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Facebook's $96bn 'Like' button
Facebook's $96bn 'Like' button
8 May 2012 by Paul Dempsey
"One thing that there's never been is a map of everybody in the world and their relationships with each other."
Mark Zuckerberg, Founder and CEO, Facebook.
OK, so who's comfortable with that?
The issue of profiling and social media has been bubbling under the surface for a while. But the announcement of Facebook's IPO, and the potential implied valuation of $96bn has pushed it more to the front of the debate.
Already, it seems unlikely that Mark Zuckerberg's company will ever reach the lofty goal set out in the offering's roadshow video.
For example, new research from Consumer Reports, the US equivalent of Which, has found that 25% of people deliberately falsify their Facebook profiles to protect their privacy, compared with 10% just two years ago.
It also highlights a number of "causes for concern", the foremost being:
Some people are sharing too much. Our projections suggest that 4.8m people have used Facebook to say where they planned to go on a certain day (a potential tip-off for burglars) and that 4.7m "liked" a Facebook page about health conditions or treatments (details an insurer might use against you).
Some don't use privacy controls. Almost 13 million users said they had never set, or didn't know about, Facebook's privacy tools. And 28 percent shared all, or almost all, of their wall posts with an audience wider than just their friends.
Facebook collects more data than you may imagine. For example, did you know that Facebook gets a report every time you visit a site with a Facebook "Like" button, even if you never click the button, are not a Facebook user, or are not logged in?
Your data is shared more widely than you may wish. Even if you have restricted your information to be seen by friends only, a friend who is using a Facebook app could allow your data to be transferred to a third party without your knowledge.
Legal protections are spotty. US online privacy laws are weaker than those of Europe and much of the world, so you have few federal rights to see and control most of the information that social networks collect about you.
And problems are on the rise. Eleven percent of households using Facebook said they had trouble last year, ranging from someone using their log-in without permission to being harassed or threatened. That projects to 7 million households - 30 percent more than last year.
The necessary caveat here is that these warnings do apply specifically to the US experience - Europe does indeed have much stronger online privacy laws. But otherwise, it seems fair enough to extrapolate to the global experience.
And all these concerns feed into the question, "Why is it almost certain that Facebook will meet it's valuation?" Or putting it another way, "What are these investors buying?"
Since no valuation can ever be deemed wholly altruistic - not even 1% probably - the answer has to be "You". Or "Me". Or "Your family".... Or "Your friends".
It isn't clear to me how Facebook can justify a valuation on a par with a retailer like Amazon unless it - horrible word alert - monetizes access to its audience. And the way in which it can do that in arguably a more powerful way than its most obvious rival here, Google, is by being 'closer' to it (i.e. profiling it) to the fullest extent possible.
This could be highly-focused advertising or simple marketing data that can be bundled and sold to interested companies. It could be by knowing what kind of farm games to sell you. But however you slice it, from the IPO's perspective, we are the bulk of the product.
Once you make that connection (and, perhaps more to the point right now, once someone puts an actual number on it), it all gets a bit creepy. We all know that the customer list is a massive part of the value of any company, but once it is so incredibly personalised as we see here, you have to wonder about the long-term.
Nor do I think that the 'vision' that Zuckerberg outlines of his connected world really convinces you, once the company becomes a publicly traded stock, subject to the demands of investment managers (and there is only a small 'retail', as in public, component within the IPO).
We're back with that old idea of "Too much information" - but with a new twist.
Mark Zuckerberg, Founder and CEO, Facebook.
OK, so who's comfortable with that?
The issue of profiling and social media has been bubbling under the surface for a while. But the announcement of Facebook's IPO, and the potential implied valuation of $96bn has pushed it more to the front of the debate.
Already, it seems unlikely that Mark Zuckerberg's company will ever reach the lofty goal set out in the offering's roadshow video.
For example, new research from Consumer Reports, the US equivalent of Which, has found that 25% of people deliberately falsify their Facebook profiles to protect their privacy, compared with 10% just two years ago.
It also highlights a number of "causes for concern", the foremost being:
Some don't use privacy controls. Almost 13 million users said they had never set, or didn't know about, Facebook's privacy tools. And 28 percent shared all, or almost all, of their wall posts with an audience wider than just their friends.
Facebook collects more data than you may imagine. For example, did you know that Facebook gets a report every time you visit a site with a Facebook "Like" button, even if you never click the button, are not a Facebook user, or are not logged in?
Your data is shared more widely than you may wish. Even if you have restricted your information to be seen by friends only, a friend who is using a Facebook app could allow your data to be transferred to a third party without your knowledge.
Legal protections are spotty. US online privacy laws are weaker than those of Europe and much of the world, so you have few federal rights to see and control most of the information that social networks collect about you.
And problems are on the rise. Eleven percent of households using Facebook said they had trouble last year, ranging from someone using their log-in without permission to being harassed or threatened. That projects to 7 million households - 30 percent more than last year.
The necessary caveat here is that these warnings do apply specifically to the US experience - Europe does indeed have much stronger online privacy laws. But otherwise, it seems fair enough to extrapolate to the global experience.
And all these concerns feed into the question, "Why is it almost certain that Facebook will meet it's valuation?" Or putting it another way, "What are these investors buying?"
Since no valuation can ever be deemed wholly altruistic - not even 1% probably - the answer has to be "You". Or "Me". Or "Your family".... Or "Your friends".
It isn't clear to me how Facebook can justify a valuation on a par with a retailer like Amazon unless it - horrible word alert - monetizes access to its audience. And the way in which it can do that in arguably a more powerful way than its most obvious rival here, Google, is by being 'closer' to it (i.e. profiling it) to the fullest extent possible.
This could be highly-focused advertising or simple marketing data that can be bundled and sold to interested companies. It could be by knowing what kind of farm games to sell you. But however you slice it, from the IPO's perspective, we are the bulk of the product.
Once you make that connection (and, perhaps more to the point right now, once someone puts an actual number on it), it all gets a bit creepy. We all know that the customer list is a massive part of the value of any company, but once it is so incredibly personalised as we see here, you have to wonder about the long-term.
Nor do I think that the 'vision' that Zuckerberg outlines of his connected world really convinces you, once the company becomes a publicly traded stock, subject to the demands of investment managers (and there is only a small 'retail', as in public, component within the IPO).
We're back with that old idea of "Too much information" - but with a new twist.
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