Facebook soothes privacy fears on eve of flotation

Facebook is bracing for increased scrutiny of its privacy policies and the way it makes money from data on its 900 million users, now that it is finally making its debut as a public company.

As the social networking behemoth has been putting the final touches to its initial public offering in the US, with trading scheduled to begin on the Nasdaq stock market today, executives have also been quietly stepping up their attempts to deal with users' privacy concerns that have laid the company open to a slew of lawsuits.

Facebook is the subject of "numerous" class action lawsuits in the US, including some from users who claim that the company continued to track them around the web even though they had logged out of the main Facebook website. Analysts expect the number of lawsuits to grow thanks to the publicity surrounding the flotation.

The suits could become a multimillion-dollar headache for Facebook if they make their way successfully through the US courts, since the numbers of users able to seek compensation could be unprecedented in legal history. The company says it does not track people after logging out.

Erin Egan, Facebook's chief privacy officer, has spent the past few days away from the hoopla of the share sale and instead trying to publicise new privacy policies designed to allay concerns and to comply with new government oversight. Last November, the company settled charges from the Federal Communications Commission and agreed to conduct "privacy audits" annually for the next 20 years. It also agreed that it will no longer make automatic alterations to privacy settings, and will instead have to get users' permission for any changes.

The issues could become more complex over time, according to Ms Egan, because the company is considering placing ads on third-party websites and targeting the ads to specific web users based on their interactions on Facebook. "We may serve ads off Facebook. That means if you could see an ad on Facebook we may use that same information to serve you an ad off Facebook. We're not doing that yet," she said.

The opportunity to dramatically scale up the amount of adverts served up to users by Facebook is the main reason demand for Facebook shares was so high. The company raised the price range for its shares from $28 to $35 originally, to $34 to $38. The number of shares being sold by early investors was also increased this week.