Tech Giants inFocus: Facebook

There’s a saying in business: if you aren’t paying for a product, you are the product. Nowhere is this more true than Facebook Inc. (NASDAQ: FB), the world’s largest social network. Founded in 2004, the company quickly grew to one million users by the end of its first year, six million by the second, and 1.86 billion by the end of 2016. Over half of all Internet users (3.4 billion people) use Facebook at least once a month, and the number of monthly active Facebook users continues to grow by about 16% year-on-year. These numbers are impressive, but perhaps what is more impressive is the fact that every one of them gets full access to Facebook’s features for free.

This is where Facebook’s business model comes in, which is based on the simple idea of selling advertising space to organisations and allowing users to access the service free of charge. While the model is simple to grasp, the way in which Facebook goes about its advertising business is not. To maximise the effectiveness of Facebook’s ads – that is to say, to ensure the ads are relevant to the people viewing them –  Facebook collects several points of data about its users to learn more about them. With traditional advertising mediums (such as TV, print, billboards), advertisers were offered such things as a general age range, an approximate location, and a statistically average profile of the viewers – at most. With the arrival of the Internet, advertisers now have a more advanced and accurate medium through which to target potential customers. Facebook has taken this technology to the extreme, offering advertisers a truly staggering 98 personal data points through which to target a highly specific audience. These data points range from basic information such as age and gender, to highly specified personal information such as location, relationship status, interests, purchasing habits and many more. Advertisers click and select the attributes of their target audience, and Facebook then serves up advertisements to those people.

Facebook uses a number of techniques to collect data. Among them are basic requirements to use Facebook services, such as an email address and phone number, as well as more sophisticated tracking tools such as cookies and geo-tagging. In between are the optional pieces of information that users put in about themselves (and that Facebook encourages), like your place of work and interests. One man, Max Schrems, requested a copy of his data from Facebook in 2010, and received a 1200 page PDF document in return. The document included his entire messaging history (even those which were supposedly deleted), his last known location, the IP addresses of every device he ever used to log into Facebook, and much more.

Max Schrems in 2015
Max Schrems in 2015

Yet, despite the Orwellian amount of data Facebook holds, more and more people are sacrificing it. This data is then sold for billions of dollars. In 2016, Facebook took in $26.8 billion from its advertising business, up 57% from the previous year. Despite the efforts of the European Union to control personal data and limit the exposure people have to companies like Facebook, it is still big business and is growing at astonishing rates.

Individuals are not the only people being affected by Facebook’s aggressive data policies – content creators are suffering too. Facebook only makes money from advertisers if people are viewing or clicking on the advertisement, which is only possible if a person is using Facebook. To encourage people to spend more time on the service, Facebook uses tools like a dynamic newsfeed and auto playing videos, which can be easily shared online and with peers, to keep people glued to the site. As a result, the average user will spend about 50 minutes a day on Facebook, according to the New York Times. While this may be great news for Facebook, it is bad news for content creators who have their videos pulled from the source websites.

For example, this effects YouTubers, who rely on the media sharing website as a revenue stream for funding the work that they do. This is possible because YouTube has a partnership program for YouTubers that allows them to take a share in the advertising profits made from the adverts that are displayed on their videos. This program was first launched in 2007 and since then has paid out $2 billion to such content creators (as of July 2016). Videos are being pulled from YouTube and shared on Facebook, which does not have any profit-sharing scheme for content creators. Therefore, the views generated on Facebook are not benefitting the creator financially, and they are missing out on the revenues that they would have earned had the video been viewed on YouTube itself. Furthermore, there is no requirement for consent for these videos to be shared on Facebook, and the process of removing videos them takes a number of days – a long time for digital creators that need to create new content regularly. Of course, the process of removing a video can only be started once the developer is made aware of the issue, and that may take time, or never happen.

Data rights are a controversial topic for Facebook, as shared data is essentially what makes Facebook a business. The company will continue to face lawsuits and court orders over the issue, but at the moment this certainly does not seem to be slowing down its ever-expanding growth.

Facebook HQ
Facebook HQ

Leave a Reply

Your email address will not be published. Required fields are marked *