Facebook Should Pay All of Us
newyorker.com
newyorker.com
What makes Facebook (and other platforms that use your personal data) valuable is that they have both information about you and a place where they can show you ads. These platforms are not, contrary to popular belief, trying to "sell" your information. They're allowing advertisers to use the platform to display ads to you based on that information. The data is a means to an end, which is showing you relevant ads.
If everyone stopped using Facebook tomorrow, the value of all the information Facebook has gathered would be negligible. The real reason Facebook is worth $X Billion is because a significant portion of the population of the world logs in to use same product every day.
In other words, your attention is the thing that is valuable. Your data just lets advertisers be really efficient in how they pay for your attention.
I dunno what kind of accounting they're doing at Facebook, but with their current approach of having advertising indirectly subsidizing users, there is no price discovery mechanism. Right now there's no way to price how much a user is worth and how much they actually cost, which seems like a very strange way to run a business.
This type of accounting, where the content itself is given a cost and a value, would mean it we're finally treating what people publish as intellectual property instead of the "user being the product".
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Edit, to expand on perhaps the advertisers directly subsidized individual users at the time of publication:
Ah, I think you're assuming that I'm saying they should go to a completely paid-for-in-cash-by-users model... which I'm not! I'm just saying that if they flipped the model, and covered the operations costs directly from users, that the books would make more sense. This would make the accounting significantly more complex, so I wasn't making an argument for simplicity, rather as much detail and accuracy as possible! This information can be later analyzed and acted upon in simple ways. This doesn't mean that there can't be a free to use service on top of a model like this. It just means that advertisers are literally paying on behalf of users for hosting, distribution and other operating costs. This would mean that there wouldn't be advertisements on the read-side, in the "stream", rather on the write-side, when publishing... like with sponsored posts... Like, I personally choose to make my post sponsored by the Buffalo Bills because I love giving my money to the Buffalo Bills and the NFL (which I really do). Or maybe some low-rent ads make you watch a 20 second video before paying for you to upload 200 photos from your phone, but at least you don't have to associate yourself with them. We're smart enough to create the kinds of incentive structures that have made intellectual property function in a market economy for hundreds of years, we just need to revisit some deep fundamentals about how we buy and sell information. It'll work out better for everyone. Facebook could take a percentage of the business for having created the market that introduced the advertisers to the authors. The authors are now free to do business as they please, directly covering their own costs or choosing to have them subsidized. The advertisers can establish better relationships with the authors, essentially treating them like business partners.
I suppose you could run something like that as a co-op; users pay a subscription fee, and in exchange, they get actual shares in the company and the right to sell their own attention to advertisers.
This co-op that your describing is basically the approach taken by certain songwriters and recording artists with Tidal, but again, we're talking about shares in the aggregator and purposefully deciding not to treat what is published as property in a marketplace.
Songs played on terrestrial radio, for example, work very differently. You're right, if songwriters thought their content was valuable intellectual property, they wouldn't let a radio station play it for free, and they don't. Radio stations have to pay a percentage of their advertising profits as performance royalties to the songwriters.
What's interesting is that Facebook seems to be headed towards a private version of this and is starting to share ad-revenue with content creators, mainly because when you don't do this, the content that people click on is so filled up with advertisements that it ruins the experience.
Imagine Top 40 radio without performance royalties... the songs would probably be nothing but jingles as the songwriters would have to embed their profit making mechanisms directly in to the content itself!
Why would that be a good deal for Facebook? With current revenue scheme they cover operation costs, R&D, various projects that do not directly contribute any revenue, various internal projects that fail and no one else hears about them, growth and marketing campaigns, various campuses and real estate around the globe and even then have some profits left over.
Why would any software company willingly cut its R&D funnel and profits that can be used as a rainy day fund?
> Right now there's no way to price how much a user is worth and how much they actually cost, which seems like a very strange way to run a business.
I'm sure there is if you have access to internal data, and entire departments in the company know not only operational cost per user, but can segment the costs by country and/or product (feed vs platform vs messaging vs video).
