Privacy is one of the most important issues facing social networking sites.

Without a clear and consistent privacy policy that matches the reality of your site, and the tools to let your members control their privacy, it will be hard to build the trust needed for a healthy community.

If you’ve ever come across most online privacy policies, though, you know that they are anything but clear. Facebook’s policy comes in at over 5,000 words, and that’s after considerable push back from members and regulators to make it simpler and more transparent.

When crafting your privacy policy, you need to find a balance between form and function. If it’s unreadable legalese, you’re not making it easy for your members to trust you.

Some advice: Don’t go to a lawyer and get them to write it for you.

You need to set your policy and make those decisions yourself. Sure, get a lawyer to vet it, but you should be driving your site’s policies.

Also make sure you understand how your platform functions, and the impact third-party services (like Google Analytics) will have on your policy.

Some of the questions you need to be able to answer:

What data will you collect, and how will you:
Share that data
Sell that data
Contact members with that data
Aggregate that data

There are plenty of free privacy policy “generators” out there, but they aren’t a substitute for making your own decisions, or making your own policy as clear as you can.

There’s a movement toward making privacy policies easier to understand

CyLab Usable Privacy and Security Laboratory (CUPS), out of Carnegie Mellon University’s School of Computer Science, suggests presenting privacy policies in a similar, consistent and graphic way as those ubiquitous nutritional information labels that are on everything in the supermarket (example at right).

Aza Raskin, Head of User Experience for Mozilla Labs, points to the way Creative Commons reduced the complexity of letting others use your work with a set of simple icons and accompanying text as an example of how privacy policies can be made more user-friendly.

Social networks need to take this one step further. Not only does your privacy policy need to set out what information you collect and what you do with it. But you also need to make it absolutely clear to members who will see their profile (or parts of it) and who will see their activity (or aspects of it).

Think of these as Privacy Settings.

They should outline exactly who will:
See their profile
See their actions
See their content
See their connections

The controls for these settings need to be as clear as possible. If you have examples of social networking sites that have nailed the communication of their privacy policies and settings, please leave a comment.