I don't think it's privacy (real of believed) that is turning younger users away from Facebook - it is the frictionless sharing which dominates almost everything you see on the site these days.
All your friends do not share all your passions, tastes, political views, etc - and yet everything everyone reads/listens/watches is pushed in front of your eyes as if they were actively curating them. They aren't. Rather than a timeline full of messages to and from friends and invotes to parties, 90%+ of that timeline is now X read this or is listened to that - none of which anyone wants to know or really share.
http://www.techfruit.com/2012/04/12/with-an-estimated-100-billion-ipo-facebook-will-not-be-a-place-for-friends/