Facebook has been in the news a lot lately, sometimes making good headlines, other times bad, and still other times it’s gotten ugly. The good news was actually great- Facebook announced that it had reached 500 million registered users. This is especially impressive since two years ago they had only 100 million users. The 300% growth has mostly resulted from expansion into older demos and within foreign markets. At the same time MySpace has actually been losing users.

Although Facebook membership has grown as a whole, the bad news is that certain key segments are shrinking. Inside Facebook reported a decline for active 18- to 44-year-old U.S. users for the month of June. This could be a sign of “Facebook fatigue” by early adopters that have outgrown the site. Perhaps un-coincidentally, the American Customer Satisfaction Index also reported that Facebook is perceived to to offer poor service due to issues related with privacy, spam and functionality.

Another bit of bad news hit Facebook when a businessman said that he had an old contract signed by Mark Zuckerberg granting him a majority stake in the company. While one Facebook lawyer said that they were “unsure” if a contract had been signed, Zuckerberg later clarified in an ABC interview that “…we are quite sure that we did not sign a contract that says that they have any right or ownership over Facebook.”

All of these news stories coincided with the release of a new trailer for “The Social Network,” an “unauthorized” movie about Facebook that comes out in October. The movie is directed by David Fincher whose previous work (Seven, The Game, Fight Club, etc.) is dark and largely of society. Unsurprisingly the trailer paints an ugly portrait, not just of Zuckerberg but also of social networks.

I also recently heard a journalist’s take on Facebook. David Kirpatrick, author of  ”The Facebook Effect: The Inside Story of the Company That Is Connecting the World” came to speak at Books & Books about his new book. He has an overall positive opinion of Facebook and attributes the site’s success to three factors:

1. “Real” Identity: Unlike other social networks like MySpace Facebook requires all users to base their profiles on their individual real-life identities and use real names. This validates user profiles, provides a greater sense of security and leads to more valuable communication between network members.
2. Viral Nature: Ideas and relationships grow in a viral manner within Facebook, strengthening the site as a communication channel.
3. Communication: Facebook began as a basic platform but with its current features and its large user base it now provides users with the infrastructure to communicate on a level comparable with mass media. According to Mr. Kirkpatrick, Facebook empowers any of its users to become “Walter Kronkite.”

David Kirkpatrick giving his talk at Books & Books for "The Facebook Effect."

Mr. Kirkpatrick also said that Mark Zuckerberg was “an amazing visionary” and a “combination of Lenin and Kerouac.” He also didn’t agree with new Facebook movie which seems to paint Mr. Zuckerberg as “evil.”

Mr. Kirkpatrick did admit that Facebook needs to improve how it handles privacy issues. He read an excerpt from the book, which mentions how Mark Zuckerberg espouses openness, saying that “dual identities are impossible” in today’s society where transparency is the norm. This is where Facebook has gotten it wrong in the past. If Facebook doesn’t address these issues with greater clarity and transparency, “The Social Network” might actually galvanize a great deal of negative sentiment against the site, leading into a larger exodus of users from Facebook, perhaps to Diaspora, an open-source alternative, or “Google Me,” a social network that Google is rumored to be working on. While it’s not likely that sufficient users would leave to dent Facebook’s overall user numbers, an exodus by young and tech-savy users would be a very ugly headline for Facebook, denting the service’s image and impeding its value offering to advertisers. Of course Facebook is aware of this threat and of the need to adjust itself. As Zuckerberg said in his ABC interview, “I think what people really want is control. And building tools to make it so that people have the control that they want, that’s our job, right. We work really hard to make it is as simple as possible.” It will be interesting to see how Facebook evolves during the next six months to address these issues.