While having the overall inputs and outputs accounted for is enough to give earnings reports for public investors, it certainly doesn't give their management very much to work with! How would they have enough information to make strategic decisions on, as a simple example, "should we cater to lower-end content creators or higher-end content creators?".
Compare that to the information say, a spark plug manufacturer, has on their business. They can make reasonable assumptions about deciding to build higher quality spark plugs with more expensive materials and selling to less customers with higher margins or they can decide to make lower quality spark plugs with lower margins sold to more customers (and many other scenarios). They can do this because they know exactly the cost and value of the various inputs and outputs in their business. The miracle of accounting!
Say they could charge per user, and they would know each user was worth exactly $.20/year. That would make for easier accounting, certainly - they could pin that down to an exact number.
But what if alternative is more complex, but much higher? It would be something like "Most users are worth $14/yr, some are worth $6/yr, and some are worth $.10/yr." The value per user varies widely, but they can pin the average value per user down to $7/year.
They choose the latter because $7 > $.2; they'd rather have more profits than simpler accounting.
I'm having a hard time following your examples. Are you saying that they can make a fictional $7/user-per-year appear higher than the actual $0.20/user-per-year?
The goal wouldn't be to have an accurate average, rather the goal would be to segment the market in to different buckets, and then perhaps use different user acquisition strategies (with differing costs) for these different kinds of users.
The point is, no matter how management decided to use this more accurate information about their business, they would be able to make better decisions.
Ah, I think you're assuming that I'm saying they should go to a completely paid-for-in-cash-by-users model... which I'm not!
I'm just saying that if they flipped the model, and covered the operations costs directly from users, that the books would make more sense. This would make the accounting significantly more complex, so I wasn't making an argument for simplicity, rather as much detail and accuracy as possible! This information can be later analyzed and acted upon in simple ways.
This doesn't mean that there can't be a free to use service on top of a model like this. It just means that advertisers are literally paying on behalf of users for hosting, distribution and other operating costs.
This would mean that there wouldn't be advertisements on the read-side, in the "stream", rather on the write-side, when publishing... like with sponsored posts... Like, I personally choose to make my post sponsored by the Buffalo Bills because I love giving my money to the Buffalo Bills and the NFL (which I really do).
Or maybe some low-rent ads make you watch a 20 second video before paying for you to upload 200 photos from your phone, but at least you don't have to associate yourself with them.
We're smart enough to create the kinds of incentive structures that have made intellectual property function in a market economy for hundreds of years, we just need to revisit some deep fundamentals about how we buy and sell information.
It'll work out better for everyone. Facebook could take a percentage of the business for having created the market that introduced the advertisers to the authors. The authors are now free to do business as they please, directly covering their own costs or choosing to have them subsidized. The advertisers can establish better relationships with the authors, essentially treating them like business partners.
It is valuable to the company you're giving it to since they get paid by the advertising. They also get money from their partners who we so graciously agree to allow them to "share" it with which happens to be for profit for them.
>> The data is a means to an end, which is showing you relevant ads. >> If everyone stopped using Facebook tomorrow, the value of all the information Facebook has gathered would be negligible.
They can still sell your information to whomever they want which means even in your scenario they would still be making tons of money, I'm guessing here, hundreds of millions IMHO. So your arguments are not correct.
But let's play devil's advocate and say they could sell the data for $100M (I think that's extraordinarily high). Given Facebook's 1.4 Billion monthly active users, that values the data at about $.14 per user.
Facebook's market cap is $270B ($187.5 per user). In other words, using obviously sketchy numbers, your attention is worth approximately 2,800 times more than your data.
I relish seeing the day that Facebook is jettisoned for a system of distributed and individual ownership of profiles and data, like the internet should be. Humanity strayed at some point when the nefarious actors like Zuckerberg and his predecessors came in and started stealing your data, stealing your person, removing the information from you that your liberty and freedom is built on. You are not a free person when you are on the internet, your person is being smeared and skimmed everywhere you go and things against your choosing or even awareness are being done to your person and identity by people and for reasons you did not authorize. That's not liberty, that's not freedom.
