As LinkedIn prepares to sell its stock to the public, the social network for professionals is warning of a potential threat to its business: Internet privacy laws.
In a filing to the Securities and Exchange Commission this month, the startup said a push by federal regulators to create first-time privacy rules “could deter or prevent us from providing our current products and solutions to our members and customers, thereby harming our business.”
Silicon Valley is on alert. As federal officials move closer to creating Internet privacy laws, companies that have enjoyed the freewheeling nature of the Internet now find themselves under increased scrutiny.
Google, Facebook and marketer Epsilon are among the world’s biggest digital information troves, and the giants have long lobbied against privacy laws that would curb their ability to collect and share data. To do so would limit their business prospects, they say, and they argue that consumers want advertisers to slice and dice data to serve up more relevant ads.
Now those concerns are rippling across the entire Internet industry.
“No matter what size the company, they are seeing how a government inquiry can shut down a business or affect the future of others,” said Hemanshu Nigam, founder of privacy consulting firm SSP Blue and former privacy head for MySpace. “Privacy is now a line-item in business plans.”
That’s a change of pace for Web entrepreneurs, who are typically given a long leash by regulators to plug away at new technologies without the distraction of politics and policy in Washington.
But in the past year, Silicon Valley firms have seen a bevy of Web companies like them swept into federal investigations for consumer protection violations and fraud.
This week, Internet radio site Pandora revealed that it was called into a broad federal grand jury investigation into the alleged illegal sharing of user data by a number of firms that create apps for the iPhone and Android devices. Days earlier, Google settled with the Federal Trade Commission on charges it exposed data through its Buzz social networking application without the permission of users. Last year, Twitter settled with the agency after an investigation found the micro-blogging site’s loose security allowed hackers to access user information.
The damage from those investigations comes in the form of legal costs and, in the case of Google, the mandate of regular privacy audits. But the bigger worry is how those inquiries hurt reputation, said venture capital investor Raj Kapoor of the $2.8 billion Mayfield Fund.