Privacy belongs in their bedroom - where the internet and TV should NOT be allowed. And of course, when they're in the bathroom. When they're away from the home, they are not obtaining 'privacy' but 'solitude' - which I can step into any time I damned well please.
I didn't have the internet growing up, heck, we didn't even have a computer for a while - my kids won't wither away because they don't have facebook, ichat, and a pinterest account, or twitter or a cellphone that lets them send photos to friends. All this crap is not a NEED nor is it even a BENEFIT, honestly.
I see far more negative and problems - very few benefits. Actually, I see no benefits to social media for kids. They can keep up with friends at school, on the weekends, in the evenings, and on the phone (which I, also, pay for).