This three year old long essay on Facebook is interesting at three levels: a) it helps you understand how much thought goes into building great monopolies; b) it helps you understand how conventional media – newspapers, books, TV channels – is being eviscerated by social media; and c) it helps you understand how wealth & power is shifting, even in India, to Facebook and Google. The latter trend has enormous ramifications about who controls, disseminates and regulates the flow of information in our country. Let’s begin with the first theme of the essay – the psychological underpinning of Facebook’s business model.
A year ago we had written a blog on the insights of the French philosopher, Rene Girard (see https://marcellus.in/blogs/marcellus-things-hidden-since-the-foundation-of-the-world/
): “In 1978, Rene Girard published a remarkable book called “Things Hidden Since the Foundation of the World”. The book, written in the form of a dialogue between the philosopher, Girard, and two psychologists provides deep insights into how societies evolve, compete, fight and resolve conflict. Those insights in turn have implications for how we think about countries and companies.
Girard’s hypothesis unfolds sequentially:
1. Human beings have an innate desire to compete with each other and rise in the world. At the outset, this desire to compete and create new things, conquer new frontiers is a healthy thing as it spurs creativity, innovation and differentiation.
2. Then a complication kicks in because human beings, being social animals. learn from each other and copy each other. As a result, we start coveting the same things as others. For example, in isolation I have no incentive to covet a diamond which to my mind is a worthless stone. However, if 20 people around me begin coveting diamonds (or admission for their children into a certain school or flats on Altamount Road or holiday villas in Goa), then I too am likely to covet the same. Girard calls this “mimesis” i.e. we mimic each other in our desires.”
In his long essay John Lanchester says that Mark Zuckerberg – and one of his earliest backers, the remarkable Peter Thiel – understand mimesis better than any other modern day media baron: “The reason Thiel latched onto Facebook with such alacrity was that he saw in it for the first time a business that was Girardian to its core: built on people’s deep need to copy. ‘Facebook first spread by word of mouth, and it’s about word of mouth, so it’s doubly mimetic,’ Thiel said. ‘Social media proved to be more important than it looked, because it’s about our natures.’ We are keen to be seen as we want to be seen, and Facebook is the most popular tool humanity has ever had with which to do that….If all people want to do is go and look at other people so that they can compare themselves to them and copy what they want – if that is the final, deepest truth about humanity and its motivations – then Facebook doesn’t really have to take too much trouble over humanity’s welfare, since all the bad things that happen to us are things we are doing to ourselves. For all the corporate uplift of its mission statement, Facebook is a company whose essential premise is misanthropic. It is perhaps for that reason that Facebook, more than any other company of its size, has a thread of malignity running through its story. The high-profile, tabloid version of this has come in the form of incidents such as the live-streaming of rapes, suicides, murders and cop-killings. But this is one of the areas where Facebook seems to me relatively blameless. People live-stream these terrible things over the site because it has the biggest audience…”
The second theme of the article is how by eating up the time we used to spend reading newspapers, reading books, listening to music or watching TV, Facebook is damaging these more conventional (and more conventionally regulated) forms of media and creating a world with no boundaries and few rules: “In Move Fast and Break Things, his polemic against the ‘digital-age robber barons’, Jonathan Taplin points to an analysis on Buzzfeed: ‘In the final three months of the US presidential campaign, the top-performing fake election news stories on Facebook generated more engagement than the top stories from major news outlets such as the New York Times, Washington Post, Huffington Post, NBC News and others.’ This doesn’t sound like a problem Facebook will be in any hurry to fix.
The fact is that fraudulent content, and stolen content, are rife on Facebook, and the company doesn’t really mind, because it isn’t in its interest to mind….We may collectively have an interest in sustaining creative and imaginative work in many different forms and on many platforms. Facebook doesn’t….
Taplin has worked in academia and in the film industry. The reason he feels so strongly about these questions is that he started out in the music business, as manager of The Band, and was on hand to watch the business being destroyed by the internet. What had been a $20 billion industry in 1999 was a $7 billion industry 15 years later. He saw musicians who had made a good living become destitute. That didn’t happen because people had stopped listening to their music – more people than ever were listening to it – but because music had become something people expected to be free. YouTube is the biggest source of music in the world, playing billions of tracks annually, but in 2015 musicians earned less from it and from its ad-supported rivals than they earned from sales of vinyl. Not CDs and recordings in general: vinyl.
Something similar has happened in the world of journalism. Facebook is in essence an advertising company which is indifferent to the content on its site except insofar as it helps to target and sell advertisements. A version of Gresham’s law is at work, in which fake news, which gets more clicks and is free to produce, drives out real news, which often tells people things they don’t want to hear, and is expensive to produce. …In September 2016, Alan Rusbridger, the former editor of the Guardian, told a Financial Times conference that Facebook had ‘sucked up $27 million’ of the newspaper’s projected ad revenue that year. ‘They are taking all the money because they have algorithms we don’t understand, which are a filter between what we do and how people receive it.’”
