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Facebook: The Value of Information in the Information Age
Wolf Richter www.testosteronepit.com
With IPO hype blowing like a maxed-out hairdryer into my face, I Googled ... Friendster—remember, the wildly successful shining star of social networking that everyone had drooled over, and that had spurned a buyout offer from Google? Me neither. Turns out, in December 2009, Friendster was bought for the paltry pittance of $26 million by MOL Global, a Malaysian company. In 2011, Friendster discontinued its social networking activities and rebranded itself as a site where Asian users “create avatars, discover new worlds, enjoy games, and meet new people.”
So what happened to the data, photos, innermost feelings, and nasty secrets that American users had posted on it? What happened to those compromising morsels they’d tried to delete? The data of their friends? Information in accounts they’d closed? Well, nothing happened to them. They’re on hard drives in data centers. Users can still access their information and export photos to Flickr and Multiply, but they can’t remove any of it from those hard drives. It’s become immortal. And it has value.
This is the information age. Users jump through hoops to hand over their information. Storage is so cheap it's a negligible factor in the decision making process. Selling information—or better yet, selling access to it for advertising purposes—is still easy enough. The same information can be sold from the same inventory millions of times. It never runs out. There are no cost of goods, no handling and shipping expenses. It doesn’t rot or mildew or rust, though it can get stale and does need to be updated, but users are more than happy to do that for free. User information is simply the best product ever invented—though it might not as sexy as.... Manufacturing Supercars in America.
Facebook may go the way of Friendster someday, given how the internet works. Someone might come along with a better mousetrap, or with a worse but cooler-looking mousetrap, or mob psychology might change, and then Facebook might go into an unstoppable downward spiral, interspersed with re-launches, followed by another spiral, and in the end, it might become irrelevant.
Except it will own an unimaginable body of information. Facebook already has 845 million active users who have recounted their lives and documented events and complained about their bosses and exes and shared secrets and unsavory tidbits and shopping habits that are now securely and forever spread out over various data centers. These bits of information are linked in a myriad ways to delineate connections and relationships, many of them known only to Facebook. A very valuable product. And Facebook owns it, not the user.
Monetizing it might appear a bit delicate for the faint of heart, but mostly, people have gotten used to it. And the young generation that has never known anything else takes it for granted. In its regulatory filings, Facebook reported revenues of $3.7 billion for 2011. A good beginning. And if it continues gathering information on its users and their friends on an upward trajectory for a few more years, Facebook will become by far the largest repository of true-name personal information ever. But is it worth $100 billion today? Or even $50 billion?
Clouds are forming on the horizon. A whole slew of companies, from startups to big guys like Google and Apple, use that business model—gathering and monetizing information on the personal minutiae of their users. And as more companies succeed at it, that information becomes commoditized, and its value invariably softens.
But information will still offer a greater return on investment than mere money, which the Fed hands out for free. Now banks and the economy are addicted to this free money, and the damage is severe. Read.... Ben Bernanke's Rain Dance at the Bottom of the Stairs.
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It remainds me a story written by Lem in "Cyberiad" (http://en.wikipedia.org/wiki/The_Cyberiad) :
On another occasion, Trurl and Klapaucius are captured by an interstellar "PHT" pirate. Trurl offers to build a machine capable of turning hydrogen into gold (something he can do manually, which he demonstrates by hand, mixing up protons and putting electrons around). However, the pirate turns out to have a PhD and cares not for the riches, but for knowledge (and in fact points out that gold becomes cheap if it is abundant). Trurl therefore makes a modified Maxwell's demon for him, an entity that looks at moving particles of gas and reads information that is, coincidentally, encoded in their random perturbations. This way, all the information in the universe becomes easily available. The demon prints out this information on a long paper tape, but before the pirate realizes most of the information is completely useless (although strictly factual) he is buried under the endless rolls of tape, ceasing to bother anyone.
We have entered one of the most dangerous periods in human history. Corporations control everything, governments protect the corporations. Technology is enabeling these organizations to collect untold information we freely divulge to each other throughout life, keep it on record, and dispense upon request. Its as though we were freely roaming the earth, and WE handed them a leash and said "Here, we trust you." Idiots, us all.
