Articles

Tuesday, May 22, 2012

To The Last Byte

The question isn't, "What is Facebook worth?", the real question is what are we worth? The secret of Facebook is that there is no Facebook, just reams of user data, information voluntarily submitted by hundreds of millions of people in exchange for a free ride, which is monetized by a company that makes nothing except increasingly broken code, by selling ads to companies hoping to convince consumers to buy the products manufactured by their Chinese partners.

There is a tremendous generation gap between the old giants which made things and traded them to people for money, and a new generation of companies, which offer connectivity services for free, build a monopoly over some element of the internet, and then squeeze companies looking to connect with consumers. Everyone is out to provide value, collect user information and begin running ads.

Behind all the flash and buzzwords is the promise of smarter and better advertising. The only thing keeping companies like Google and Facebook afloat is the same thing that used to keep magazines, newspapers and networks afloat-- advertising. And with users creating and promoting their own content, all the companies need to do is provide the connectivity tools, servers that stay up and an interface that people can figure out.

The products of this process have changed our lives, at least insofar as finding directions, having instant access to information and being able to interact with anyone we have ever known is life-changing. But so did the original communications revolution, which brought one standard of programming into homes across an entire nation, and made it possible to hear an event happening, even while it was going on.

The latest incarnation of the ongoing communications revolution is more flexible and less centralized than its predecessors because it no longer depends on massive corporations providing content to us. There are no more gravelly voiced announcers telling us what to think about the Vietnam War, in between commercials for sudsy soaps. Or rather they still exist, and if you are desperate you can find Dan Rather still blathering about Nixon and the Vietnam War on HDNet, a failed project of another Dot.com billionaire, and likely the only conceivable place that might still give Keith Olbermann a job, but they don't matter anymore.

Why bother spending millions developing content, whether it's a television cop show or a news anchor reporting from some officially "war torn" part of the world, to pull in a million viewers or readers, when you can let ten thousand people create their own content and pull in a million viewers that way, and the only cost is the physical and programming infrastructure to make it all possible.

If you think there's nothing good on television anymore, that's because there's no reason to make anything good for free television anymore. Network newscasts, the New York Times and magazines are vanity projects now. Some of these operate at a loss, the rest are battling diminishing revenues. They have no future and the easiest way to see that is by gauging the number of new newspapers, networks and magazines being launched.

That doesn't mean Facebook is the future, it's already the past. Without an economic relationship, the only way to lock in users is by providing a vital service that can't be easily shifted. There's nothing Facebook offers that qualifies; the morass of daily user interactions don't need to moved, its users will one day leave them behind. Its only staying power is user inertia, and that has no future. Google has managed to sink its roots far deeper into the lives of its users than Facebook, which, for all its intimacy, is just another waypoint full of user data, that, like milk, loses value after freshness.

The difference between Facebook and Friendster, the cautionary tale of social networking, lies in such areas as timing, branding and uptime. One day, in the not so distant future, Facebook will be another cautionary tale. That is the inevitable lifecycle of even the giants, to one day serve as a cautionary tale for the next upstart with a garage story and a valuation in the billions.

Facebook is just another company with a bland interface, that started life as minimalistic before degenerating into digital design sprawl, which was heralded as the next big thing because it had a lot of users and it has a lot of users because it's the next big thing. Break that cycle and it no longer has a lot of users or is the next big thing.

The media-rich obsessions of a bored society turn bland neurotics like Bill Gates, Steve Jobs and Mark Zuckerberg into outsized public figures, as if they were the next Carnegie or Rockefeller. They're not. They're mildly clever toolmakers, adapting the work of more innovative thinkers, or paying others to adapt it. They're not personalities or empire builders, they're not even the smartest kids in the class, just smart enough to build a company based on doing one thing well and rarely learning to do anything else. That one thing can keep their idiot savant companies afloat, and lead to them being declared geniuses and trendsetters, but there's always another smart kid who has learned to do something else well, and that thing will also change everything.

