Facebook about-face gives more control of Beacon ad data back to users -- will they use it?

If handling adversity well is the measure of a successful startup executive, we're about to find out what Facebook's young CEO, Mark Zuckerberg, is made of.

We're also going to find out just how much most Facebook users care about privacy. 

Zuckerberg today issued a sweeping mea culpa in a blog post, admitting that the social networking site made several major blunders in rolling out its new social ad platform, known as Beacon.

That technology allows Facebook and its partner Web sites to track what Facebook users are doing on the Web at large, outside the social networking site, and post that activity to the users' profile page. That data, visible to the user's friends, could then be shared among Facebook, its partners and advertisers as well.

That type of behavioral data, at least as rich as what Google and other search firms collect and keep, represents the golden key that Facebook wants to use to monetize its huge user base. Read our previous post here. 

But there was a big problem with the program from the start: Facebook made it an opt-out system, which meant that everything a user did was tracked unless the user specifically asked that it not be. 

Many bloggers, including Om Malik of gigaom.com, hammered Facebook from the start on the features, raising an important question about whether users should be forced to choose to opt out.

Yet the opt-in versus opt-out aspect of Beacon is only part of the story, and it ignores a broader one: hundreds of millions of Internet users every month don't have the choice to opt out when they use one of the major Web search engines.

If you're concerned about whether Facebook is collecting Web surfing data, you should be even more scared of the the pending Google-DoubleClick acquisition. That combination will possess a far more detailed view of a Web user's habits, via their history of searching and clicking on ads.

It's why Congress has been holding up approval of the deal, and why the Department of Justice went after search data as part of its crusade to curb online child porn -- you can learn a lot about someone by analyzing what they search for on the Web. While Google wrung some concessions out of the DOJ to keep the results anonymous, it started down the same slippery slope that Microsoft, Yahoo and others did who offered the data with no strings attached. 

Let's face it: the way consumers' Internet surfing habits are tracked and analyzed is a nightmare to anyone concerned about privacy. I share those concerns.

But here's the rub: while privacy advocates decry stored search data, and journalists hold companies feet to the fire, and college recruiters urge undergrads not to torpedo their future careers by posting embarrassing photos online -- people keep right on searching and clicking and posting.

Just as an older generation has no trouble letting Amazon.com track the purchase of every book, CD and DVD they buy, the more-youthful users of MySpace and Facebook have no qualms about letting it all hang out online. They were raised in the age of Jerry Springer and the Hollywood star confession, after all, when a trip to rehab is an integral part of many a movie's publicity campaign.

Some people will trade privacy for the sake of convenient shopping. Others will trade it for Web fun and fame. 

Journalists who've covered the tech industry long enough can remember when Google first rolled out its technology and some pundits scoffed, saying that the company would have a credibility problem because it placed sponsored links next to free search results. Google now has a market cap over $200 billion, and I can't remember the last time I heard anyone say they've got no cred with consumers.

To some, the difference between Facebook and Google is that Facebook is all about Web 2.0, which means its users are supposed to be in charge of their own online experience. But will Facebook users not choose to opt into Beacon even if the company makes it very convenient and beneficial to do so?

That is where the challenge will be for Zuckerberg, who now has to execute more than just a public relations repair job that began with today's blog post. 

Now they need to get this product right to justify Facebook's lofty $15 billion valuation. If Zuckerberg and the Facebook team can make it too compelling to not opt in for the vast majority of Facebook users, the concern of privacy advocates, journalists and bloggers will still be valid. But they'll also have no bearing on the company's success.