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Facebook Privacy Concerns: A Majority of Facebook Users Don’t Trust It

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Demand for Facebook (FB) shares is heating up ahead of its initial public offering, which is expected to take place Friday. The company announced Wednesday it is offering 25 percent more shares for investors to purchase. Facebook is now set to sell 421.3 million shares, up from 337.4 million, at a price target of $34 to $38 a share. Facebook's IPO could ultimately lead to a valuation of more than $100 billion.

But as investors clamor to own a part of the hottest tech company since Google (GOOG), there are some dark clouds surrounding the company. Two big ones include ad sales and privacy concerns for users.

Facebook Road Block: Privacy

The vast majority of Facebook users don't trust it. While Facebook's growth has exploded to more than 900 million users worldwide, 59 percent of users have little to no trust in the company to keep their information private, according a recent AP-CNBC poll.

"You certainly need to be concerned anytime any company has that much information about you," says Justin Brookman, director of the Consumer Privacy Project at the Center for Democracy & Technology.

Facebook stores all sorts of user data, including everything related to your Facebook page: all your messages, pokes and "likes" -- even the IP address used to login or your location on a mobile device. Most of this information is viewable on a user's Facebook timeline and can be accessed indefinitely.

But the company also collects and keeps information you might not expect, including data on what you do while surfing around other websites. (A user must be logged into Facebook to collect this information).

Facebook recently changed its privacy policy and is now capturing information about you anytime you are on a website that has a Facebook "like" button or some sort of Facebook widget. Whether or not you click those features, Facebook still knows you are there and stores that information for up to 90 days, says Brookman. Currently that information is not used to target you with ads.

But now that Facebook is set to go public "there will be more incentive on them to find ways to monetize users and to monetize users more consistently," Brookman adds.

On the flip side, Brookman says there is a lot of pressure on Facebook from Washington to disclose all privacy issues to users. At the end of last year Facebook signed an agreement with the Federal Trade Commission promising not to deceive users about privacy. If the company breaks this agreement, Facebook could face millions of dollars in fines.

Facebook Road Block: Ad Sales

Many analysts have also been worried about Facebook's ability to monetize the mobile application of its site. The Daily Ticker's very own Henry Blodget cites this as a major risk for the company moving forward. (See: FACEBOOK IPO: Biggest Risks and Opportunities)

But in a surprising turn of events Tuesday, it seems Facebook may now have a bigger problem with its overall ad sale strategy. General Motors (GM) announced it was pulling its ads on Facebook because the ads did not translate into car sales. GM spent $10 million to advertise on the social networking site last year, which is small compared to the $3.7 billion in revenue Facebook pulled in during 2011.

Adding insult to injury, that same AP-CNBC poll found that half of Facebook users don't click on ads displayed on the site.

Tell us what you think in the comments below or on Facebook.

Stay tuned for more Facebook coverage from The Daily Ticker and check out our previous coverage below!

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