A guest post by digital media expert Simon Buckingham, CEO of Appitalism.com

With more than 500 million active members and a captive user base, Facebook is a booming business with a user base can best be described as the goose that lays the golden eggs.  Facebook’s users provide the social networking giant a massive audience, which marketers and advertisers spend billions of dollars to cater to. So, why does Facebook continue to be its own worst enemy by surreptitiously allowing third-party applications to access users’ addresses and phone numbers? 

In short, the answer is money.  By giving third-party applications increasing access to private data, Facebook caters to marketers and advertisers---instead of users. Up to this point, Facebook has successfully walked the razor’s edge between consumer and marketer interests. But with one wrong move, Facebook could entirely lose credibility with its users.  To avoid a possible catastrophe, here are five ways Facebook can handle any privacy concerns.

1. Admit that Facebook is a business. While users happily enjoy the multitude of benefits that come with a Facebook account, few realize that an enormous amount of money is required to power a site with over half a billion users.  Facebook should make it clear that in order to keep its service free for users, it needs to generate a massive amount of revenue.  Advertisements are a great way to do that, but in advance of a major IPO, Facebook needs as many revenue streams as possible.

2. Act with transparency. Much of the shock in regard to Facebook’s shift in privacy settings is due to the surreptitious and sudden manner in which the changes were implemented.  Facebook’s public relations team needs to do a much better job of advertising and discussing major privacy changes before they happen, instead of trying to put out fires afterwards.

3. Educate your users. If Facebook truly believes that its new policy will not adversely affect its users, it needs to spell that out clearly in a message to all users.  There is massive outrage when Facebook changes the layout on profile pages, so when a privacy setting changes the uproar is only amplified.  Facebook has done a poor job of reaching out to its users with a clear message and description of its privacy measures.  Facebook’s credibility is built on trust, and if that trust falters with consumers, Facebook will falter as well.

4. Highlight the benefits. Do not let the story of privacy concerns become a black hole of negativity.  Facebook should be trumpeting that its new privacy settings are designed to draw in better developers to build applications on the Facebook platform.  Facebook should present to the media a number of useful new apps, like GPS check-ins, which could use the new information you would give the app access to.

5. Emphasize user control. People become anxious when they feel powerless to control their own life, digital or otherwise.  Make sure any announcements on privacy settings emphasizes the continued ability of users to absolutely control exactly what they want to share.  If you can assure users that ultimate control of their profile and their information remains in their hands, you will go a long way towards a sustained good faith relationship with users.  Prioritizing user control should always be the center of any changes Facebook makes.

The bottom line is that Facebook needs to act with much more delicacy when it comes to privacy issues.  While the social networking giant may feel it has the heft to make changes as it sees fit, an angry contingent of Facebook users could become a massive headache for a company preparing for possibly the largest IPO of all time.  For a company on the leading edge of social-networking innovation, there is no excuse for Facebook’s history of reacting to privacy complaints; Facebook should put forth an equally herculean effort to place itself on the leading edge of digital privacy as well.  To achieve this goal, Facebook must actively work to ensure that all privacy decisions are made with its users’ best interests in mind.

Remember, cutting the goose’s head off gets you nothing. Only a happy and well-fed goose lays golden eggs!

Simon Buckingham is CEO of Appitalism.com, a platform agnostic online storefront and community for all things app.