What if we paid for Facebook?

Geoffrey Fowler asks that question, here is one bit from his analysis:

You can actually put a dollar figure on how much we’re worth to the social network. Facebook collected $82 in advertising for each member in North America last year. Across the world, it’s about $20 per member. Facebook the company is valued at about $450 billion because investors believe it will find even more ways to make money from collecting data on its 2 billion members.

You might imagine charging Americans $82 a year, though at that price the overall network would be smaller and of lower value to users.  Alternatively, Zeynep Tufekci wrote (NYT):

Internet sites should allow their users to be the customers. I would, as I bet many others would, happily pay more than 20 cents per month for a Facebook or a Google that did not track me, upgraded its encryption and treated me as a customer whose preferences and privacy matter. [She earlier had cited 20 cents per month as their profit per customer…TC takes all of these numbers with a grain of salt.]

Like Jonathan Swift, I have a simple proposal: don’t use “Facebook the service,” and conduct all of your social networking on WhatsApp, which by the way is owned by “Facebook the company.”  WhatsApp is fully encrypted, and it has no algorithms and indeed few bells and whistles of any kind.  From each person, messages are stacked in sequential order.  You can send photos and you can delete content, permanently I believe.  You can set up groups.  There is some kind of microphone function, though I’ve never figured it out.  And did I mention it is totally free?  Zero ads too.  Nor is the page cluttered, nor do you get these little notifications: “You have 37 messages, 49 notifications, 23 friend requests, 81 pokes, and a partridge and a pear tree,” etc.

Everything you are asking for exists now, from “Facebook the company,” though it is not “Facebook the service.”

Problem solved!  Oh, wait, you’re not interested…?  What should I infer from that?

Addendum: I do get that if everyone switched from “Facebook the service” to WhatsApp, the cross-subsidy would diminish and the terms of WhatsApp would change.  But still, at the margin, and in the meantime, plenty of people — including you — could switch and I expect this deal can remain the same.  Be a free rider!  Our democracy may depend on it.

Comments

Two things.

First, this relies on you having friends on WhatsApp, which is far more common internationally than domestically (speaking from an American perspective).

Two, while you do address the "on-the-margin" argument, even this is not accurate. Many people were using Messenger (Facebook's IM service) for communicating without having a Facebook profile (Facebook as a service). Surprise, surprise, Facebook has decided to insert ads into the message stream and also asks you repeatedly to sync your contacts. I wonder why? I wonder what product they will monetize next?

I think there was a Straussian take here with your quip about what you should infer, but I'm not smart enough to know for sure; my hunch is you had a urge to insult the public for their use of Facebook without realizing how and why Facebook is in the position its in - and what steps they are taking to stay on the map.

I'm curious, why don't you share your thoughts on the fact that the majority of senators facebook will face in its hearings on the Hill are beneficiaries of Facebook lobbying money? What should I infer from that?

great stuff

Yet not every company is interested in collecting money from the people they collect data on. And for such a company, it is likely there is no amount of money they would take to not collect your data - 'At the core of the i360 operation is a comprehensive database of all 18+ American consumers and voters containing thousands of pieces of individual and aggregated information that give us the full picture of who they are, where they live, what they do and what is happening around them. Leveraging this and our capabilities in data science, analytics, technology development and advertising, we help clients take their efforts to the next level by embracing the concept of truly borderless data.' http://i-360.com/

And this text is jarring to see - 'TC takes all of these numbers with a grain of salt' [He had earlier cited $82 … CP wonders who is writing here.]

From a quick search: FB market cap (company stock value): $400B. FB yearly income is around $40B (i.e. consistent with 2B users times $20), and profits about $15B, around 35-40% of income.

20 cents per month of income is one tenth of the global figures of $20/year, but a direct subscription may be less expensive to operate than ads. Still, profits per user is about $7 globally, or 60 cents per month - and scaled up for North America, I make it perhaps $2-3 per month. So that would be a bare minimum assuming no collection costs.

I believe you have completely missed the point about what CP finds jarring in that quoted passage.

There are a couple of different explanations that are reasonable, and CP quite honestly doesn't know which one is correct when it comes to how content for this redesigned web site is discovered and presented.

You taking your meds, bro? You keep referring to yourself in the third person.

No need for meds, just simply wondering whether Prof. Cowen has a favored nickname for himself when jotting notes, or is that how other people refer to him.

[TC takes all of these ideas in the comments with a grain of salt]

Tyler, added the TC in that case because the sentence started by a reference to 'she' referring to Zeynep Tufekci. So, he made an explicit reference to clarify that it was his point of view.

