SAN FRANCISCO (Reuters) - The secret of Facebook’s success, and its future viability, hinges on how the social network site protects privacy, taming the anything-goes intrusiveness of what might as well be known as the World Wild Web.

A Facebook profile is seen in an undated publicity photo. REUTERS/Handout

Chris Kelly, Facebook’s chief privacy officer, said users want greater control over who sees their personal information, rather than expecting total privacy, or anonymity, the concept underlying much of the legal thinking on privacy for more than a century.

“Privacy is beginning to transform from the classic ‘right to be left alone’ to this notion that ‘I want control over my information,’” Kelly said in an interview on the sidelines of a Fortune Magazine technology conference held here last week.

Started in 2004 by then-undergraduate Mark Zuckerberg as a social site for fellow Harvard University students, Facebook has been opened up over the last year to users of all ages, who have a degree of control over who sees what personal details.

These privacy controls paradoxically encourage users to reveal more about themselves within their approved circle of friends than they would do on the wide-open Web. As a result, many post mobile phone numbers, reveal political loyalties or even show changes in their dating status for friends to see.

Facebook has seen membership spike 25 percent to more than 30 million since May, when it turned the site into a big tent for outsiders to build software inside it. This lets users engage in online activities while limiting exposure to security pitfalls.

“We have tried to take a very control-based approach for our users, so Facebook information doesn’t leak out on the Web in general,” Kelly said. “Privacy, as anonymity, is declining, but privacy, as control, is on the rise.”

THE BUSINESS OF PRIVACY

As a company, Facebook’s livelihood hinges on how it balances the trade-offs between privacy and openness.

The free, advertising-supported site runs a limited number of conventional Web banner ads. But it also is looking at how to offer ads that match people’s expressed interests without frightening users that their data will be abused by marketers.

“In a trusted environment you share more,” Kelly said of the business logic of insuring privacy. “There is an opportunity to target advertising, as long as you keep that trusted environment.”

Facebook board member and financial backer Jim Breyer, a partner at venture capital firm Accel Partners, said the company would do well over $100 million in revenue in 2007, be profitable, and have significant positive cash flow this year.

Breyer also sought to knock down rumors the company may be for sale -- the latest speculation last week was that Microsoft Corp. should consider paying $6 billion for Facebook.

“We continue to focus on building the best stand-alone company we can be and, simply said, are not for sale,” Breyer said via e-mail on Saturday.

PRIVACY MEETS VOYEURISM

Facebook is no privacy nirvana, nor does it mean to be.

Indeed, its core function is to enable a kind of virtual voyeurism that makes it easy for members to post comments, photos and videos about their own lives while keeping tabs on what their network of online friends are up to.

It does this by offering an automated news feed of what friends are doing on their own Facebook profile pages -- a kind of gossip column among friends.

Highlighting the tension over privacy at the core of the site, when the feature was introduced last September, members temporarily revolted until the company introduced greater controls over what information their friends could see.

In another example of how privacy protections play out on Facebook, photos are often shared among users, but individuals retain the right to delete their names from photo labels, providing a degree of insulation from personal embarrassment.

While large and growing, Facebook functions like an endless series of online private clubs. The average Facebook user has access to only one in 200 of its members, Kelly said.

Among diehard Facebook users, many of whom have hundreds of connections to friends, a more subtle privacy complaint arises. As it now stands, Facebook software treats friends pretty much equally, a byproduct of its college-campus roots.

But as more users add different types of contacts -- bosses, family members, colleagues, business acquaintances -- demand grows for more refined privacy controls to distinguish between various types of real-world relationships.

Kelly said the company was working to address the issue. “Stay tuned: We are all about user control,” he said.