Facebook is worth nothing and worth everything. Its value, like its content, is flash value, the explosion of the immediate, the unleashed energy of the moment. It monetizes the idle moments of people's lives, but it has no future beyond that moment. When the moment passes, it passes too. Its only power rests in the sheer size of its user base, in the aggregation of moments, the mayfly energy of distraction. So long as it appears to be growing, it appears to be of infinite value. When its growth stops, the collective moments will begin to diminish and the illusion will end.

The triumph of Facebook is the triumph of a post-media marketplace where companies no longer know how to talk to users, and users are always bored and always moving on to something else. It's the triumph of accessibility and convenience for users and user data for companies which are no longer in the manufacturing business, but in the branding business.

If everyone's products are being made in the same dirty alleys of China's factory towns by Chinese companies, which will in a matter of months or years, roll out their own brand to Western consumers, the conglomerates aren't really selling products anymore, they're selling brands. The big letters on the can, the "designed-to-death" logo, and the whole package of emotions associated with the brand.

Companies like Facebook try to lock in users with free services in order to resell those users to American companies looking to cultivate brand loyalty in order to resell those users back to the Chinese manufacturers who actually make their products. Facebook sells the ads while the company buying the ads feels confident enough about its brand value to add 10 cents more to the price of its detergent, gadget or jeans made in the same factories and sweatshops in Asia as everyone else's.

The actual product being moved in all these exchanges is "You", the Western consumer being sold and resold down the digital river which flows all the way to Shanghai. Whatever new revolution is hatched in Silicon Valley, the ultimate beneficiaries are still the clean rooms of Asia where the technology that powers the revolutions gets made. Facebook and Google may come and go, and their data with them, but the manufacturers who make storing and moving the data possible are the short-term and long-term beneficiaries of every revolution.

Whether Apple or Google comes out on top is of small meaning to the Chinese industrial machine. Android or iOS still run on Chinese hardware, much like Mark Zuckerberg's own genetic code will. The future doesn't belong to the revolutionaries, it belongs to the machine of revolution, and the machine of the digital revolution is not in California, it's across the ocean. The short term benefits of technological revolutions may fall to the end users, but the long term benefits go to the manufacturer who uses it to build up its infrastructure.

Technological revolutions are toolmakers' revolutions, but the value of a tool is what you do with it. We have done all sorts of neat things with them as individuals, but the sum total of all these things is the easy road of convenience and indulgence. The time that our tools save us, we invest back into the tools, and we make more tools to do more things, but all those things involve playing with the tools. It's little wonder that the chief beneficiaries are not the toolmakers, but the toolmakers' toolmakers.

Making our economy fragmented and individualistic; has also made it portable and destructible, and the tycoons with their massive data caches and user habit algorithms are only making it easier to sell Chinese products to America, not vice versa. The empires, like the data, are speculative, their value, like that of our currency, rests primarily in the perception of value. Its economy is increasingly our economy, a vast marketplace of numbers that runs on technology made in Chengdu, Huizhou and Shenzen.

An economy of brands has no future because sooner or later the perceived value crashes and then nothing is left but a hole where an economy once was.





21 comments:

Joe said...

Facebook is the best way to keep all your date safe and secure. I have made a thousand friends on it at least and promote my website with it. Brought me thousands of readers.
Mark Zuckerberg is a genius and deserves our deep respect as a man who revolutionized the internet.

Tammy Batmeister said...

Oh I love Facebook. I probably spend a couple hours a day posting to it and Twitter. Its how I keep in touch with my friends and stuff.
I don't know what I would do without it.
I dont get why the stock was sucky though. What's the deal with that?

Théodore LeBoiteux said...

It's the first time I leave a comment here and probably the last time. You are a poet in prose. Reading you, I have the same pleasure I felt when I read T.S.Eliot. Even when you might be (partially) wrong, you "byte".

American Genie said...

