It’s all about the Zuck
Blake J. Graham | Monday, February 13, 2012
On Feb. 1, everyone’s Internet love affair (Facebook) filed its S-1 registration statement with the SEC. This is not the first tech IPO to occur in recent history, but it is perhaps the most iconic and personal. The document unravels some startling truths about the company where before there was only conjecture. The numbers and statistics of Facebook’s rise to success are codified in a government document available to the public domain: 845 million monthly active users, 2.7 billion likes and comments per day, 250 million photos uploaded daily and over 100 billion friendships. With a valuation of around $100 billion, Facebook has finally arrived.
But wait. These users, likes, photos and friendships didn’t just materialize. We built this city just as much as Facebook did. Our romances, comments, heartfelt proclamations, drunken party photos, pokes, flourishing farms, animal pictures, memes, break ups and mirror pictures filled in the walls that Facebook developed. We, the collective members of the Facebooksphere — the Army of Zuck — turned this house into a home. It’s time enough to pat each other on the back. This coming of age for the Internet is also a coming of age for ourselves.
In a letter to investors Mark Zuckerberg said, “I started off by writing the first version of Facebook myself because it was something I wanted to exist.” Not because he wanted to become the preeminent hub of online interaction or make $30 billion dollars, but because he wanted Facebook to exist. In accordance with the numbers, it appears that we wanted it to exist as well. And because of our desire for a information nexus, we made choices to give up certain liberties. Privacy has always been an issue with Facebook, and never have they clearly apologized for the manner in which they treat your data. But when something occurs on Facebook, you can be assured it will last.
As a general rule, people will not stop to think before they offload their address, location, tastes, preferences, credit card number, closest relations, etc., to Facebook’s servers. It’s not because people assume that their data is secure (it isn’t), but because the dangling lure of being immersed in the Facebook ecosystem is too much. The result is a codependency between the users and the service. Sherry Turkle, a professor at MIT and prominent writer, said, “I can’t think of another piece of passive software that has gotten so embedded in the cultural conversation to this extent before.” When people look at that gigantic $100 billion figure, they see success and are hesitant to make the connection that Facebook is profiting off the intimate details of your life.
Facebook makes money in two main ways: advertising and Facebook payments. They collect your life details to better target advertisements to your preferences and they take a cut of payments made to companies like Zynga when you upgrade your Farm-, City- or Whatever-Ville. To achieve a valuation of $100 billion, each active Facebook user is worth a theoretical $117.
But if you compare Facebook’s current methods of monetization, each user only generates $4.39. The level of information you share equates to a little under four percent of your theoretical worth. To remedy this, Facebook needs to extract significantly more data from you. To give you another comparison, if Facebook grows to three billion users — half the world’s population — it will only generate $13.2 billion in revenue if it doesn’t find ways to get more money from your information.
I pass no judgment on whether Facebook is good or bad for people, but I do know that now Facebook is a publicly traded company and it definitely has a bottom line imposed by its investors. Doing so will require higher levels of sharing and optimized advertisement placing. The processes have already been set into motion. The newest update to the Facebook photo viewer may appear to be a nod to the Google+ viewer, or an attempt to better show images and comments together, but it has an effect of ad placement with higher click rates. The ticker may seem like a great place to see what’s going on instantly, but it also drives people to click on apps, songs, photos, etc.
As Facebook works to meet that bottom line, its mission will begin to seem fuzzy. While Mark Zuckerberg may claim he intends “to make the world more open and connected,” it will become harder to accept for those with a keen eye. But you should also recognize that the savviest moneymakers are involved in putting such a high price tag on the service. They assume that increasing the user value from $4.39 to $117 is a surefire bet and nothing will get in the way of that happening. We, the users of Facebook, do have a sense of agency and are shareholders in a company where we invest our information. Zuckerberg may say, “We don’t build services to make money; we make money to build better services,” take heed of the transactions being made. Remember, Facebook is only as good as you and your 845 million best friends make it.
Blake J. Graham is a freshman. He can be reached on Twitter @BlakeGraham or at [email protected]
The views expressed in this column are those of the author and not necessarily those of The Observer.