"Idiots, us all."
Well, you and me maybe, and most of the rest, but not all. There are still people who have the grit to divorce themselves from the government tit, the information matrix, the public utilities grid and the communications grid. I know some of them. It's not a convenient life, but it is a free life. Not "gratis" free, but "libre" free.
Like Henry David Thoreau, except they never write a word about themselves, and they remain invisible to the Machine.
"if you're not paying for something, you're not the customer; you're the product being sold".
[sorry for the cut and paste - too many sources to give credit]
We have had a substantial budget for pay per click (PPC) advertising with the major search engines for a number of years. As measured by just about any metric (time on site, pages visited, number of times vistited, sell through, etc) we have found the value of PPC Customers to be 5-6x the value of customers who visit our site from banners, random ad placement, mobile devices and all of the other methods.
First, with the exception of major corporations with large branding and ad budgets, I don't see how Facebook is going to attract large advertising revenue from the millions of smaller businesses.
Second, the total amount of advertising revenue available will not materially increase. New competitors will have to offer siginificantly discounted rates to attract new advertisers. As in the death of print media, ad revenue was diverted from print advertising to internet advertising - overall ad budgets did not expand.
Thirdly - IMO, anyone who posts personal information in forums like Facebook, Twiitter, Chat Rooms are making a mistake that they will likely come to regret at some future date. My wife and I argue about this from time to time. She has her Facebook account and accuses me of being out of date, however, she did concede to my demand that pictures of our minor children would not be posted.
the information age ended, its all about speed. know which the best stock is on the fundamentals? good, but you make money by front running the trade with HFT. storage isn't necessary when you have speed, information keeps moving. facebook is about interaction. hi i'm doing something, me too its fun mines boring me too. its what used to pass as cocktail party chatter. thats the new world, no information just interaction. dont' ask why it matters, but advertisors are willing to subsidize it with literally no tangible results to their bottom line. if you want something on the internet you go looking for it. i like potato chips, but i found out that the basic store brand is just as good as the brand name at half the price. they do the work of convincing me to buy, then i buy the generic equivalent? but advertising is another story.
You aint had Utz's Chips yet.
I'm proud to say I've never once used Twitter or Facebook... I never intend to either.
I did use facebook a while, once I caught up on who lives and who died and how in my class and worked over my neices and nephews I closed it up.
A classmate who excelled in all things Gym was heading for the Olymics and we all believed it. decades later he lolls on the beach somewhere in Hawaii having let himself go. Heh....
Twitter is one thing I will not use, however I lurk in it because resources are there in our State during ice storms, floods and such.
Facebook - mental masturbation in public.
Let me cut to the chase. Facebooks model is 100% "advertising" but not one dipshit on the planet has any clue what that means.
It means YOUR privacy, and every detail is advertised (solicited) to paying vendors, including banks and homeland security. People's lives are flagged and solicited to paying customers.
"Advertising" sure as hell aint the other way around like the vast majority of Joe Sixers waiting for an eHarmony ad thinks. It is that poor schlepp that gets skinned, and gets nothing for it.
Epic short opportunity as the masses realize Shitfacedbook is for 800M suckers that think Goldman Sachs values ownership of information.
Nope, it's stripped and mined for their benefit (they have access to it), not you -- which is true ownership. This is affirmed by FB themselves clamoring for a skewed-bullshit definition of ownership. The first court case will shred FB's interpretation of "ownership."
The joke will be on anyone long (after playing the pop) and on Facebook suckers themselves hence forth.
Thumbs up.
Been going on for decades.
What I have trouble understanding is how the minutiae of people's lives is somehow valuable in later years. It may be valuable to them, or a some tiny number of close associates to them, but for marketing purposes? All those Friendster datacenters are doing is eating up electricity. Move the data to second or third line storage and be done with it.
I have zero doubts that Facebook and Twitter will one day be fondly remembered in some retrospective tv show like those stupid "Remember the 80s" shows that came on. People will say things like "Remember Tweeting? WTF were we thinking?" Kind of like how we look back upon the CB radio craze of the late 1970s.