Your use of cp, on the other hand, just comes across as odd and a bit nutty.

Well, 'CP' certainly did not work as a subtle hint in original comment about what was jarring, that is for sure.

Your explanation does not feel like a very good match to the actual text though - [She earlier had cited 20 cents per month as their profit per customer…TC takes all of these numbers with a grain of salt.] Particularly because 'TC takes all of these numbers' is a peculiar way to phrase what you consider is text 'to clarify that it was his point of view.'

But as already noted, possibly this is the way that TC prefers to refer to himself - though strangely, till now, 'TC' has not been in much evidence at MR in that fashion.

But sure, it is a possible explanation, if not one well supported by previous experience of the writing at this web site.

The problem with this thought experiment is that many who think that Facebook's current practices are bad also believe that using significant amounts of traditional social media is not healthy.

The only ones who might be motivated to go to any lengths to replicate FB while avoiding it would be those groups where enough people in the local network are worried about privacy concerns & value the traditional style of social media enough to recreate it in an inconvenient & weird manner.

And when I ask people, those in their 20s/30s in a major metropolitan area, about the feature that keeps them on FB it's usually the event invite functionality that they say is the most useful.

What's actually happening is that permanent group chats are getting to be a more popular way for friends to interact. Content is being created in these iMessage, WhatsApp, etc. walled gardens where the walls are too high to let anyone else in, especially advertisers.

Content is being created in these iMessage, WhatsApp, etc. walled gardens where the walls are too high to let anyone else in, especially advertisers.

If you are right that people want a wall to keep advertisers out, this is very bad news for Facebook. WhatsApp is basically SMS done a bit better (which is itself the telegram done much better).

So if that is the kind of service people want, it is telcos and phone manufacturers who are in a position to provide it.

The switch to WhatsApp in Malaysia has been precipitated by curbing of press freedoms and government monitoring of social media (with the threat of penalties for sedition-type offences) ...

1) If you want to be Swiftian, 'simple proposal' should be 'modest proposal'.
2) if you want to be Swiftian, the modest proposal should in fact be a horrible and unthinkable impossibility designed to make a political point;
3) If you don't want that, then for fuck's sake leave Swift out of it altogether.

You should infer that Facebook has a network effect monopoly.

Agreed. Facebook is a desirable platform mostly because almost everybody over a wide range of demographics is on it. This makes it feasible to have some awareness of what is going on in the lives of high school and college classmates, second cousins, members of your former military unit, your former Boy Scout troop and sports team members, members of a church you used to attend before you moved to a new town, and in general, people with whom you have or had a weak but real relationship, with a high probability of being able to locate most of them. This is possible only because Facebook has a network effect monopoly or something close to it. Particularly in an age where the telephone white pages are no longer a useful way to locate people, Facebook is often the easiest way to get in touch with someone you've lost touch with and don't have time to correspond with regularly by conventional means. The more barriers to membership/entry there are, there weaker the network effect and the less value the resource is. Free is a key part of the business model.

Whatsapp sends information to Facebook. I live in Hong Kong and Whatsapp is used for everything, including business communications. I had a few chats with customers via Whatsapp and fairly soon thereafter received an email from Facebook suggesting them as my friends. I deleted the FB app over a year before that (while maintaining the account). They may not know what we are talking about, but they know who we are talking to, and if they know enough about those people then they can start to make inferences.

'Whatsapp sends information to Facebook.'

Well, only according to the rules, if this recent settlement is any guide (valid in the EU, terms may vary in your location).

'People have a right to have their personal data kept safe, only used in ways that are properly explained to them, and for certain uses of their data, to which they expressly consent. This is a requirement of the Data Protection Act.

My office has just completed an investigation, which commenced in August 2016, into whether WhatsApp could legally share users’ data with Facebook in the manner they were considering. In 2014 Facebook acquired WhatsApp, which offers an instant messaging service for smartphones.

My investigation found:

WhatsApp has not identified a lawful basis of processing for any such sharing of personal data;

WhatsApp has failed to provide adequate fair processing information to users in relation to any such sharing of personal data;

In relation to existing users, such sharing would involve the processing of personal data for a purpose that is incompatible with the purpose for which such data was obtained;

I found that if they had shared the data, they would have been in contravention of the first and second data protection principles of the Data Protection Act.