The third theme of the article is Facebook’s incredible access to information about the lives, habits and personal data of billions of people. No company or national government has ever had access to so much data and this wealth of data not only makes Facebook very profitable, it also places the company in a position of enormous power: “When the time came for the IPO, Facebook needed to turn from a company with amazing growth to one that was making amazing money. It was already making some, thanks to its sheer size – as Martínez observes, ‘a billion times any number is still a big fucking number’ – but not enough to guarantee a truly spectacular valuation on launch. It was at this stage that the question of how to monetise Facebook got Zuckerberg’s full attention. It’s interesting, and to his credit, that he hadn’t put too much focus on it before – perhaps because he isn’t particularly interested in money per se. But he does like to win.
The solution was to take the huge amount of information Facebook has about its ‘community’ and use it to let advertisers target ads with a specificity never known before, in any medium. Martínez: ‘It can be demographic in nature (e.g. 30-to-40-year-old females), geographic (people within five miles of Sarasota, Florida), or even based on Facebook profile data (do you have children; i.e. are you in the mommy segment?).’ Taplin makes the same point:
If I want to reach women between the ages of 25 and 30 in zip code 37206 who like country music and drink bourbon, Facebook can do that. Moreover, Facebook can often get friends of these women to post a ‘sponsored story’ on a targeted consumer’s news feed, so it doesn’t feel like an ad. As Zuckerberg said when he introduced Facebook Ads, ‘Nothing influences people more than a recommendation from a trusted friend. A trusted referral is the Holy Grail of advertising.’
That was the first part of the monetisation process for Facebook, when it turned its gigantic scale into a machine for making money. The company offered advertisers an unprecedentedly precise tool for targeting their ads at particular consumers. (Particular segments of voters too can be targeted with complete precision. One instance from 2016 was an anti-Clinton ad repeating a notorious speech she made in 1996 on the subject of ‘super-predators’. The ad was sent to African-American voters in areas where the Republicans were trying, successfully as it turned out, to suppress the Democrat vote. Nobody else saw the ads.)
The second big shift around monetisation came in 2012 when internet traffic began to switch away from desktop computers towards mobile devices. If you do most of your online reading on a desktop, you are in a minority. The switch was a potential disaster for all businesses which relied on internet advertising, because people don’t much like mobile ads, and were far less likely to click on them than on desktop ads. In other words, although general internet traffic was increasing rapidly, because the growth was coming from mobile, the traffic was becoming proportionately less valuable….
Facebook solved the problem by means of a technique called ‘onboarding’. As Martínez explains it, the best way to think about this is to consider our various kinds of name and address.
For example, if Bed, Bath and Beyond wants to get my attention with one of its wonderful 20 per cent off coupons, it calls out:
Antonio García Martínez
1 Clarence Place #13
San Francisco, CA 94107
If it wants to reach me on my mobile device, my name there is:
That’s my quasi-immutable device ID, broadcast hundreds of times a day on mobile ad exchanges.
On my laptop, my name is this:
This is the content of the Facebook re-targeting cookie, which is used to target ads-are-you based on your mobile browsing.
Though it may not be obvious, each of these keys is associated with a wealth of our personal behaviour data: every website we’ve been to, many things we’ve bought in physical stores, and every app we’ve used and what we did there … The biggest thing going on in marketing right now, what is generating tens of billions of dollars in investment and endless scheming inside the bowels of Facebook, Google, Amazon and Apple, is how to tie these different sets of names together, and who controls the links. That’s it.
Facebook already had a huge amount of information about people and their social networks and their professed likes and dislikes.2 After waking up to the importance of monetisation, they added to their own data a huge new store of data about offline, real-world behaviour, acquired through partnerships with big companies such as Experian, which have been monitoring consumer purchases for decades via their relationships with direct marketing firms, credit card companies, and retailers…These firms know all there is to know about your name and address, your income and level of education, your relationship status, plus everywhere you’ve ever paid for anything with a card. Facebook could now put your identity together with the unique device identifier on your phone.
That was crucial to Facebook’s new profitability. On mobiles, people tend to prefer the internet to apps…A game app on your phone is unlikely to know anything about you except the level you’ve got to on that particular game. But because everyone in the world is on Facebook, the company knows everyone’s phone identifier. It was now able to set up an ad server delivering far better targeted mobile ads than anyone else could manage, and it did so in a more elegant and well-integrated form than anyone else had managed.
So Facebook knows your phone ID and can add it to your Facebook ID. It puts that together with the rest of your online activity: not just every site you’ve ever visited, but every click you’ve ever made…Since the Facebook button is pretty much ubiquitous on the net, this means that Facebook sees you, everywhere. Now, thanks to its partnerships with the old-school credit firms, Facebook knew who everybody was, where they lived, and everything they’d ever bought with plastic in a real-world offline shop.4 All this information is used for a purpose which is, in the final analysis, profoundly bathetic. It is to sell you things via online ads.”
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