Want to Protect Your Online Privacy? Too Late

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Password giveawayRecently, word has spread that companies are beginning to ask potential employees to hand over their Facebook passwords, saying it's just another piece of the all-important background check.

Experts say that the requests may be legal. But that's not necessarily what's really worrying Internet companies.

Even if it's A-OK in the legal sphere, the publicity around the idea brings up a topic that companies like Facebook and Google (GOOG) would prefer to avoid: privacy.

In their ideal world, these companies could gather as much user data as possible without creating a backlash against their core products. But we don't live in an ideal world, do we?

Good Luck With That

Facebook has been dealing with this for years. And ironically, it's Facebook's own social network that sounds the alarm and sets off the frenzy whenever privacy issues rear their heads.

Every time the company changes its privacy settings, intrepid users blast their friends with alerts and tell them how to change their settings to protect private information.

Facebook isn't making things easier for itself. The company allows apps to ask for almost any type of information they want. For example, Zynga (ZNGA) wants access to your name, profile picture, gender, friends, and any other public information. They even want to post on my wall on my behalf. If you don't give them the rights to your information, you can't play their games. What's this world coming to?

Google has enjoyed a somewhat easier ride with privacy over the years, but it's beginning to come under attack as well.

With its reach now expanding from search to YouTube to social networks, its privacy policy update allowing its units to access information from anywhere in the Googlesphere shows how far the company is going to use your data. The backlash was just as intense as changes at Facebook generate. The message: This matters to users.

Why It Matters to Companies

The conundrum for Facebook, Google, and any other company that collects your data, is that they use information about you to target goods, services, and advertising. If you "like" Coca-Cola on Facebook, you may find a Coke Zero ad on some of the pages you visit. Scarier yet, if you follow Coca-Cola on Google+, Google can place those ads almost anywhere you go on the Internet, since the company's advertising reach is so wide.

Knowing more about you means more focused ads, and more focused ads mean more revenue for Google and Facebook. It's in their best interest to know as much about you as they can.

Sorry, the Privacy Ship Has Already Sailed

Part of the problem for consumers is how easy it is to allow our information to be taken. Ever read the iTunes agreement, Google privacy policy, or any lengthy end user licensing agreement you can just click "accept" on? Me neither.

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Consumers don't even know what they're giving up until they find out from a media report how these companies are using the information, and even then, it's hard to change anything. So when something like the recent password-request issue comes up, it makes the news for a day, maybe two, and then goes away. It's too easy for companies to keep tracking us more and more closely.

And more and more tracking is exactly what they're doing.

Do you even know what's being tracked on your computer, smartphone, or tablet right now? Google recently got in trouble for slipping some tracking code into Apple (AAPL) devices, so you probably don't. There are cookies, widgets, and other thingamabobbers that track all kinds of information about your Internet usage and feed it back to a variety of sources.

Privacy has become so complicated online that it doesn't really exist. Unless you keep information off the web, there are probably ways someone will share it.

How Mad Do You Have to Get?

The industry has been in enough hot water over this topic that it's surprising that a solution to the privacy issue hasn't been found. Maybe there's not enough outrage, or maybe we just don't care. Until we do, Facebook, Google, and other Internet companies are going to squeeze as much information out of you as they can. It's in their best interest to do so.

Motley Fool contributor Travis Hoium does not have a position in any company mentioned. The Motley Fool owns shares of Coca-Cola, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Coca-Cola, Apple, and Google, as well as creating a bull call spread position on Apple.

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Want to Protect Your Online Privacy? Too Late

Oct. 28, 2003: Mark Zuckerberg hacked into restricted areas of Harvard University's computer network to create Facemash, a website that pulled the private dormitory ID photos of students, then asked users to compare the pictures of two random students and chose which one was better looking. For the brief period before university administrators shut it down, it proved quite popular.

January 2004: Zuckerberg began to write the basic software to create a universal Harvard social directory, TheFacebook.

Jan. 11, 2004: Zuckerberg registered thefacebook.com domain. Then, on Feb. 4, TheFacebook launched at Harvard University. Mark Zuckerberg, right, and Dustin Moscovitz, co-founder, left; took a semester off in 2004 to further improve on TheFacebook website.

March 2004: Initially restricted to Harvard students, TheFacebook expanded to other colleges, including Stanford University, Dartmouth College, Columbia University and Yale University.

April 13, 2004: Zuckerberg, Dustin Moskovitz, and Eduardo Saverin formed Thefacebook.com LLC, a partnership.

June 2004: TheFacebook moved it's headquarters to Palo Alto, Calif., and received an investment of $500,000 from Peter Thiel.

June 2004: Thefacebook incorporated into a new company, and Sean Parker, a co-founder of Napster, took the job of president for the growing business.

September 2004: Facebook replaced its "User is..." prompt with a "What's on your mind?" question in the newly designed space for posting and sharing status updates called "The Wall." 

September 2004: Harvard students Cameron Winklevoss and Tyler Winklevoss of ConnectU filed a lawsuit against Zuckerberg and other Facebook founders for allegedly stealing their idea for a college social network called HarvardConnection.

July 19, 2005: Then-dominant social networking site MySpace was acquired by News Corp., spurring buzz on the Internet about the possible sale of Facebook to a larger media company.

