Monetizing on Web 2.0 communities - Beware of Regional Differences, particularly concerning data protection

Implications: Facebook will follow Myspace and launch a German version of its service, some time in the first half of 2008. While Facebook has faced criticism in the USA for the way it introduced a new model of targeted advertising (Facebook Beacon), the issue of monetizing the user behavior of its members is much more sensitive in other countries, particularly in Europe.

Analysis: On December 14, StudiVZ, a clone of Facebook based in Germany with over 4 million members, informed its members of a change in its general terms and conditions. Members were alerted that they had to agree to the new conditions by January 9th, 2008. Otherwise access to their profile would be blocked. While worded in a longwinded legal language, it soon became clear that the new terms and conditions would allow the platform to sell personalized data to third parties and to permit targeted advertising to members via mobile technology (SMS) and chatting services (instant messengers). 
The announcement not only led to an outcry of thousands of members but also the German media. The huge pressure forced the management of StudiVZ to partly withdraw the new conditions just three days later, canceling the option to target members' mobil phones and messengers. It also stressed that it would net sell personal data for commercial purposes but only to legal authorities and it introduced an "opt-out" model where members could block the use of their data (such as age, gender, address and college degree/course) yet only after they would have agreed to the general terms.
It remains to be seen how many members will leave StudiVZ (many thousands have already done that), but it is clear that the public reaction will make it very difficult for the platform owners to monetize its massive community. And while StudiVZ is nowhere near the valuation of Facebook based on the Microsoft deal, German publisher Holtzbrinck reportedly paid around Euro85m in January to buy it.