My further thought is what will supplant FB will be more distributed and not controlled by any one entity. Meanwhile, if people want to make Mark Zuckerburg a billionaire, well, I guess that's their decision. Personally, I simply do not get it, and I'm one of those "not that old" type of guys.
Well, for example NYC Ellis was number one with Baltimore number two in immigrants in the late 80's it would be interesting to know who came, when, what they had to put up with and get into this country.
A hundred years from now, provided the data is still in Binary, our children will understand just how we put the bill on them for living high on the national hog today.
Even further, so and so got killed due to enemy fire the MSM says. In facebook there will be ONE specific entry and a circile of family and friends and eventually the real story comes out.
We had a Marine who graduated high school in our area a few years ago and not yet 21 he was heading to his Machine Gun Position under mortar attack when a metal hit him in the neck and sliced it.
Something to consider.
I relied on stories passed down generations with bits of left over physical evidence from those days and our children's children will literally discover and read all about us, including one who did not marry and had fathered a baby out of wedlock.
THAT will be interesting, about a decade or two from now.
Matters little to me, I dont feed Facebook anymore. I don't work for Z.
I ain't gonna work on Zuckerberg's farm no more,
I ain't gonna work on Zynga's farm no more,
I wake up every morning hold my hands cause they're in pain,
I've got a head full of digital ideas driving me insane,
It's a shame the way he makes me click the mouse, well,
I ain't gonna work on Zynga's farm no more....
There's a re-write there somewhere.
Debt collections.
I have always been perplexed and amazed at peoples willingness to put personal information out on the net. Is nothing sacred? Is 15 minutes of imagined fame with imaginary friends more valuable than privacy?
I have never participated in any social media (facebook, myspace, etc)...perhaps it's my age...but I'm not that old.
The computer age is creepy. It's like that MJ song....
That was Rockwell, although MJ did some backup vocals.
And we have the all time creepiest president to go with it.
Who has time to think when there is so much to tweet?
TLTM
tweet less think more
more words of wisdom from the lead snake oil salesman on cnbs:
"facebook will reignite interest in our stock market…it's that important"
jim cramer 2 - 2 -12
social networking sites
defunct social networking sites
Imagine, people paying good money for a venereal disease on privacy.
Real sheep acting like sheeple ...
23 hilarious seconds, an actual flock of sheep
Showing the true 'sheeple' behaviour:
http://www.youtube.com/watch?v=aSuaDmi7cmU
Reminds me of a game of grabass. But that's exactly the point...
"What are you talking about?"
http://mrstaberswiki.pbworks.com/f/1296839013/sheep-600.jpg
Funny. Reminds me of trying to chase my goats off of the deck (they like sunning on the dog bed).
If you want to understand the information paradox, you have to face that other paradox : that of the liar, of the spin doctor in today's age of ephemeral media dictatorship.
A very good illustration of this goes back to a memorable confrontation imagined in the mid-nineteenth century :
the debate between Machiavelli and Montesquieu in Hell. It gives a tremendous insight on Machiavellian take to Montesquieu's call for separation of powers, for rule of justice, for information dissemination to educate the people. I have to tip my hat to HCE of ZH forum who called our attention to this text.
Machiavelli's "power over justice" (end justifies means) argument, is breathtaking for that age : Not worried by information dissemination, as TPTB can produce more dis-information to counter it!
So our current spin doctors of media fame....of "the medium is the message" glory...have invented nothing new.
O tempora, O mores.
http://en.wikipedia.org/wiki/The_Dialogue_in_Hell_Between_Machiavelli_an...
http://fr.wikipedia.org/wiki/Dialogue_aux_enfers_entre_Machiavel_et_Mont...
Tech bubble 2.0, 3.0...... X.0. The banksters are playing well to make their dough! It is all smoke and mirrors to hide the true purpose.
Liars have unusually large egos, as they see themselves as the arbiters of what is or is not. Wait for the opportunity to "help" with an outrageous whopper of dissemblance. They will jump at the chance to use the new device and will become victim to its shortcomings. Lie to the Liars; they don't deserve the truth.
btw, falak, thanks for your continuing scholarship.