the promotion thereof subject only to your privacy settings or (ii) enable a user to Post, including by offering a Share Link on your website and (b) to use your name, likeness and image for any purpose, including commercial or advertising, each of (a) and (b) on or in connection with the Facebook Service or the promotion thereof.

The bolded and underlined words are my emphasis. But they are a critical piece.

Assume you’ve got some cute baby picture that your friends think is great. It gets so popular, one of your friends reaches out to Gerber to let them know about it. Gerber wants the picture. Do they:

1. Ask Facebook for permission to run the baby picture in an ad?
2. Ask you for permission to run the baby picture in an ad?

Lets assume, as the worst fears illustrate, that Gerber goes to Facebook. Facebook says, sure, have that baby picture, and pay us $$$.

Great! So where will Gerber run your baby’s picture? Only on Facebook among your social network. Why? Because that’s all your privacy settings will allow!

Yeah, that’s a real scalable model for Gerber and other advertisers. How much time and effort would be needed to search Facebook for these gems of content?

Not to mention that public relations nightmare facing Gerber if they actually operated this way.

Glad to see Facebook reverted to the old TOS to avoid inserting fears in the market. Hope they have a plan C for their revenue model too!

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