Social Networks : Can online communities manage their privacy problem?

Social networks are redefining the way people find and share information, they've provided a platform for a new wave of applications, and their impact has even spilled over into this year's revolutions in the Middle East. The operators of these networks make money primarily through ads, wooing advertisers with the prospect of campaigns better targeted than anything competitors like search engines or television can provide.
Consequently, social networks present the first serious challenge to the dominance of Google's search-based advertising business.
But to provide precisely targeted advertising, they must continue to make the most of the personal information provided by users. In the past, network operators have had a largely free hand in how they used that information, but on a number of occasions they provoked howls of protest by overstepping the mark. Now privacy concerns are becoming the focus of attention from consumer advocates and governments around the world (see "When Private Information Isn't").
These concerns will become even more pressing as social networking is integrated with more and more online services, such as personalized search tools that factor in what you and friends like or recommendation engines that suggest which movies to see, restaurants to visit, or news to read. But even as privacy issues linger, it's likely that before long, not having a profile and some connections on at least one social network will seem as strange as not having an e-mail address or a cell phone.

Ref:
Technologyreview