The Federal Trade Commission announced Tuesday that Facebook will settle claims that the social networking service deceived customers into believing certain information was private when it was, in fact, being shared publicly.

Facebook already claims 800 million members and consumers and legislators are concerned about its privacy issues. The FTC settlement is indicative of a uniquely modern dilemma: consumers willingly give out information to companies online while simultaneously trying to protect and control their identities through privacy controls.

Commissioned by global communications leader Alcatel-Lucent, Allison Cerra and Christina James set out in Identity Shift: Where Identity Meets Technology in the Networked-Community Age  to understand this problem. The new book examines how users construct their virtual identity and how much information consumers are willing to share with companies online. Cerra and James also look at how companies, like Facebook, may actually have an incentive to protect the privacy of their users in order to develop a trust relationship.

The book released Tuesday analyzes the real and perceived relationship between modern technology, consumers and personal information, based on ethnographic and quantitative data collected on subjects in various age groups. For their research, Cerra and James watched 30 respondents interact with the Internet on a daily basis and also surveyed 5,000 American consumers online. The study, focused on how users interact with social networks, cable and mobile phone companies, online banking and online shopping web sites, ultimately provides useful data for both consumers and companies.

Presentation, Protection and Preference

Cerra and James found users' interests often come into conflict when making a decision of what information to give out online. Consumers tend to control their online identities based on what is most important to them.  

There are three Ps that illustrate how people identify online, Cerra explained to IBTimes. Presentation, protection and preference.

In the study, emerging adults seemed to care most about how they project themselves online.

Emerging adults are 'uber' conscious of their image and aware they are open to eyes across the world, Cerra told IBTimes. The younger you are the more interested you are in presentation.

77 percent of young people in Cerra's study had searched for themselves online in an effort to see what others were saying or posting about them.

Parents, especially of younger children, and midlifers, older adults in their 50s and 60s, were found to prioritize protection, opting for more privacy controls. 43 percent of parents believe it's difficult to protect their children online from inappropriate content and offensive language. 36 percent of parents worry about protecting their children from predators in their children's online activities.

People who prioritized preference were more willing to open themselves up to being tracked if they gained benefits by releasing certain information. For example, 58 percent of midlifers were willing to share information about themselves if they received discounts or free services in exchange.

However, the study found that all users face challenges in deciding how to represent themselves online and conflicts may occur in making choices on the short term versus the long term. A user might, for example, opt to give out information to gain access to a certain Black Friday deal that contradicts her usual caution against sharing information online.  

Protecting Your Information Online

Cerra is concerned that consumers are unaware that what they say and what they do often conflicts.

Research showed that while 88 percent of young people in the study claimed to spend time updating their social networking page to control their image, more than half then admitted to posting updates, comments or photos about themselves or their family that they later regretted sharing.  

Consumers care about control and navigations, Cerra told IBTimes. 60 percent of users think privacy settings should be simpler.

However, while users demand less inconspicuous privacy settings from companies online, they are also quick to dismiss warnings in the moment. 64 percent of respondents proceeded with what they were doing even though a browser warned of a security threat.  

Consumers need to educate themselves about what tools are available, Cerra explained.  Facebook, for example, already has extensive privacy settings, but many consumers choose not to use them or are unaware that they exist.  

Users can also protect themselves by being cautious and by making wise choices online. 66 percent of respondents claimed to have given their credit card information to a site they just discovered, while 3 in 4 reported they had interacted with people online whom they had never met.

Cerra insists that consumers need to raise their level of consciousness and be aware of what they do online.

Trust Matters More Than Love for Companies

While Identity Shift provides an interesting outlook for consumers looking to protect themselves in the virtual world, the book is also crucial for understanding the future of how companies need to structure privacy settings and organize information.

Alcatel-Lucent's study found that 86 percent of users are comfortable sharing information when visiting a familiar website or application. In addition, 85 percent of mid-lifers said they are comfortable sharing information if they have control over who sees it.

Loving or hating a brand has nothing to do with it, Cerra told IBTimes. Trust is the currency in the world we live in.

Companies need to garner the trust of consumers in order to be successful. Trust, however, can come in many forms, including developing a reputable brand and privacy settings allowing consumers to see explicitly who has access to their information.  

Facebook has recently come under fire for questions over whether the company tracks individuals and the company's settlement Tuesday with the FTC over privacy concerns indicates the social networking giant may not be the most trustworthy web site.

In light of Facebook's hope to go public next year with a potential valuation of over $100 billion may be able to better protect its financial interests by also protecting consumers. The social networking site's IPO success may depend on factors very different from companies in the past. Facebook makes money from advertising, applications and selling virtual goods relying heavily on its 800 million users. If users feel unsafe or unsecure on the social network, it would cost Facebook significantly.

It will be interesting to see how trust becomes monetized, Cerra said, as the new currency online.

Ultimately, Alcatel-Lucent's study in Identity Shift seems to indicate that greater awareness and the development of a trust relationship between companies and consumers can ensure more control, but also more freedom of information, allowing the line between users' virtual and real-world identities to blur.

Follow Julia Greenberg on Twitter: julia_greenberg.