Is Facebook, Inc. Compromising One of Its Core Principles?

Source: Facebook.

"You have one identity. The days of you having a different image for your work friends or co-workers and for the other people you know are probably coming to an end pretty quickly. Having two identities for yourself is an example of a lack of integrity."

-- Mark Zuckerberg,The Facebook Effect

Facebook has always enforced a real-name policy for users of its site. This has long been a core principle for the dominant social network, as well as a differentiating feature (at least initially) as Internet anonymity has long been a defining characteristic of the web itself. The company does this in an effort to keep its community "safe." Facebook wants its users to know who they're connecting and interacting with.

The real-name policy has directly conflicted with the interests of some niche communities recently, culminating in a blog post from Facebook product chief Chris Cox, apologizing for how the situation was handled, clarifying that users can use "authentic names" and that "legal names" were never required.

This might not be the only way that Facebook is compromising on its stance on identities.

There's an app for that
According to a recent report from The New York Times, Facebook is developing an app that embraces anonymity. The social network is supposedly experimenting with the idea, potentially allowing users to use different pseudonyms in certain contexts to discuss topics that they may not want associated with their true identities. That's always been the appeal to Internet anonymity in the first place, as it allows people to pursue private interests in ... private.

The app is still in development, and a lot of details haven't been decided yet. Its release is reportedly scheduled within a matter of weeks, but it could also never see the light of day.

At Facebook's F8 developer conference earlier this year, the company introduced a new way for users to anonymously log into third-party applications. But that was more of a way to safeguard privacy, limiting what information is shared with third-party developers -- information that Facebook already has.

Some do it, other's don't
Google enacted a similar real-name policy back in 2011, only to backtrack earlier this year, affecting its dozens of users. LinkedIn requires real names, but professionals have a vested interested in providing real names since they are potentially looking for career advancement.

Twitter has always accepted pseudonyms, although it does prohibit people impersonating others. Twitter is the most relevant rival here though, positioned more similarly with consumers and having greater usage than Google+. Authentic identities are an important distinction between Facebook and Twitter.

How it could affect the business
Since not much else is known about this anonymous app, it's unclear what impact it could have on Facebook's advertising business. If Facebook provides tools for users to mask their identity from the site itself, reducing the amount of data that Facebook can collect and use for advertising purposes, its ad prices could suffer alongside declining ad relevance.

However, if Facebook still knows who you are but merely allows users to mask their identity from other Facebookers while still collecting data on those interactions, it could open up an entirely new frontier of mining user data. What activities do people prefer to do anonymously? What do they do under their real names?

Facebook could track users' public activity as well as private anonymous activity, and potentially come up with new ways to leverage that information with ad relevance. Of course, this all depends on if Facebook launches the app and if people adopt it, and some of Facebook's experiments have failed in the past.

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Evan Niu, CFA owns shares of Facebook and LinkedIn. Evan Niu, CFA has the following options: long January 2016 $150 calls on LinkedIn, short January 2016 $200 calls on LinkedIn, long January 2016 $125 puts on LinkedIn, and short January 2016 $140 puts on LinkedIn. The Motley Fool recommends Facebook, Google (A shares), Google (C shares), LinkedIn, and Twitter. The Motley Fool owns shares of Facebook, Google (A shares), Google (C shares), LinkedIn, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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