MediaFile

Facebook has reached an almost unimaginable milestone: 1 billion people are active users. It is hard to get your head around that number, which represents one-seventh of the world’s population (and not every one of us even has Internet access). It’s almost half the total number of people estimated to be on the Web at the beginning of this year.

Even CEO Mark Zuckerberg can’t quite seem to comprehend it: “It’s really humbling to get a billion people to do anything.”

But despite gangbuster growth, Facebook is based on a tricky business model: The more they use members’ shared information to target them for advertisers and marketers, the less members are likely to go along, and the more they’ll realize the bargain they’ve struck. Just as Facebook effectively redefined “Friend,” it is pushing the boundaries of the public-private divide.

So it’s a fine line they have to walk, promising granular, voluminous, robust member data that has real value in the marketplace, while reassuring members there’s nothing to worry about.

Facebook does the latter primarily by not drawing attention to the issue at all. It has over the years changed things in ways that consistently favor increased sharing, putting the onus on members to opt out. Tech writers scream bloody murder, and yet (shockingly!) membership still rises.

But what would happen if Facebook actually offered a clear-cut choice to all of its 1 billion members?

Suppose the next time every member signed on, he or she were faced with a simple white page offering two clear choices. One choice would be: “I want to share my information only with people I designate as friends.” The other would be: “Facebook can give my information to whomever it wants, subject only to law.”

You wouldn’t be able to access your account until you chose. Facebook would be bound to honor each individual choice – the majority wouldn’t rule.

How would you answer? What do you think the final tally would be?

Even if a minority of Facebook’s members chose the “friends only” option, that number would still be vast enough to wreak havoc on Facebook’s business plan. Clearly Facebook’s current revenues don’t exactly support its current valuation, but everyone who bought in was making a bet on the future. It is the future that remains in doubt, since there isn’t even a plan to execute. But one recent estimate says that if social advertising succeeds, Facebook could quintuple ad revenue to $21 billion in five years. That analysis, based on research by Carlos Kirjner, would value Facebook at $141 billion in a few years. That number drops if Facebook can’t share all of its users’ data with advertisers.

Facebook won’t put this to the test, of course, because it would be suicide. Even raising the question of whether users want to trust Facebook could sow seeds of doubt in users’ minds. Facebook would have nothing to gain and everything to lose. It already offers a range of privacy controls, and if you have the stomach to wade through dozens of choices, you can lead a very private Facebook existence.

Most people don’t bother, of course, but it’s probably not because they have given the matter a whole lot of thought. The median member age when that billionth person signed up was 22; the average person still signing up for Facebook knows little outside the Era of Sharing. She hasn’t been stung yet by a privacy breach, and is still naive about how innocent shares can go in unanticipated directions.

But that’s the thing about privacy: Most of us don’t really think about it until it has been invaded. And then it matters more than almost anything. And the more Facebook pushes the envelope, the greater the risk that members will push back.

Facebook’s challenge is to hold two conversations in parallel – emphasizing the rich data potentially available to the business folks, while reminding members how much better their lives are when they share. When these lines cross, Facebook has to scale back, as it did recently with its reversal on “frictionless sharing,” one of the key advancements unveiled by CEO Mark Zuckerberg at last year’s F8 developers conference.

The backlash led to what Wired‘s Ryan Tate called “Facebook Whiplash”: “Apps … get a big surge of traffic as Facebook opens its platform to a new category, only to fall back to Earth after Facebook users complain and Facebook cuts activity from that category out of users’ news feeds.”

Facebook’s members are its product: That is a well-worn truism. And Facebook may be able to soothe or distract members long enough to get over the hump. If they start printing money, and nobody feels abused, that will mean Facebook has figured it out.

But the only way that happens is if Facebook doesn’t have “The Talk” with its members. Public or private is a question Facebook won’t ask. Which pretty much tells you what the answer would be.

PHOTO: Facebook Chief Executive Mark Zuckerberg laughs as he addresses students at the Moscow State University in Moscow October 2, 2012. REUTERS/Maxim Shemetov