I am pleased to state that WhatsApp has now signed an ‘undertaking’ wherein they have given a public commitment not to share personal data with Facebook until they can do so in compliance with the upcoming General Data Protection Regulation (GDPR), which comes into force in May this year.' https://iconewsblog.org.uk/2018/03/14/whatsapp-signs-public-commitment/

WhatsApp will not work as a replacement for facebook’s news feed. How would you do that? Spam text all your contacts with baby pictures? That’s like saying e-mail is a replacement for facebook, because you can set up mailing lists and people can Reply All.

Also, companies have been free to offer their services for a fee instead of using their users as product. No one has been willing to pay, especially for a new network hoping to expand by getting more members. This has been the case since day 1 of the Internet. But, sure. Go ahead and suggest that as a solution.

Facebook has lured unsuspecting customers in by promising them a service for free. It turns out they have been using our data in ways we may or may not like.

So $82 a year is not unreasonable. I expect most of us pay a lot more than that for a phone. But a paid service does not have a lot of friends. Facebook has already got a lot of people to sign up. All our friends are there. Even mine. So a paid service needs some sort of critical mass before it can become useful.

Besides, to be honest, the lure of the Great Green is just too strong. They might start out promising this or that. The same way Google promised not to be evil. But there is another promise - the promise of obscenely large sums of money. So large that they are beyond all reasonable human understanding. Would Zuckerberg or anyone else obey the spirit of any promise he made if he was listening to marketing guys and lawyers offering him billions? Or would they be looking for loopholes, and special exemptions and so on that would enable them to harvest and sell once we have all signed up? To ask it is to answer it.

Google did not become evil overnight. It took one small moral compromise after another. A little bit. Every day.

'Facebook has lured unsuspecting customers in by promising them a service for free. '

Facebook's customers are not unsuspecting, and they do not get Facebook's services for free. Like many people, you seem to think that the voluntary data entry services provided by so many people make them customers of Facebook. Such people aren't customers, their data is the product being sold.

Facebook's ability to extract $82 of gain does not mean that a reasonable price for an equivalent service with enforced data protections would be $82.

Consider the standard "reasonable rate of return" for a public utility, for example.

If Facebook's assets are $10 billion, then a regulated rate of return resulting in profits of $1-1.5 billion annually would still be very generous, and leave significant resources for further development. That would add up to a $1-2 annual charge for each user.

I paid Target for goods and my information was stolen. I paid Home Depot and my information was stolen. I paid Aetna and my data was stolen. I paid Best Buy and my data was stolen. I paid for a copy of my credit report from Equifax and my data was stolen. At what price point should I feel my data is secure? Breaches are a systemic problem. I like the idea of fining the companies a given amount for every customer in every occurrence.
Whatsapp sounds perfectly fine but the trust is broken.

Why do you trust WhatsApp? Facebook is better at technology than you are, has more lawyers than you do, and owns the product. If there's a loophole in the terms of service they will find it, assuming they didn't deliberately create the loophole themselves.

The microphone function is actually incredibly useful, I recommend familiarizing yourself with it. Not infrequently it is impractical to type or read for a variety of reasons.

Cowen is too polite. What he means is that users of Facebook place an exceptionally low value on their privacy; indeed, the point of using Facebook is SHARING. I will once again refer readers to Bryan Caplan's dark observation about democracy: "Democracy as we know it is bad enough. Democracy that really listened to all the people would be an authoritarian nightmare.”

Caplan's dark observation about democracy is reflected in that pathetic young woman who shot up the You Tube office. She is but an extreme case of every habitual user of social media.

+1 "the point of using Facebook is SHARING"

If you are worried about facebook, you are probably OVER-sharing.

Indeed, I just don't get this pearl clutching at the thought that Facebook is collecting data on people - people are literally putting their entire lives on Facebook for all their friends and family to see. These are people that would actually care about any personal information, not some stranger. If you were worried at all about privacy why go on it in the first place?.

It’s funny that people who hate big energy, pharma, ag, etc. companies which actually produce something people need for being big and profit driven, and don’t feel that way toward Facebook. Actually, the closest analog to Facebook is probably big tobacco, which also provides a knowingly addictive experience.

Famous Jewish American newspaper Forward (is it the old Forverts? What happened to it?!) has said what I said: it is a shame America supports the Saudis. Maybe now that Israel's mouthpiece said it, instezd of a good friend of America, America will pay attention.

I have a somewhat zany idea.

How about FB paying us (or some of us) for giving up our privacy. It can still be a free service. But let's say some of us are willing to totally give up our privacy for the rest of our lives and let FB or Google do whatever they want with our data (with all its attendant risks), then we can charge these companies a fee for this privacy-renunciation. Maybe as high as a few hundred thousand dollars for some of us?

