Tuesday, January 22, 2013

Putting my head above the parapet

Facebook's latest unwanted privacy intrusion. Sorry, no, no. Let me start again. Facebook's latest 'product' innovation was last week greeted by widespread bemusement but no shortage of flim-flam. All of the reports in the mainstream media agreed that Mark Zuckerberg had announced something called Graph Search but the detail was - how should one say? - a little bit hazy. Some journalists suggested Zuck is positioning Facebook to compete with Google in the search advertising market (he isn't; he may have a long term plan to introduce a more sophisticated search product but that is a different story). Others suggested Graph Search may help Mark 'monetise' the site - how this might achieved was vague to say the least.

What the old media failed to grasp was the heart of the story: Mark Zuckerberg's failure to confront the truth about what he has created. Not what he would like to have created or what the shareholders would have liked him to have created or even what the site might one day become, but what Facebook *is* as it exists today. Here is a clue: it is the title of an Oscar winning movie about an awkward American college student who creates the world's most popular website. Hold that thought.
I have been thinking about this since before the miserable IPO but I think now is the time to go on the record with a prediction that will almost certainly leave me with egg on my face (as almost every prediction is wont to do) in years to come

Right, here it is:

Facebook will never make any real money. 


There it is. And, before you pile in, US$3 billion is not 'real' money - in Silicon Valley terms - when you have a user base of more than one billion people worldwide.

Google gobbles up more than half of all Internet advertising dollars, leaving scraps for everybody else - outside of the English-speaking or even the Western world things are a bit different, but, I digress. The point is first-mover advantage combined with 'enhanced network effects' make it very difficult for anyone (even Facebook) to compete with Google in the online advertising market.

What Facebook would really like to do (it would seem) is SELL YOUR DATA, which, it wants to claim as FACEBOOK's data!!!

However, consumer advocacy groups and (more importantly) independent Facebook watchers are quick to pounce on any explicitly privacy-related announcements and frequently force Facebook into humiliating climb downs. See the Instagram controversy just before Christmas, when Facebook tried to claim ownership of every image ever uploaded to the service in perpetuity. There was a mass exodus of users and, despite the climbdown, users are still drifting away.

I think it is helpful to think about it like this: Facebook users are like squatters, while Facebook is like an exploitative landlord who thought he could entice the hippies and the students with the promise of free rent and board, but who now cannot figure out how to squeeze any money out of his dungeon hoards. The squatters have no rights and are vulnerable to coercion or eviction. But, provided the landlord lacks the will to use force, they have little to fear. Plus, if the landlord gets too heavy handed, the squatters can just up and leave - the only thing that keeps them where they are is the conspiracy of silence amongst their friends about their awful living conditions.

The situation is very finely balanced. The landlord has put cameras in the ceiling and microphones under the floorboards. The squatters put up with this because the roof over their heads are still free and the only noticeable aspect of the intrusion is the junk mail that corresponds to their conversations. But that is easily ignored and, what is the harm? Meanwhile, the landlord is loosing money and the banks are getting nervous about whether posting junk mail through the squatter's letter box is going to every repay their loans.

The landlord has a few options, none of which are particularly desirable. If he gives the squatters the same rights as residents he will have to take out the cameras and the microphones, but their is still no guarantee the squatters will pay the rent he would like to charge. If he ups the level of junk mail the squatters may leave regardless.

There is no way out of this quandary without fundamental reform of the entire squatter-landlord relationship. But that carries with it too much of a risk for Facebook to countenance. Hence the battle for 'hearts and minds'. The landlord wants to convince the squatters he has changed, without actually doing anything of the sort. So, he promises the squatters all of the advantages of tenanthood - electricity, running water, waste disposal - along with a whole host of new electronic toys and games: higher resolution CCTV cameras, infrared detection systems and geolocative tagging for every item in the house, provided the squatters accept more and shinier junk mail as a pre-condition. Of course, there are plenty of other properties the squatters could rent at reasonable cost without having to accept excessive junk mail and spying for free, but whether the squatters are too enfeebled or distrcated by the myth of the benevolent landlord remains to be seen. I choose to be an optimist and think that the squatters will wake up in time to avoid disaster.

In short: Facebook is a Social Network, not a Business.