Aug. 23, 2005: TheFacebook dropped its "The" and became Facebook. Purchase price it paid for the Facebook.com domain name: $200,000.

September 2005: Facebook added networks for high school students.  In December 2005, Facebook reached 6 million users.

2005:  Artist David Choe began painting murals at the headquarters of Facebook in exchange for company stock. Today, the shares he received are worth an estimated $200 million.

2006: A cash flow statement was leaked showing that Facebook had a net loss of $3.63 million for the 2005 fiscal year.

Sept. 26, 2006: Facebook removed its restrictions and allowed anyone 13 and older with a valid email address to join.  A news feed and a mini-feed were introduced, providing easier ways to see what your friends are up to.

May 2007: Facebook Platform launched with 65 developers and more than 85 applications.  Third-party developers quickly followed, building applications to integrate with Facebook. Games such as Farmville and Mafia Wars spread rapidly.

July 25, 2007: A federal judge gave twin brothers Cameron (left) and Tyler Winklevoss, founders of ConnectU, and Divya Narendra until Aug. 8 to flesh out the allegations in their lawsuit against Mark Zuckerberg. Those charges  included fraud, copyright infringement and misappropriation of trade secrets.

December 2007:  Facebook reached 58 million users. With the successful addition of Facebook Platform and video, growth remained strong.  Facebook charted a course toward becoming a general portal like AOL; meanwhile, the choice was made not to aim toward being acquired, as   MySpace.com, YouTube and so many other tech startups were.

June 2008: Facebook settled two lawsuits, ConnectU vs Facebook, Mark Zuckerberg et al. and intellectual property theft, Wayne Chang et al., over The Winklevoss Chang Group's Social Butterfly project. The settlements effectively had Facebook acquire ConnectU for $20 million in cash and Facebook shares valued at $45 million, based on a $15 billion company valuation.

July 2008: The first Facebook iPhone app was released.

August 2008: News broke that some employees reportedly privately sold their shares to venture capital firms at prices that gave the company an implied valuation of between $3.75 billion and $5 billion.

October 2008: Facebook set up its international headquarters in Dublin, Ireland.

February 2009: The "Like" social plug-in was added, allowing users to follow status conversations without having to say anything.  The like button was instantaneously a hit. It's initial purpose has been widely misinterpreted as a positive approval button.

August 2009: Facebook acquired FriendFeed, a real-time news aggregator.

September 2009: Facebook said that its cash flow had turned positive for the first time.

April 2010: Facebook announced the acquisition of photo-sharing service Divvyshot, and introduced Community Pages.

May 31, 2010: Quit Facebook Day was an online event where users vowed that they would quit the social network shortly after widespread criticism was received on the new privacy controls rolled out in mid-May.  Zuckerberg publicly admitted the company had "missed the mark."  An estimated 33,000 users quit the site.

June 2010: Facebook employees sold some shares on SecondMarket at prices giving the company an implied valuation of $11.5 billion

August 2010: Places launched, allowing users to share information about where they are in the real world, so friends can find each other.

Oct. 1, 2010: The Social Network, a film about the start of Facebook, was released to theaters. The film, directed by David Fincher, was met with widespread critical acclaim and won the Golden Globe and Critics Choice Best Picture for the Year. Mark Zuckerberg stated that the film is an inaccurate account of what happened.

November 2010: Facebook added features to its mobile software for Android devices. The number of users reached just short of 608 million, with mobile traffic increasing.  

December 2010:  TIME magazine named Facebook founder and CEO Mark Zuckerberg the 2010 TIME Person of the Year.

January 2011: Equity investors put $500 million into Facebook for 1% of the company, placing its implied value at $50 billion.

February 2011: Facebook added 'Civil Union,' and 'Domestic Partnership' to its Relationship Status options.

February 2011: Facebook application and content aggregator Pixable estimated that Facebook would host 100 billion photos by summer 2011.

June 2011: Facebook partnered with Skype to add video calling as well as a new group chat feature.

September 2011: Heroku joined forces with Facebook for application development using the Facebook Platform.

Sept. 22, 2011: Facebook debuted the new Timeline user interface at the F8 Convention.

October 10, 2011: Facebook launched its iPad app.

December 2011: Membership reached 845 million users.

December 2, 2011: New York Mayor Michael Bloomberg (left) Facebook Chief Operating Officer Sheryl Sandberg (center) and Sen. Charles Schumer (D-N.Y.), react during a news conference on the announcement that New York will be the center of Facebook's new engineering technology initiative.

December 22, 2011: Facebook launched the new profile user interface, Facebook Timeline.

January 24, 2012:  Facebook announced that  "Timeline" would become mandatory for all users.

Feb.  1, 2012:  Facebook filed paperwork to go public, seeking to raise $5 billion on Wall Street in the largest flotation ever by an Internet company.

March 6, 2012:  Facebook launches Messenger for Windows, which gives users of Windows 7  Facebook services without the need for a web browser.

April 9, 2012: Facebook announced that is will acquire the photo-sharing app Instagram for $1 billion USD.

May 18, 2012: Facebook founder, Chairman and CEO Mark Zuckerberg, center, rings the opening bell of the Nasdaq stock market from Facebook headquarters in Menlo Park, Calif. The social media company priced its IPO on Thursday at $38 per share, and beginning Friday regular investors will have a chance to buy shares.

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