Tammy, the stock could be "sucky" because FB is under investigation by the FBI for allowing pedophiles, and child pornographers to openly exchange their disgusting and vile photographs and videos while Zuckerberg ignores the problem.

Anonymous said...

Tammy,

Facebook stock is cratering because it's currently worth $4 a share, not $45. The IPO was a classic wall street pump 'n' dump. Zuckerberg is a genius - for getting away with the scam.

fsy said...


Tammy, the stock could be "sucky" because FB is under investigation by the FBI for allowing pedophiles, and child pornographers to openly exchange their disgusting and vile photographs and videos while Zuckerberg ignores the problem.


Should he really be a censor? Couldn't this apply to any aspect of the Internet?

FFI4 said...

Great article, great insights. Thanks for applying your perceptive powers to an area outside your usual focus.

You are certainly right about Facebook being already in the past. The IPO was just Zuckerberg's effort to monetize it before it fades away. The already ongoing investigations into stock fraud are but symptoms of the sickness of the stock before its release. Analysts and surveys have already been saying Facebook is a passing fad.

Again, Android, iOS, and Chinese factories, well, you're spot on as usual.

Eigenvector said...

Mr. Greenfield, I must tell you I really did not like this column.

I must express some wonder as to why you felt you had to write it in the first place.

Oh, of course, it's your blog and it's your right to publish whatever you like here, on any conceivable subject, but nevertheless, it just felt to me like a useless exercise in reflexive punditry.

Your columns about Israel are much more enjoyable, informative and original than most other writers', so I was rather saddened to read this one, which felt just like an angry rant. Angry at what?

One point particularly jarred me:

You compare Bill Gates, Steve Jobs and Mark Zuckerberg very infavourably with Carnegie and Rockefeller. You go on to characterize the former as "mildly clever toolmakers", "not even the smartest kids in the class", "just smart enough to build a company based on doing one thing well and rarely learning to do anything else".

Why so, if I may ask? To take one example, I think Bill Gates is a very talented person; for instance, do you know that his Erdos number is 4? Do you really think that Microsoft (which I'm no fan of, by the way) is a company that does just one thing?

Or take Steve Jobs. The man re-invented himself and Apple a number of times. Just one thing?

On the other hand, why do you laud Carnegie and Rockefeller so much? What personal innovations did they make? They were great businessmen, so are Gates and Jobs. Are they to be lauded so only because hey are "dead white men"? (I am being a bit nasty here to drive the point closer to home, not to drag the conversation into a "cultural studies" morass).

Oh, and "idiot savant companies"? Come on, have you ever worked for a company that produces something, that you pronounce such sweeping judgements on business techniques?

I am sorry for the somewhat caustic tone of some of my remarks. I do greatly care for your columns and so I felt being quite let down in this one.

Ravis said...

The best summation of Facebook I've seen came from a Zerohedge commentor:

"God I hate F'book. I hate everything about it, from the empty eye sockets of it's leering, grasping, nausea inducing, ceo to it's ubiquitous linkages, constantly sniffing my hyperlinks like the violating nose of a money dog at my crotch. Fadebook is a demonic Narcissism machine and a conditioning engine of repression. How many entities use it to SPY on it's users? The Gov., The Media, your Employers, Burglars, Identity thieves, your parents...."

Anonymous said...

Brilliant analysis and I feel sorry for people who find friends only on Facebook, friendship has to be earned by deeds not gossip.

Anonymous said...

I'm glad you wrote this. Now that I've regained access to my Facebook account I plan on deleting it entirely.

I don't like a big company gathering all sorts of information about me. There's something creepy about the collection of advertising profiles and intelligence agencies (you know, those three letter spook type ones) watching and gathering.)

Big Brother meets Big Business. Not a good thing!

Keliata

Anonymous said...

Jobs, Gates and Zuckerberg are/were brilliant. Bashing them does not diminish that.

