You have to wonder why the Obama administration isn’t hinting at a bailout for Facebook in the event that the social network’s latest privacy kerfuffle threatens the very vitality of the global poking grid. There are Facebook user protests and even predictions that this will cause a mass exodus of users and the eventual shuttering of Facebook as a going concern.

Seriously, does anyone believe that Facebook’s dominance (doubling in users from 200 million in April of last year to 400 million today, for example) is somehow threatened by this?

Here’s what’s going to happen. Already the EU and other parties have stepped up and notified Facebook that its recent behavior is unacceptable. But like a parent threatening to throw a teenager out of the house if he or she doesn’t “shape up,” these admonitions from the EU and other bodies have little long term effect. In fact, the EU warned consumers in January, 2009 that Facebook might compromise their privacy, but said nothing about the company’s obligations.

Regulators, ill equipped to deal with the new media new frontier, will make a show of protecting consumer interests. That’s not to say there are not smart people at the EU, FTC, etc. who want to do the right thing, but there are not enough people anywhere who understand the complexities of what Facebook is doing well enough to draft coherent consumer protections right now.

The company, perhaps for the first time in its history, recognizes that consumer (and regulatory) outcry requires a response, and today held a Privacy All-Hands Meeting. But ultimately, what will change? Facebook will issue a watered down explanation — it won’t be an apology. It will back down on a few missteps, tweak the privacy settings, and update its privacy agreement. And it will be damn sight more careful the next time it adjusts its privacy settings, which, in essence, are the setting for the company’s ability to generate advertising revenue.

Here’s what’s not going to happen. I think it’s highly unlikely that Facebook will be fined. Regulators are still mostly uncertain as to how current laws apply to social media/networking. And that’s not a slam. Now that Facebook has released its Open Graph Protocol for example, which allows, among other things, developers to add a Facebook “Like” button to their blog or web site, who is responsible for privacy as it pertains to the use of that Like button? The web site owner or Facebook? You now have the intermingling of functionality, the blurring of ownership, and the competing interests of two potentially responsible parties with nothing that resembles a contractual agreement.

There will also be no new privacy protections enacted in response, at least not this year. Public outrage at the latest affronts is greater than ever before, but that is because more people know and use Facebook than ever before.

Remember Microsoft’s anti-trust problems? In June, 1990, the FTC launched a probe into allegations that Microsoft and IBM were colluding to corner the PC software market. The FTC deadlocked, and the Justice Department took over in 1993. In 1994, Microsoft signed a consent decree agreeing to not use its dominant position to squelch competition. Short version: that action took four years to culminate, and did not harm the company’s long term viability. There have been numerous other actions taken against Microsoft in the intervening years (click the link above to see Wired’s excellent timeline), but none has taken the company down, and today it boasts annual revenue of $59.54 billion and a market cap of over $250 billion.

Facebook is no Microsoft by revenue or valuation, but it is in a similar position. It is essentially a social networking monopoly, as Microsoft was an operating system monopoly. People have the proverbial love/hate relationship with both companies. They complain constantly about both companies’ policies, privacy abuses, complexity, constant unexplained and sometimes invisible changes, and seeming obliviousness to the rights of consumers. But at the same time, hundreds of millions of people use the products and services of both companies all day long, every day of their lives. Because each offers the most popular and most widely understood (not necessarily the best) offering in its respective category.

In both cases, there is too much marketplace momentum and dominance for either company to fail. They will both experience ups and downs in user sentiment, and revenue. But people simply aren’t going to walk away from Facebook. The very experience that has made Facebook so successful, the ability for people to so easily make connections with others, necessarily requires some sacrifice or privacy. And Facebook is run by business people who will keep crossing the line to maximize the dollar value of the business.

This will not be recorded as an online privacy sea change. This is going to be a minor course correction. I do hope Facebook heeds this as warning and changes its position on consumer privacy and user satisfaction. But I’m not optimistic about that.

Tags: facebook, privacy, monopoly