My wife has an account. Sometimes I'll scroll through it for a bit, just to see. It seems like people mostly use it as a semi-broadcast medium, rather than a communication mechanism amongst a tight group of peers. The less armchair punditry in my life the better. If people like it, that's great for them, but I can't do it.
My wife attempted to use the messenger thing for a while, but it was such an unreliable software disaster-pile that she had to drop it.
Maybe if all your peers use it exclusively, then you'd be out of the loop, but I suspect that is very rarely the case.
You know that even if you don't use facebook, they still collect data about you from other people, right?
Facebook is a platform. A lot of people use it. It gathers the data that you put into it. Its existence doesn't hinder your freedom, unless you're misconstruing the definition of "freedom."
Society has a lot of bullshit expectations, and there are many dominant opinions that cause circumstances I like, but none of those stop me from being "free."
Facebook has years and billions of data points on human interaction between friends, lovers, acquaintances, and enemies. Facebook can determine your lifestyle, sexual orientation, socio economic status, and whether or not you're married just from your friend list. Facebook has one of the largest sources of demographic information on the planet, and each of those demographics has told facebook exactly what their hopes, dreams, interests, and fears are.
This is an absolutely ridiculous line of reasoning that willfully ignores the fact that knowledge, and more importantly knowledge about you, is almost pure power. By this same logic Gmail is only worth money because they have a tiny bar above your inbox that people look at, as opposed to having an enormous machine learning corpus of people's intimate communications.
If anything, the simple fact that algorithmic traders are using Facebook's open graph data to find an edge on the stock market is blatant proof that the real money is in the data.
>>> If everyone stopped using Facebook tomorrow, the value of all the information Facebook has gathered would be negligible.
Just like if everyone stopped using the internet today all the information the NSA has gathered would be negligible, right?
These are some things that you get in exchange for giving up your information:
A place to store photos
A platform to publish your photos
A communications platform (Messenger)
A platform to stay officially connected to things you "like" and their updates
Near instant publication of your brain thoughts to a curated group of people
High availability
Maintenance of connections to other people
IRL event management
Mobile and web applications to use the aforementioned
Some of the best engineering talent in the world working on the aforementioned
At least for shadow profiles Facebook should pay.
It would be great if we could move toward a model where each citizen had copyright-like protection of his personal data.
But sadly most people don’t see this as a problem Facebook caused, but as EU overregulation.
From where? Nowhere free or not advertising to you or selling your info to advertisers, I'd bet.
But is it fair to say that other people feel that way? And that's ok?
FB has a network effect, which a a major reason all those products/services get used. However, it's not really fair to imply that FB is 'succeeding' at all the things you listed. If it were, then there'd be little talk of existential threat from things like Instagram/Whatsapp etc...
This doesn't work for long time already. If you have liked something, you rarely see the updates anymore unless the page owners pay for Facebook. It's called Boosting now. Really sucks for small companies or communities, unless you pay - your page is dead.
For me personally, Event management is the only thing it keeps me on Facebook. Part of it's success if of course because everyone is on Facebook, which makes it easy. But again, if you're a small Facebook page owner and want to invite your loyal fans to your own event you created under your page - Good luck with inviting them, you can't - need you pay again.
The thing is, in the current state of Facebook, wanting to hear everything that a page writes is an exception. As a user, I'm glad it isn't default anymore.
The problem is a combination of things. One problem is that there's pressure (from several potential sources, sometimes from Facebook's UI, sometimes social pressure from friends) to like too many pages. This has sort of diluted the meaning of a "Like" w/r/t a page.
Another big problem is that pages spam - some to the tune of several messages per day. I expect that most people who "Like" the pages that often get "Likes" (which appears to be largely big companies, bands, movies, etc.) don't actually want to see every one of these posts - they'd drown out the user's "Friends".
It is unfortunate for small business owners that things happened this way. Fortunately, really loyal fans should be more likely to listen to you when you ask them to subscribe to something outside of Facebook, or to do the extra couple clicks of adding to an interest list in Facebook. I expect, however, that some of the "loyal fan" base might be made up of (as mentioned before) people who liked the page out of social pressure.
