Previously mentioned during the Big Bad Blog’s morning coffees: Facebook makes ill-advised changes to its Terms of Service, and then reverses the changes following some serious outcry.

It has been two weeks since then, which seems like enough time to reflect on things. What went wrong at Facebook? Could it happen elsewhere? What can be learned from it?

What went wrong?
Facebook — and other similar sites which depend on user-generated content — are in a little bit of a pickle when it comes how to use that content. The model is pretty simple: people register, add content to facebook.com, and other people who have registered can view that content. They sell advertisements, and try to make a profit. All good, right?

Wrong. They need rights to that content, or they cannot have them on their website — particularly if they are to be sources of revenue. So they need users to sign away these rights, which most do happily. Very few of us are professional photographers or writers, so the snippets of photography and writing hold no monetary value to us — we just want to share it.

Facebook’s latest strategy involves new partnerships with other companies, raising new problems regarding how user data will have to be treated. A good example is their proposed partnership with Nokia, which would “include the storage of Facebook friend’s contact information directly into Nokia phones, so users can check to see if friends are online or send messages through their phone’s contact list.”

So Walter is a Nokia phone user, and a Facebook user. Henry is one of Walter’s friends. Henry’s data is no longer only being stored on Facebook servers — it is now also stored at Nokia and on Walter’s phone. Facebook could conceivably have a deal with Nokia that would clear the data off their servers when Henry leaves Facebook — but they have no authority over Walter’s phone. Henry’s content is there, and Facebook (presumably) makes money off that content either via advertising or their deal with Nokia. Even if Henry has removed the content or stopped using the service.

So they need their agreement with Henry to cover the fact that Walter might never remove this information from his phone — they need rights in perpetuity.

The bigger problem
The problem, as it stands, is not confined to Facebook — it’s the “new” direction of the Internet. Web 2.0 is driven by user contributions. Web sites are no longer passive media, they often engage their users or depend on their users to actually provide the content. The first generation of these — the Facebooks, YouTubes and MySpaces — are just reaching adulthood, and starting to try to stretch themselves and really start to make money.

But what to do with the content? These companies do not own the content — their users do. At least they hope their users do — quite often their users do not, so the rights granted are a little bit iffy. The question facing Facebook is facing the entire 2.0 generation of websites: How do these sites continue to grow while simultaneously respecting the rights of their end users/content creators?

The ability to find satisfying answers will determine whether a MySpace or Facebook can join their predecessors (Microsoft and Google) as huge success stories, or be replaced by better technology or the limitations of the Web 2.0 model.

The disturbing part
There is one thing about this whole thing that increasingly bothers me — I cannot remember agreeing to the new Terms of Service when Facebook changed them. That does not mean I didn’t — like most people, I am far too passive about these things. It is entirely possible that I clicked “Yes” to a new Terms of Service. But I suspect I didn’t.

Why not?

Because I never had to click “Yes” on something to change back. I remember that clearly — Facebook merely informed me that they had changed it back. On the way back, they definitely changed the Terms of Service without my agreement or consent.

And this disturbs me. Because the agreement is not just about my participation as an end user who does not pay for the service. My participation is also as a content provider. If I have an agreement with a website that they can use something of mine — artwork, music, writing, whatever — for a limited time, they cannot just change the rules on me overnight. My instinct would be to say that it was an illegal attempt to modify a contract and take ownership of my content — but why have others who are more knowledgable about these things not made those same claims? Can I challenge these sorts of changes in the UK? Canada? The US? All three locations have merit. Whose rules apply, and what are they?

Moving Forward
The Facebook saga is not over yet. They need to change the rules for their service to function as part of the partnerships they are pursuing. They are consulting with their customers — scratch that, with their content producers in order to do so.

This is the big lesson for Web 2.0 — you gain points for viewing your customers not as End Users or customers, but as content providers. This change of approach seems to be well received, and I hope it yields results for Facebook. If this strategy works, others will follow suit.

And if not? The next company to go down this road will not play nicely.