Facebook's Privacy Fallout

In recent days, Facebook has suffered a backlash unlike any in its history over its privacy policies. Here, Facebook founder and CEO Mark Zuckerberg is pictured speaking to developers.In recent days, Facebook has suffered a backlash unlike any in its history. After the Palo Alto, Calif.-based company changed its privacy settings, effectively making content on Facebook available to other sites and to people not on Facebook, a number of users, including DailyFinance senior writer Sam Gustin, called it quits and deactivated their accounts.

"I don't trust FaceBook anymore," says Gustin. " I didn't join the service to participate in a massive viral marketing campaign where my private information gets displayed far and wide across the Web." Gustin quips, "You almost have to be a forensic accountant to figure out how to negotiate all the settings."

But is Facebook really that bad? Is its privacy policy really so onerous and its settings really so complicated? Will the company be able to fix its problems and come to terms with users angry about its privacy policies? The fact is, there have been privacy snafus in the past and they've been overcome.

The flipside, of course, is that if Facebook hadn't changed its privacy policies, how would it develop its business and generate revenue? How would it test the limits of what users will accept and remain innovative? How would it warrant, if it eventually goes public, a valuation of $35 billion, as estimated by Private Equity Data Center at VC Experts.com?

In the short video below, Sam Gustin explains his decision to de-friend Facebook and discusses Facebook's strategy and Senior Writer Dan Burrows discusses the implications for Facebook's business -- and its lofty valuation.

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