Anonymous said...

mr. knish - i maybe 'old enough' to appreciate your comments and certainly have in all previous posts.
However, since i care little to share and stay connected, i will not get inebriated on social media.
That's right, i don't get Twit-Faced.

Ericcs said...

Daniel,
I have worked as a software engineer in Silicon Valley for over 20 years, and what you say is absolutely and unequivocally true. In fact, your conclusions don't go far enough. As but one result, Silicon Valley is dying, as the ability to create truly new products as opposed to vaporware like Facebook are rapidly diminishing. In addition, there are so many foreign nationals from India and China imported as cheap educated slaves for the high-tech companies, that then go home after a few years taking their expertise and newfound knowledge with them, that logistically the place couldn't survive even if jerkoffs like Gates, Jobs (when alive, a marketing hack control freak), and Zuckerberg weren't in control. BTW, the common consensus among those of us who know about operating systems is that the various incarnations of Windows delivered by MicroSoft over the years are essentially trash, always have been and always will be. An analogy has often been made that if your car were built with the same approach as Windows, you would have to pull over to the side of the road and reboot it every 1000 miles. Oh well, even if we all learn to speak Mandarin, the world's most chauvinistic society is not going to let any of us barbarians in to write software.

Please keep up the incisive and insightful columns. You are a bright light among a sea of drones.

Eigenvector said...

@Ericcs

I'll agree with you that Windows is rather crappy, softwarewise. But I think you fail to see it from the user's point of view - millions of people keep using Windows, and nowadays it's not for lack of free alternatives. The thing is that Windows is fine enough for the needs of most people, including very advanced users who want to get things done (including writing scientific papers, programming in various languages etc.) and don't really care for a perfect operating system.

That's one of the iron rules if business (and life): the good is the enemy of the excellent.

So, things look a bit different when you change perspective, don't they?

namaste said...

daniel, reading the divergent views here in the comments, i'd say you did another fantastic writing job! sooner or later a writer displeases. it does not take away from your excellent writing abilities. in fact, you're courage in taking such controversial positions only adds to your talents. well done, as usual! :)

Perfected democrat said...

I'm shorting asap; One has to have a sense of humor, Zuckerberg is a real clever kid with his entertainment/fun club for the "me, look at me" generation, and making nothing much, really, into gold; he'll join Seinfeld in history, but Jerry was funnier... Google, however, provides useful programs, services and software, has revolutionized access to the universal knowledge bank and is an authentic leading edge in the technological advancement of the human race, actually.

Eigenvector said...

@Perfected democrat

Hey, you can't just walk in and start confusing people with the facts.

Fat Man said...

Dude: You lost me on the last turn. Less than all is well in China too. Indeed, everything you said about China was said about Japan 25 years ago. Then came 1989, the bubble burst, and now they are about commit economic seppuku by turning off their nuclear power plants.

China has many problems:

http://www.youtube.com/watch?v=39nMp5Sc0qs

And they are on the precipice of an economic recession:

http://www.nytimes.com/2012/05/25/business/global/chinas-once-hot-economy-is-turning-cold.html

But their deepest and most intractable problem is the illegitimacy of the ruling party. And, that party does not want to seek legitimacy because it might be denied to them.

We on the other hand suffer from self inflicted wounds. We may begin to recover in November by throwing the Choomster in Chief out of office. The first sign of light might be Tuesday a week the SEIU and AFSCME will be rejected by the people of Wisconsin.

I would rather be an American.

Dovber Schwartz said...

This is your only article that I think is unnecessary and even perhaps slightly foolish.

vladdy1 said...

Funny how so many people are extremely invested in social media and feel the need to attack when it is described as what it really is -- a gathering of data and a means of getting yourself (in a very small way) "out there." Reminds me of the obots when NO is criticized.

Have you ever written about Google's buddy-buddy- relationship with the White House and how they've made so many changes possible, including the "arab spring"? I cringe whem people say "Google it." Why give these people free advertising? Just say "look it up." Geez.

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