Seems like it's highly dependent on the number of things you liked/followed, not on the page itself.
In one extreme case you have 0 friends, and have liked that and only that page. You're likely to see 100% of their postings.
On the other extreme, you like that page + 500 others + you are friends with 1,500 people who all produce some type of content. Why would you expect to see content of that one page over 2,000 other potential sources?
I ditched my Facebook account two years ago, seemingly with a mixture of benefits and losses.
I predict failure on a lot of that. The value provided is not sufficient to justify the cost alone, and then on top of that you add privacy concerns. That means I'm paying for a net negative.
It sucks though when you miss things that you would have heard on there. For example, I found out too late that somebody whom I was good friends with had a family member pass away. They didn't do an obituary, and folks that I talk to regularly IRL didn't mention it, because they figured I saw it on Facebook!
Others have come up with legit alternatives and doubtless more would try if not for the fact that their biggest asset is lack of interoperability or common protocol. They managed to get just about everyone, techie and non-techie, to sign up and a lot of those people just won't pull up stakes to move to another platform as long as the rest of their "contacts" are using Facebook.
When compared to other communication services that are often hosted by third party companies (webmail is the easiest example) there's really just no way to use something else without still using Facebook in addition. It's not like switching to Gmail or Hotmail because you got tired of your old @aol.com account. In that case you can use any competitor and still communicate with people regardless of whether they switch or ever use the same service as you.
But with Facebook, I can't just start using Google+ or some other service to keep up with friends and family unless they all switch over as well. Or rather, I can switch over but I still need to use Facebook in addition. Same would go for another service even if it was built on a common protocol.
That's the main problem I have with Facebook (or any other service that uses the same model). It's not that I can't find or build something that works better for me. It's that it doesn't matter unless everyone does the same and that simply isn't very likely right now or in the near future.
People do get things out of facebook. Why else would they be on it all the time, checking it at least a couple times a day?
1: Watching my wife peruse FB but I suspect she is an example of a typical user.
2: I'll grant that worthless diversions have their place when used sparingly. But neither FB nor TV are used sparingly by most people unfortunately.
I don't understand how the sell your information argument comes in either. They run their own custom ad network. They aren't even leasing that infrastructure to anyone.
I challenge you, to please go pay Facebook and buy information about where I was on Sunday in the evening. If they sell you that, I'll pay you five times the amount. If you can't buy it, they aren't selling it.
But even that's not a problem, really. Who cares if Coke knows where you were on Sunday evening? What about Allstate though? Or Humana?
One commenter noted above that our personal information isn't valuable without our attention and he's right. Don't you think that an auto insurance company would just love to know that one of their customers is a fan craft beer and was out partying with Jane Doe on Saturday and that Jane Doe has a DUI? Now they're raising rate on the guy who happened to pay passing attention to craft beer.
I concede that we don't have evidence that Facebook sells that kind of detailed information on an individual. In fact, I believe they probably don't. Right now. I guarantee you that if comes down to keeping your information private and keeping their stock price up, you might as get a For Sale sign tattoo'd to your forehead.
The whole business model of Facebook is targeting, that's the derivative they get out of your information. If they start selling the information, everyone would have the derivative. In your example, if Facebook sells information to Coke, Coke can use any cheap internet advertiser on the street. Why would it buy facebook ads anymore? No company would sell their only value prop, you've got it backwards.
There is slight amount of information leak in terms of ad targeting and public profiling. Insurance companies can just put up fake beer ads and try to extrapolate how many 25 year olds are clicking in each area. But that's what you get for not living in a cave. The same insurance company can also sit on the highway and count beer trucks. They can also sit outside a shop and see how many 25 year olds are buying beer.
Yet, two things are happening.
1) Advertisers keep coming back for more.
2) FB revenues (primarily derived from advertising) are up, not down.
How come?
It's only a matter of time haha, I'm aware of at least one startup that is trying to do targeted TV advertising.
(Incidentally, privacy badger is a pretty nice plugin.)
