Is Facebook smartphone just a new way to collect data about you?

Using Facebook on your phone? Soon, the company will make it much easier, but, some say, at a steep cost to your privacy.

That's the tradeoff as the social media giant announces on Thursday that it is launching a branded smartphone that will reportedly operate on software called Facebook Home. Unlike the current Facebook app that allows users to access the site, the new Facebook phone will further integrate the software into features such as text messaging, photo uploading, and more.

As more consumers transition their online habits from desktop computers to smartphones and tablets, advertisers are following. The phone allows  Facebook to tap into the lucrative US mobile advertising market that is expected to be worth $7.29 billion by the end of 2013, according to eMarketer.

However, consumers and privacy advocates are concerned.

The phone is the latest development to highlight the many privacy concerns activists and consumers have raised about Facebook, today the leading social network in the world with more than 1 billion users. Critics warn about the covert ways they say the company solicits personal information – ranging from mobile phone numbers and addresses to personal tastes based on what activities users have chosen to “like” – and then makes it available to advertisers.

With consumers using Facebook to shape their online identity – expressing their preference for a neighborhood restaurant, a certain type of music, their favorite clothing retailer, or how often they read books or see movies – the social media platform becomes a greater resource for advertisers that seek to finely hone their messages.

Despite a recent class action settlement and warnings from the Federal Trade Commission, the company remains committed to exploiting its massive user databank, they say, and the new phone and other emerging tech gadgets will significantly enhance their capacity to do so. For example, with Google Glass, a headset that allows users to walk around interacting online via voice command, companies will be able to mine location data more deeply than they had in the past.

“The more you integrate with a mobile phone, the more data you can collect,” says Parker Higgins, a spokesman for the Electronic Frontier Foundation, a cyber-rights advocacy group in San Francisco. “In the case of Facebook, there’s more concern because Facebook doesn’t have a great track record with respecting people’s sense of privacy.”

Jeffrey Chester, executive director of the Center for Digital Democracy in Washington, told the Los Angeles Times this week that “consumers using the Facebook phone will be further ‘in the pocket’ of [Facebook founder and CEO] Mark Zuckerberg,” and that the company “has dramatically expanded how it collects and analyzes its users’ mobile data, giving it a detailed map of what we do, where we are, and what we buy.”

In 2010, a federal judge approved a $9.5 million settlement of a class action lawsuit involving a program that published what users were purchasing without their permission. The next year, the Federal Trade Commission announced a settlement with Facebook that said it allowed advertisers to glean personal information from users and share that information with outside app developers, even after those accounts had been deleted. Facebook was not fined, but was forced to get the explicit consent of users when sharing information and is subject to privacy audits for the next 20 years.

Privacy groups set off alarm bells once again in February this year, when Facebook announced partnerships with four data-mining companies that specialize with collecting online data as varied as credit card transactions, web browsing habits, and legal records, in an effort to help advertisers “show more relevant ads” to its users.

“We believe the extension of custom audiences to include select third parties will further improve marketers’ ability to reach the right customers on Facebook and will lead to more relevant ads,” Facebook said, in a statement.

Each company specializes in different sectors that impact consumers’ lives. One such company, Datalogix, based in Westminster, Colo., says on its website it has data on “almost every US household and more than $1 trillion in consumer transactions” involving the purchase of over 1,400 “leading brands” made in over 8,000 stores.

“We made it our mission to leverage the power of purchase-based audience targeting to drive measurable online and offline sales,” the company states.

Acxiom, another company based in Little Rock, Ark., says it manages over 15,000 databases, including court records, financial service companies and government documents, and processes about 13 trillion consumer transactions a quarter for its clients, which comes from sectors including financial services, retail, travel, communications, health care, and more.

“When companies work with Acxiom, we make it easy for them to establish strong ties with customers by helping them better understand what customers like, what they want and the best ways to communicate with them,” the company states on its website.

The other two companies working with Facebook are Epsilon of Plano, Texas, which specializes in collecting consumer transaction data, and BlueKai of Cupertino, Calif., a technology company that tracks user habits.

While Facebook insists it does not sell user data and has adopted the ability for users to “opt out” from allowing advertisers access to their personal information, privacy advocates say the issue is more about transparency than about how it uses its data.

“A lot of what happens with your cell phone is pretty sensitive stuff, and the fact that it is being collected indiscriminately and Facebook is pushing for more, is alarming," says Mr. Higgins of the Electronic Frontier Foundation.