Ofcourse I don't expect too many people to sign up for this. But even if a few thousand people do volunteer, it is a wealth of data for FB / Google, which they can sell to anyone. It may cost them a fair bit - let's say a thousand people sign up, and each of them charges $50,000, then that's a cost of $50MM.

If we gave people enforceable rights of privacy,
Facebook would have to pay me.

No they wouldn't - there is an enforceable right to data privacy in Europe, and plenty of people are willing to use Facebook anyways. With the caveat that Facebook has to accurately declare what is going on, something Facebook continues to have difficulty in doing,

Agreed. Although disagree if a platform violates its own rules, there should be a private right of action. Also, sovereigns, like EU, can set minimum standards and provide that some rights are not waivable even with disclosure. In fact, am taking an online course today on EU data privacy rules for continuing legal ed requirement. Models for both Google and Facebook will emanate from the EU regulation.

A while back, Google announced that it won't scan your email any more. It was a business model for a while, but now personal email is a loss-leader for a product they honest-to-God sell you for money: email for businesses.

"Oh, wait, you’re not interested…? What should I infer from that?
Great line!

I propose that a decentralized, strongly encrypted, open source, social network be based on "proof of storage."

There, done, the miners will put the storage online.

You keep a copy of your data, but proved storage provides distributed access.

In the Wall Street Journal, Andy Kessler offers a their option: make Facebook users the owners of their private data. Facebook then stores the data for a fee, but pays the users to share it.

Personally, I would not continue on Facebook. YouTube, however, I would pay for. Their algorithms and supply of music are incredible. If I pick, say, a strings-only piece by an obscure Eastern European composer, suddenly I'll see some by others of the same category. I have learned so much (new to me) classical music from them.

You don't pay for YouTube now? (Red).

Some content is paid for by the businesses providing the content. YouTube is the cheapest way to reach their stakeholders thanks to economies of scale far beyond any other institution except Amazon, maybe Microsoft, IBM, Oracle catching up to the two cloud service model standards. Amazon charges businesses to use cloud service tools to provide specific services, while google creates and sells the services, using free ad supported individual customers to draw in businesses paying google for the products.

The Facebook phenomenon raises fascinating economic questions. There is economic value in a social graph, which Facebook and the other social media companies have managed to harvest. We could legislatively treat the social graph as the intellectual property of the PERSON, which the HARVESTER may use for a limited time, for limited purposes, and always subject to the person's power to terminate. If I could move my social graph from one platform to another as easily as I move my cell phone number (another legislative mandate!), we could create an entire new generation of entrepreneurial businesses AND apply appropriate free-market incentives to what is now a monopoly.

Good comments. Of course, there were costs in creating the social graph, just as there are costs in creating a telephone directory, which was paid for by the yellow pages. The transference part though is problematic...do my friends get a say as to which platform I move them to as friends without them consenting to the attachment to another platform. Of course you could argue so long as I do not drag their content, all I am doing is giving the names to links, which they can attach to or not.

"...our democracy may depend on it."

I don't get how Facebook selling data is even in the same ballpark as Twitter and YouTube (and also FB) intentionally silencing/demonetizing right-leaning voices.

This article was cited favorably on Jack Dorsey's Twitter feed, if you care to know the dreams of the CA tech crowd:

https://medium.com/s/state-of-the-future/the-great-lesson-of-california-in-americas-new-civil-war-e52e2861f30

Go ahead, name a law-abiding, non-abusive, and merely right-leaning voice that was silenced.

The medium story, link was interesting, and I have to admit it felt good in a if you aren't going to cooperate rationally , we'll just defeat you way.

"Non-abusive." Eye of the beholder, of course. These particular beholders think Sharia advocacy is fine, but "gay" as epithet is a death sentence. So long, Owen Benjamin. Black women enthusiastic about Trump? "Dangerous to the community," says Facebook. So long, Diamond and Silk.

"If you aren't going to compete rationally..." If it gets to irrational competition, I don't like the chances of soft-skinned urban keyboard jockeys.

Oh, you are just talking about controversial media darlings, not right-center thinkers on policy. Never mind then.

Yeah, well, for better or worse most of the electorate are not reading policy papers.

Borderline genocidal fake news propaganda is not the same thing as advocacy for low taxes and individual freedom.

