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Still not sold on the idea of a company whose revenue source is targeted ads caring about their user's privacy. I think this is a good direction for Facebook to go, but to assume they now have the user's privacy at heart is probably too far. At best, they are controlling the user's data better so people not paying for ads don't get free information.
Funny that Facebook is citing the time when they used to have more privacy options. A bit late now. Business model changes would have a better chance of regaining lost trust.
Why does it matter that much? I am sure that there are good reasons why some users would care, but...
Facebook thinks "Privacy" is controlling what your friends see.

Controlling what my friends see is the least of my concerns on Facebook.

Everyone else doesn't want you to see what they can see.

They even pass secret laws about it.

This is probably just more propaganda attempting to redefine what privacy actually means.
So what is your real concern about Facebook?
I would guess controlling what people other than his/her friends see.
Data mining his data to extrapolate what advertisers they can sell his data to, not excluding their quasi-partner (the NSA) who extrapolate whether his views are 'sheep' or 'wolf'. Wolves go on the 'potential terrorist' list.
Obviously Facebook wants people to feel comfortable so that people will share as much as possible, even if it's within a closer circle. (Facebook is still recording everything about you, and might tap into more intimate info this way.)

What might be less apparent is that this is a great way to make a news feed more relevant to people. By having posters self-select who sees what, it reduces noise and make's Facebook job easier for determining what content is displayed in the feed.

Looks like slate bought right into some excellent PR that seeks to redefine "privacy" -- moving concerns away from how FB uses all of the data it gathers, and instead into how it presents a subset of that data amongst its users.
It's not a definition from the "PR" - it's the fundamental interpretation of privacy as a social construct. You being a very private person means your desire to share your personally identifiable information (PII) with other human beings is very narrow. It has very little to do with the entity that facilitates that sharing (i.e. Facebook). Privacy concerns about Facebook is essentially concerns about how (some) Facebook employees will look at and use your data (including sharing it with third parties) without permission. Since I very much doubt Facebook (or any ad-supported Internet company for that matter) is letting that happen, I have always felt that privacy concerns with Facebook as a whole is kind of silly. What people usually express outrage against (including myself) is that Facebook facilitates easy inter-user consumption of information that often breach the basic notion of privacy for many users. One prime example of that is the opt-out of default public sharing of posts.
You did say that privacy concerns are essentially concerns about how [FB] will look at and use the data. Which is actually my point as well - privacy is much broader than which of my friend and followers will see what I post. It is even broader than which third party apps have what access to my account -- yet the article makes it seem like those things are the only privacy concern instead of just a subset of it.

Agreed they won't share your information with third parties or use it themselves without permission - but they myriad of ways in which they ask for that permission, and in which you default to giving it means it serves only as the loosest constraint. By default users allow them to perform analytics that reveal a disturbing amount of information about them, among many other things.

Similarly, I think the notion of privacy in which data you share is quite silly - if you're sharing stuff on the Internet, you should expect it to be public for all time. No matter who you're sharing it with or through. However, I would also expect the company I'm sharing through to act only as a middle-man, and not use my data for its own ends*. (That seems to be a different take on the silly angle that you have. )

Fear Uncertainty Doubt

In the beginning, Facebook was, to some extent, private. I'm thinking back to the days when they were rolled out college by college. Even after then, mostly people of a certain generation were on FB.

Since then, their reach has gone global and it reached the late adopters: parent, grandparents, uncles and aunts. As that circle became larger, Facebook felt less private.

What the article seems to have missed is that the popularity around other sharing models is actually relatively new. 1-1 messaging, at least on mobile, really only got huge within the last 2-4 years. How old is Snapchat? < 3 years? And it's been mainstream-ish for less than that. Secret, Whisper, Kik... all of these apps with different sharing models are a pretty recent phenomenon.

It seems pretty silly to call this an "about face" considering the span of time considered. Opinions always evolve over time. Look at Steve Jobs: Famously known for saying that Apple would "never" make a tablet smaller than the original iPad. Lo and behold, they did.

Products and the philosophy around them change over time, especially in an area like tech which is quick moving and ever-changing.