You know the consumer Internet business is getting crazy when a big story is whether Twitter will move its offices out of San Francisco (of course, the company stayed because it got its tax breaks). 

We got another doozy this week:  Facebook hired a big-time PR firm, Burson-Marsteller, to propagate negative stories about Google’s (Nasdaq:GOOG) privacy policies for Social Circles (seriously, does the company have a real social product?).  At first blush, it sounds underhanded.  Even Burson-Marsteller said it was a project it should not have taken.

But isn’t guerilla marketing about creating FUD (fear, uncertainty and doubt) about your rivals?  If anything, this is a time-honored practice in tech.  If there was a FUD Hall of Fame, one of the first inductees would be Oracle’s (Nasdaq:ORCL) Larry Ellison.  Back in the 1980s, he effectively skewered competitors like IBM

(NYSE:IBM), Sybase and Informix – and created an empire.

So for Facebook, it looks like the problem is that it got caught.  While the company knows how to build a highly successful social network, it certainly doesn’t know how to run a FUD campaign.

Ironically enough, it actually highlights that Facebook is scared silly about privacy – it’s the Kryptonite that could kill the growth machine.  After all, Facebook’s growth — and massive valuation — is based on its ability to monetize its massive user base, which is overflowing with data. 

Think privacy may be a problem?  In fact, Facebook’s data is much more personal than Google’s, resulting in many complaints from users and privacy organizations.

And I’m sure the folks at the Federal Communications Commission are paying attention to Facebook’s latest PR episode as well.

Tom Taulli’s latest book is “All About Short Selling” and his Twitter account is @ttaulli.  He does not own a position in any of the stocks named here.