Did Facebook Privacy Blunders Spark Plummeting Membership?

Facebook might finally be feeling the effects of its protracted and highly publicized privacy and security issues after its growth practically came to a grinding halt in June.

According to market research firm Inside Facebook, the social networking giant added just 320,000 new users in June, a abysmal comparison to the almost 8 million new members (7.8 million ) it incorporated into its folds in May.

Meanwhile, the firm reported that Facebook experienced a decline of active users in its largest demographic, its 18 to 44 age range, falling to about 125 million. While slow down trickled into the older 45 to 54 age group, as well as the 13- to 17-year-olds, those numbers were still within the "normal ranges," Inside Facebook reports.

One of the reasons for the significant drop-off could be due to the copious negative press regarding Facebook privacy blunders over the last six months.

"One possibility is that we're finally seeing the backlash from heavy media attention to Facebook privacy issues – some of which were real, some the result of confusion and sensationalism. Regardless of the causes, the age group that logged a loss in June is also the one most likely to have paid attention to the privacy debates, and the timing could be correct, since the Facebook ad too we use to gather this data is often several weeks behind," Inside Facebook said.

The research group, however, did speculate that the drop in users could be anomalous, or the result of a natural market saturation point that would facilitate a growth plateau.

'Less excitingly, the negative growth could simply be a blip," it said. 'It's not uncommon to see a saturated country like the U.S. take a breather after a spurt of growth."

Although, that's not very likely, they said, adding, "In the years we've been tracking the demographic data, we've rarely seen a dip like this, so we would tend to favor the idea of a root cause," it said.

Meanwhile, German officials have launched a formal investigation of Facebook for accessing and saving personal data of non-members, according to the BBC.

Facebook could potentially face fines totaling tens of thousands of Euros for violating German privacy laws. Facebook has until August 11 to formally reply to the legal action.

"We consider the saving of data from third parties, in this context, to be against data privacy laws, said Johannes Caspar, head of Hamburg's Data Protection Authority, to the BBC. Switzerland is also reportedly concerned about the use of third-party data, the BBC said.

"There are much stronger privacy laws in Europe than here, where privacy is viewed as a consumer protection issue as opposed to a fundamental human right," Consumer Watchdog's John Simpson told the BBC News. "We see that a number of Silicon Valley companies don’t really understand how seriously privacy issues are taken in Europe and they will continue to run afoul of data protection laws there. I also think there is a growing reaction in the U.S. that we should beef up our privacy laws along the lines of those in Europe."

While Facebook has been toying with privacy since its inception, the social networking monolith committed some major privacy blunders that resulted in furious backlash from users, legislators and privacy watchdogs alike. Among other things Facebook sparked public outcry when it revamped its privacy settings in November to include an "everyone" setting, which shared personal profile information with the entirety of the Internet by default.

Facebook later came under fire for launching an "Instant Personalization" feature, which linked users' Activities and Interests information from their profile with sites such as Yelp, and other third-party apps without their knowledge or consent.

Facebook responded to the heated criticism by simplifying and revising some of its privacy policies. However, numerous privacy advocate groups later submitted an open letter demanding six additional changes, contending that Facebook's revisions didn't go far enough to ensure users' privacy.