Also I think this article over-values personal information in a world where your local supermarket, Amazon, ad networks, the government, etc. already know so much about us. In that context, you aren't giving up that much additional privacy by also sharing with Facebook -- the price you are paying may not be that great.
My coworker (I do not have facebook) had companies that had scanned his badge show up on his Facebook advertisement feed the next day.
To me, this was the real eye opener. Facebook doesn't just sell to advertisers the promise of groups of users. They can offer to sell to you, specifically, by name if they want to.
Most likely, your friend was targeted for advertising using Facebook's custom audiences. FB let advertisers upload a list of email addresses or Facebook IDs to show ads to.
Personally, I consider this much further on the creepy scale than it is on the genuinely worrisome scale, more creepy than harmful. It's pretty creepy though, so.. relativity.
More precisely, she wants the company to offer a cash option (about twenty cents a month, she calculates) for people who value their privacy, but also want a rough idea of what their friends’ children look like.
They could just email with their friends. It's unclear to me, at least, that a 'feed' of data about people I know is an important service. Clearly, I must be an outlier given the number of people I see looking at Facebook every day.
Much like the agriculture industry, tech companies that deal in user data use the shield of trade secrets, NDAs, lobbying etc to hide their actions from the public as they all know that if they general public knew what they were truly doing, they would have a much more difficult choice when deciding upon using that service.
It's not that users don't care or think they are getting a good value for their information, it's that users have so little information about how it is being used.
"Ehhhhhh? Why am I worth $76 to them?"
http://www.technologyreview.com/view/528866/researchers-test...
each piece of data is worth about $2. Now, simple maths would tell any company that making money off that data is a lot more profitable than collecting $0.20. Also, how many people would actually want to enrol in such a premium service? It would not be every person that uses Facebook, for sure. Plus, selling off the data is lot easier than soliciting people to buy their premium product (people give them the licence to do so through the ToS).
I've tried multiple endpoints to do so (for data analytics purposes) and they have all failed. The only way to get data on a person is for them to opt into granting the necessary permissions for the app.
In exchange we give facebook our data and usage patterns and the right to put targeted ads in our feed.
http://www.forbes.com/sites/timworstall/2015/08/16/the-econo...
Google should pay all of us.
Yahoo should pay all of us.
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I've thought for a while that the dominant business model of the web is for-profit piracy. I don't mean The Pirate Bay -- those are small time players and are not very profitable if at all. I mean Google, Facebook, etc.
To make that argument work you have to define piracy independently of whether or not it's illegal piracy. In this case we'd define for-profit piracy as the "indirect monetization of content you did not produce or license and in which you do not pay the producer."
Google monetized the entire web. They didn't create the content, but they sold ads on it. It's like having a radio station where you don't make the music, don't license the music, and don't even run the transmitter, but you get to present ads in-stream. Then on top of that you get to charge people for those ads while you are also monetizing them. It's brilliant.
That's not illegal (in this case), but it is perhaps a form of piracy. Google would have had no value had the web not been full of people dumping valuable information online.
Does this mean Google is a value extraction enterprise rather than a value creating one? I'm picking on Google but this applies to a whole lot of the web's business models. I think it's legitimate to question the economic justice of this. Again it's not illegal, but there are many things that are not illegal that are shady. Is the monetization of what began as an open gift culture shady?
Obviously Google's founders didn't think of it this way when they built Google, but one of the things social criticism does is to question what things really are or really become independent of their original intent.
The counter argument is that Google provided a valuable service that made the web more useful. That's undeniably true. But how much effort went into that vs. creating all the web's content? Does building a road to make it easier to reach someone's farm entitle you to 100% of the proceeds of their farm?
The the internet is a big stack of books in a room, Google is a librarian with a master index who organizes the data. Calling that piracy is a stretch of the term.
Actually, taking the thought experiment further, you could argue that book publishers are the real pirate, taking ideas and making themselves toll keepers.
The problem being explored by this and other ideas is this: the Internet has massively increased our intellectual wealth, but for the vast majority this does not translate into any increase in physical wealth. If anything, the Internet may actually make it harder for many people to earn physical renumeration from intellectual activity.
