05/11/2012 06:04 pm ET Updated Jul 11, 2012

Facebook Privacy Changes Could Help Social Network Sell Ads On Other Sites

By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Facebook Inc, just days before it goes public, said it has revamped its privacy policy in a way that could broaden the reach of its advertising business through other websites.

The operator of the world's biggest online social network has at no point said it planned to sell advertising on other Internet sites, but the policy changes would further expand its ability to do so.

Facebook's money-making potential has been spotlighted as the company prepares to raise up to $12 billion in its initial public offering. Some analysts and investors have pointed to Facebook's slowing revenue growth as an area of concern.

Analysts have long speculated about whether Facebook would join the likes of Google Inc and Yahoo Inc to create a so-called ad network that distributes the ads it sells to other websites.

Facebook makes the lion's share of its revenue selling ads on its website. Letting those ads appear on third-party websites would broaden their reach.

Ads on Facebook itself are aimed at different slices of its audience, based on their personal information, such as age and marital status, as well as activities on the network such as those indicated by their "likes" for certain items or topics.

The Menlo Park, California-based company said on Friday the changes in privacy policy are designed to take account of new features on the service as well as recommendations from Ireland's privacy regulator, which released an extensive audit on Facebook's privacy practices last year.

The new privacy policy also provides more details on how Facebook uses consumer data to sell ads on the social network. It included a page devoted to the so-called cookies that Facebook, like many Web companies, places on users' computers to help target ads to consumers.

Privacy has been a challenging issue for Facebook and other online services in recent years. In November, Facebook settled a privacy case with the U.S. Federal Trade Commission that subjects the company to 20 years of independent audits.

Under its revised privacy policy, Facebook broadened the types of ads that it could potentially place on third-party websites. Facebook has previously said it could offer "social" ads - which incorporate information from a user's friends - on third-party websites. The revision states that Facebook can offer any kind of ad on outside websites.

Facebook Chief Privacy Officer Erin Egan noted that the company does not offer ads on outside websites. But the network wanted to ensure that it has the "flexibility" to offer various types of ads should it ever decide to do so, she said.

Facebook also changed the language about how long it will retain user data. Such information from advertisers will now be kept for 180 days, and Facebook will retain all types of data for "as long as necessary."

Exceptions to the 180-day policy may include, for example, a Facebook page created by an advertiser that showcases certain user information, Egan said. The company will offer a detailed chart of all the types of data it retains about its users at some point "down the road," she added.

Justin Brookman, director of consumer privacy at the Center for Democracy and Technology, a non-profit advocacy group for Internet user rights, said the change to the data retention language did not seem to be an area of concern.

"They're really just keeping it around for very narrow reasons," said Brookman, whose firm receives funding from Facebook and other companies.

Facebook's policy changes will be open to a 7-day comment period from users. Any change which receives more than 7,000 comments will be put to a vote by Facebook users. If a particular comment receives 30 percent of votes supporting it from Facebook's "active" users, it will go into effect.

(Reporting by Alexei Oreskovic; Editing by Richard Chang)