Facebook’s stealth attack on Google

In an unfolding tale of Silicon Valley skulduggery, Facebook on Thursday fessed up to hiring a top-drawer PR firm to bash rival Google (GOOG) by planting negative stories in newspapers and across the blogosphere.

The social networking giant’s admission that it had hired Burson-Marsteller to rustle up reporters and bloggers to attack the search giant for violating Facebook users’ privacy was just the first of several shoes to drop.

Burson quickly admitted it “undertook an assignment” for Palo Alto-based Facebook, then said accepting the assignment “was not standard procedure” and that it should never have done it. And while Google did not return repeated requests for interviews, company spokesman Chris Gaither, with typical Google whimsy, told USA Today that “we’re not going to comment further. Our focus is on delighting people with great products.”

As two of the valley’s titans fought the latest skirmish in what some think is shaping up as the Internet’s biggest battle ever, observers were left amused and scratching their heads.

“It’s on like Donkey Kong between Facebook and Google, seeking victory by any means,” said Santa Clara University law professor Eric Goldman. “But I’m a little perplexed about why Facebook decided to try and stir the pot through a PR agency. If they wanted to call out Google, then call them out publicly.”

‘Whisper campaign’

But public was not the way Facebook wanted to roll. The stealth campaign started to unravel last week after two Burson agents, including former CNBC news anchorman Jim Goldman, stepped up what USA Today called “a whisper campaign.” The plan was to get top-tier media outlets to run news stories and editorials about how an obscure Google Gmail feature called Social Circle ostensibly violates Facebook users’ privacy.

Burson operative John Mercurio emailed former Federal Trade Commission researcher and blogger Christopher Soghoian, making a vague pitch for him to pen a Google-bashing “op-ed this week for a top-tier media outlet on an important issue that I know you’re following closely.” And in one pot-calling-the-kettle-black passage, Mercurio wrote, “Google, as you know, has a well-known history of infringing on the privacy rights of America’s Internet users.”

But when Soghoian started asking pesky questions, like “Who is paying for this? (not paying me, but paying you),” Facebook’s secret mission began to implode. Smelling something fishy, Soghoian posted the full email text of Mercurio’s pitch — along with his rejection — on the Internet. Daily Beast blogger Dan Lyons then pieced together the clues and figured out that Facebook was behind the spin campaign.

Much to Facebook’s embarrassment, their spinmeisters had reached out to the wrong hack.

“Facebook did make a mistake, and the mistake is when you’re dealing with a reporter, particularly one you don’t know, you shouldn’t hide who you’re working for,” said one Bay Area public-relations executive who asked that his name not be used in order to avoid embarrassing his clients. “It’s part of competition to share concerns you have about your competitors’ products and services, and that’s a natural part of business.”

When he read of Facebook’s campaign, industry analyst Tim Bajarin said, “I had to laugh. I’ve been doing this for 30 years and I see this stuff all the time, because PR companies are responsible for trying to make their clients look the best they can. How Facebook’s PR team went about it was a little unorthodox perhaps, but they were just doing their job.”

Still, Facebook felt bad about the whole mess. “The issues are serious and we should have presented them in a serious and transparent way,” the company said in a statement.

Battle for advertising buck

The scandal highlights the battle between the two Goliaths over control of the lion’s share of the lucrative online advertising business. With its 600 million members, Facebook is increasingly exploiting its treasure trove of personal user data by targeting ads, putting it in conflict with the Mountain View-based search giant.

Competition between the two companies was underscored recently when Google CEO and co-founder Larry Page put out a memo letting staff know that social networking was a top priority for Google — so much so that a quarter of every Googler’s bonus this year reportedly will be based on how well the search company does in the social realm.

Roger Kay, an analyst with Endpoint Technologies in Massachusetts and a blogger for Forbes, said Burson’s failure to keep the stealth campaign stealthy effectively made Facebook tip its hand in a high-stakes game of online domination.

“This shows the world that Facebook is really focused on Google as its main competitor, which many people might not have fully realized,” he said. “The nightmare scenario for Facebook is that all the data they’ve gathered and stored about their members over time could now be threatened by Google.”

Rivalry out in open now

Facebook’s beef driving the campaign, according to Burson, is that Google has been scraping private data from Facebook’s membership base to “build deeply personal dossiers on millions of users.” Specifically, Facebook says Google’s Social Circle, which allows people with Gmail accounts to see information not only about their Facebook friends but also about the friends of their friends, is a violation of member’s privacy. Google would not comment.

If Google “is able to take out its big camera and take a huge snapshot of that metadata and somehow monetize all that information, that prospect obviously scares the bejesus out of Facebook,” Kay said.

For now, Google remains king of search and Facebook remains king of social media. “But if both companies are trying to monetize that same private data, it seems like they’re now set on a direct collision course,” said Kay. “And this won’t be the last time that that battle breaks into the open.”

Contact Patrick May at 408-920-5689. Follow him at Twitter.com/patmaymerc.