Meanwhile the cost of the most necessary physical goods and services keeps rising. We've created a world where a person can be homeless yet have the combined knowledge of all of humanity available to them instantly. We've created an imaginary post-scarcity society online, but that's coming into stark conflict with the very real scarcity of the physical world in which it ultimately exists. Cyberspace is like the Egyptian afterlife: you go to heaven, but someone must guard and bring food to your Ka.
It's truly bizarre, a total inversion of the ancient world where almost everyone could live off the land yet the priests monopolized knowledge and literacy.
https://play.google.com/store/apps/details?id=com.google.and...
[and the corresponding payer endpoint: http://www.google.com/insights/consumersurveys/home]
I don't trust Google or Yahoo any more than I trust Facebook but at least the former two companies don't know about me what Facebook probably does. I say probably because I actually deleted my account several years ago and block their trackers. But I'm under no delusion that they don't know who I am or don't still retain a significant amount of my personal information even though I deleted my account.
Facebook knows the facade that you want to present to the world. Google knows what you want (or what you want to know).
Now, each of these is actually only addressing the front-facing portion of the business. Each company obviously has much more information when you begin to consider their link tracking, advertising network tie-ins, communication mining and external domain 'likes'.
But it's good to remember that Google's advertising is so damned valuable because you're already looking for stuff when you go there.
Today Google knows:
- What you search for - What websites you visit - Who you communicate with - The contents of your email - Your physical location
...and the list goes on.
I do use diaspora*. No one I know IRL uses it, but that's fine for now.
tl;dr: FB makes money on our data, so we're 'paying' FB with our data, something that's no secret and everyone who ever cared knows and easily finds out.
It doesn't relate to the title of the article at all. The only thought mentioned is that if we're giving FB our data, then we must get rewarded for it, or 'paid', while blatantly ignoring the obvious, that the use of FB for free is that reward.
Ironically, this article is entirely driven by an event that the writer mentioned about how a sociologist offered to pay FB with actual money, rather than data. This sociologist keeps getting mentioned which one can summarise with 'such a thought-provoking thing to do, exposing the relationship between your data and FB's business model', as if it's anything new.
Yet the writer misses the point which is why it's ironic: the sociologist offered to pay actual money because guess what, FB is actually providing a product, one of communication, news, media, information, entertainment, connectivity, networking, debate, that has genuine value.
And so the notion that FB has to pay money to people for providing them a free service that they value, is ridiculous. It's the consumer who has to pay, and they happen to do it through data instead of money. You can question if they should, but that's not what the article is about.
The only way the writer's article makes sense is if FB was a data collecting agency who did absolutely nothing but provide a form on their website where you could fill in all your data, while somehow verifying it's truthful data, then selling that data to other companies, and offering you nothing in return. Indeed it would make sense then for FB to pay you money for that data.
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Anyway, a different discussion I was hoping some people had some insights into for me to read is this... One thing I'd be curious about, is if anyone has any data on the actual value/impact of FB's data on their advertising revenue, versus their service simply being extremely well used and thereby driving a lot of revenue.
After all, FB's average revenue per user is something like 15% of that of a Google user, despite FB reaching ridiculously high levels of daily use, activity, minutes spent, sessions, engagement etc. So where FB has some of the most granular per-customer data ever to drive ads, and has some of the highest activity per user (and thereby, ability to show ads over and over through tons of sessions), they're trailing pretty far. You'd think that their ARPU is more driven by simply being extremely popular (data or no data), than offering advertisers the best data-driven advertising platform.
Surely a big part of it can be explained by maturity, their ARPU is growing faster than Google's so they're slowly catching up, and it's true that Google's data isn't exactly poor either of course. But still, contrary to common belief, common sense and intuition, it doesn't seem their revenue indicates their data position is all that valuable (yet). Would love other people's thoughts and insights on this.
And Facebook is overall negative because they are taking things that otherwise can exist without Facebook, like people sharing personal updates with each other, and works to be the gatekeeper "capturing value" i.e. exploiting people for their own gain in ways that severely lack accountability and democracy.