Banning Youtube videos that link to gun manufacturers/sellers is not the same as banning "genocidal fake news propaganda." I sincerely wish you'd stop replying to my comments. This is something like six years running and you've yet to say anything intelligent.

Perhaps there was something specifically offensive about the video you're referring to?

Among other things, the right to be the owner of a standard-issue rifle which uses standard-issue ammunition, for the purpose of having capacity to mobilize militias in order to prevent tyranny, is not the same thing as bringing handguns to Walmart or stocking rapid-fire assault rifles in the home.

"This is something like six years running and you've yet to say anything intelligent."

Troll Me is one of 4 users I used the kill file script to remove from the thread. Now that the website changed, I can see his comments again. And this has confirmed my original use of the kill file script.

The maximum extraction of surplus by a monopolist is not equal to the fixed + marginal cost of operation.

Wouldn't something more along the lines of $5 a year be reasonable, allowing to hire some hundreds or thousands of programmers to update the site and to meet whatever regulatory demands there might be to prevent its use for brainwashing and/or other similarly wrong manipulation purposes?

What makes you think $5/yr will even cover server and bandwidth costs for a worldwide social netowrk, let alone dev, Q/A, and support staff?

(2B users, yes - but a lot of them aren't in the first world, and $5/yr is relatively serious money in many places - and note that those user counts are more or less "monthly active".

People who check in on Facebook once a week in, say, sub-Saharan Africa are not paying $5/yr, because the value proposition is negative.

Let's restrict this to, say, the US, and its 214M users.

$5/yr gets us a trifle over $1B/yr.

Facebook's a publicly traded company and thus has public financials. For 2017's FY their cost of revenue was just about $5.5B - that doesn't include R&D or Sales and Admin.

It doesn't seem likely that they'd be breaking even at $5/yr, given that I don't think they could get that income from their long-tail customers - and equally the NA/First World customers paying $5/yr use more resources than infrequently-connected ones on low bandwidth.)

But the point isn't about the specific number, whether $2 or $8, the point is that $82 is a stupid point of reference because it's the financial amount extracted by a monopolist, whereas actual operating costs are a small fraction of that.

Say, $1 annual minimum + bandwidth (plus reasonable return) charges. Minimum access could even be subsidized (e.g., the minimum annual fee plus a sufficient bandwidth for occasional users) by governments who recognize that increased contact with a social network tends to increase access to economic opportunity.

I wonder of Tyler can provide costs for providing a social network service?

Ie, how much does MR cost to provide free social networking, presumably supported by ad revenue, including the impute ad revenue of generating revenue for Tyler, Inc, and Alex, Inc. (Likely generating globe trotting tourism as imputed earned income, from getting invited to speak at conferences, etc all over the globe. )

Whatsapp is a messaging service.

It's not a social network, the way the term is normally used.

(For one, nobody's farkin' using it in America or Canada, which is where my friends live. Not the way people use Facebook, or the way it's used in other parts of the world.

Secondly, it's not the same market/product niche, despite "having messages and notifications and friends".

WhatsApp "competes" with Facebook Messenger, not Facebook.

Messenger is not Facebook's core value proposition; "seeing what your friends are doing without them having to do a message to everyone they know ala email lists" is.)

Well put.

A lot of people use FB as a blog. To make long posts. To discuss issues at length. A lot of this is done from desktop.

Whereas whatsapp is purely a messaging tool. And nobody ever uses it from their laptop.

I use WhatsApp (and Telegram) from my laptop

"No algorithms"?

https://twitter.com/danluu/status/983466330320965632

Why can't social media be like email, where you can connect with anyone in the world without everyone being on the same platform?

One current possibility: Mastodon, a distributed/federated social network that is growing fast: https://joinmastodon.org/

At some point, one or another of these distributed models will take off and we'll wonder why we all lived inside Facebook's walled garden. It will be like when AOL died, people just wanted a more open experience; it was impossible for that to work with the incumbent business model, which is now a shell of its former self.

Facebook the social network is a walking corpse; it may take 5-15 years for it to dwindle into insignificance, but there is no way a centralized social network can survive long against this new wave of Internet decentralization.

Facebook the company will likely survive: it has other products (WhatsApp, Oculus, etc), will certainly use its current cash war-chest to acquire more companies for longer-term relevance, in some other lines of business.

"What should I infer from that?"

That the killer feature of Facebook is the feed. There are high cognitivev costs in thinking 'does person X want to see my content Y'. The feed design flips that on it's head and says 'is content Y good enough for your followers', which is a much easier proposition. It is naturally less privacy-focused however.

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