Inside Google

SAN FRANCISCO — When it comes to Washington insiders, Facebook is on a hiring spree — landing former Clinton Press Secretary Joe Lockhart on Tuesday after bringing on several former Bush administration aides and flirting with President Barack Obama’s former press secretary, Robert Gibbs.

These aren’t idle friendships.

With an initial public offering just months away, Facebook faces a nightmare scenario in Washington: passage of a restrictive federal privacy law that could make its business all but impossible.

And the company is going to do everything it can to stop that.

Facebook announced Tuesday that Lockhart, a long-time Washington hand who helped start the powerhouse Glover Park Group, would be moving to California and starting July 15 as the company’s vice president of communication.

Last month, Facebook hired former Bush deputy chief of staff Joel Kaplan as vice president of public policy in Washington.

Lockhart’s job will be to help guide the company as it evolves its business and its approach for handling privacy concerns, the company said in a statement.

And for Facebook, privacy concerns are the ultimate Achilles’ heel. It needs to be seen as a safe place online in order to keep and attract new users. But restrictive privacy laws could also slow the company’s ability to innovate with online tools, increase users and create new revenue models.

“They have a big target on their back because of past missteps and that they have more information about people than anyone else,” said Justin Brookman, director of the Consumer Privacy Project at the Center for Democracy and Technology.

The company says it takes the privacy concerns of its users seriously.

“Our mission is to give people the ability to connect with others so they can share information,” said Marne Levine, former chief of staff at the National Economic Council, who took the reins as Facebook’s vice president of global public policy in June 2010.

“Ultimately, what it comes down to is trust,” she said. “We understand that if we don’t have users’ trust, we don’t have a service. We are highly invested that users have a safe and secure experience on Facebook and they understand the tools available when they have the levels of openness they want.”

But lawmakers are wary.

In California, the company recently dodged a privacy bullet when the state Senate killed a bill that would have required users to decide when they sign up on a social networking site how much personal information they want to share. Supporters of the bill, which made it through committee but lost narrowly on the Senate floor, said they would look for other ways to push their measure, including the possibility of a state ballot initiative.

As it fought the bill, Facebook said requiring that people decide about privacy settings up front would be the equivalent of having users read a list of all road signs before going out for a drive. Such a requirement would not serve users because people would set privacy settings without an understanding of the context, the company said.

While not directed specifically at Facebook, a new Tennessee law makes it a crime to “transmit or display an image” online that is likely to “frighten, intimidate or cause emotional distress” to someone who sees it.

And this week brought just the latest privacy flare up with European officials saying they will look into Facebook’s facial recognition and photo tagging tools. That prompted some U.S. privacy groups to look at the service and file a complaint with the FTC.

On Capitol Hill, Facebook has faced tough questioning from members of Congress — together with threats of consequences if privacy concerns aren’t addressed.

Like many tech companies, Facebook faces a big cultural gap with lawmakers. While everyone may use Facebook, not all understand it. And Facebook’s attitude in the past may not have helped either. Facebook can at times lead with an engineering perspective that privacy concerns will go away once people use, understand and come to love a new feature or service.

The cultural gap was evident at a hearing in May when company executives withstood criticism from the chairman of the Senate Commerce Committee. “It’s my general feeling that people who are 20, 21, 22 years old really don’t have any social values at this point,” said Sen. Jay Rockefeller (D-W.Va.).

But the hearings and the debates have yet to damage the firm.

“You can have a rough hearing but that’s different than having a bad outcome,” said Ralph Hellmann, senior vice president of government relations at the Information Technology Industry Council. “I don’t think they have had a loss on an actual outcome. Everyone has to testify eventually in Congress. The question is how you weather the storms.”

Hires like Kaplan and Lockhart can help with that. Another step the company could take, but hasn’t yet, is to create a political action committee, a common move for companies that want access to key politicians to tell its side of the story.

Even without a PAC, the company has had no problem landing meetings with top lawmakers. In recent months, Facebook’s offices in California have become the must stop for lawmakers touring Silicon Valley with recent visits by Obama as well as House Speaker John Boehner and Republican Reps. Kevin McCarthy and Darrell Issa.

Privacy concerns have gone hand-in-hand with Facebook’s growth. Last year, a federal judge approved a $9.5 million class-action settlement over the company’s Beacon service, which published where users were buying. The company shut down the service in 2009. The funds were used to set up a foundation to improve online privacy.

Since its Beacon experience, the company has been more willing to view new services or tools through a privacy lens and talk to consumer groups in advance of rolling out new ideas, say some privacy advocates. “They are not in the same place as they were in thinking that this is going to blow over,” said one privacy advocate.

Others disagreed. “They could say we are hiring lobbyists to keep government off our back or they could say, ‘We do better when our customers have faith in us and trust us and we’ll sit down and negotiate,’” said John Simpson of the Consumer Watchdog. “Up to now, Facebook has stiffed serious attempts at that kind of policy development.”

For its part, company executives say they are evolving in their approach and have more staff on the ground to do outreach to people and policymakers.

The company has only to look at the troubles faced by other tech companies to see how policy debates can go from testy hearings on the Hill to un-welcomed regulatory scrutiny that can go to the heart of a firm’s business model. Microsoft, followed by Google, slowly ramped up its D.C. presence before finding itself ensnared in business-altering problems, such as an antitrust investigation.

“The advantage that Facebook has is that it doesn’t have any enemies actively trying to bring it down,” said a high-tech lobbyist. “It probably is its own enemy.”

Garnering more than 500 million users in its seven years, Facebook’s growth has exploded, as it has become the key meeting place online. Its advertising and e-commerce business model relies on people using the social network as their main interface with the Internet.

What it does with the information of this growing and captive audience is an ongoing source of concern.

For a fast-growing company, its strength in the policy realm depends on its ability to stay nimble and build relationships as it fights many battles, say observers.

“Tech companies often have self-correcting mechanisms,” said Hellmann. “Smart companies make changes in policy so that lawmakers don’t have to legislate.”