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The thing that so many people fail to realize is that the data isn't valuable in and of itself. Excluding the type of information that lets you steal identities

The thing that so many people fail to realize is that the data isn't valuable in and of itself. Excluding the type of information that lets you steal identities (and therefore bank accounts), there's not much you can do with huge swaths of data. There's not really a market for sheer information. What makes Facebook (and other platforms that use your personal data) valuable is that they have both information about you and a place where they can show you ads. These platforms are not, contrary to popular belief, trying to "sell" your information. They're allowing advertisers to use the platform to display ads to you based on that information. The data is a means to an end, which is showing you relevant ads. If everyone stopped using Facebook tomorrow, the value of all the information Facebook has gathered would be negligible. The real reason Facebook is worth $X Billion is because a significant portion of the population of the world logs in to use same product every day. In other words, your attention is the thing that is valuable. Your data just lets advertisers be really efficient in how they pay for your attention.

j03m1 11y ago
+1billion
williamcotton 11y ago
What if the model was flipped, so instead of advertisers paying Facebook to cover their operation costs, individual users covered their own operation costs, and perhaps the advertisers directly subsidized individual users at the time of publication? This would mean that people who wanted to pay could turn off advertising and just use Facebook as pay-as-they-go service. I dunno what kind of accounting they're doing at Facebook, but with their current approach of having advertising indirectly subsidizing users, there is no price discovery mechanism. Right now there's no way to price how much a user is worth and how much they actually cost, which seems like a very strange way to run a business. This type of accounting, where the content itself is given a cost and a value, would mean it we're finally treating what people publish as intellectual property instead of the "user being the product". --- Edit, to expand on perhaps the advertisers directly subsidized individual users at the time of publication: Ah, I think you're assuming that I'm saying they should go to a completely paid-for-in-cash-by-users model... which I'm not! I'm just saying that if they flipped the model, and covered the operations costs directly from users, that the books would make more sense. This would make the accounting significantly more complex, so I wasn't making an argument for simplicity, rather as much detail and accuracy as possible! This information can be later analyzed and acted upon in simple ways. This doesn't mean that there can't be a free to use service on top of a model like this. It just means that advertisers are literally paying on behalf of users for hosting, distribution and other operating costs. This would mean that there wouldn't be advertisements on the read-side, in the "stream", rather on the write-side, when publishing... like with sponsored posts... Like, I personally choose to make my post sponsored by the Buffalo Bills because I love giving my money to the Buffalo Bills and the NFL (which I really do). Or maybe some low-rent ads make you watch a 20 second video before paying for you to upload 200 photos from your phone, but at least you don't have to associate yourself with them. We're smart enough to create the kinds of incentive structures that have made intellectual property function in a market economy for hundreds of years, we just need to revisit some deep fundamentals about how we buy and sell information. It'll work out better for everyone. Facebook could take a percentage of the business for having created the market that introduced the advertisers to the authors. The authors are now free to do business as they please, directly covering their own costs or choosing to have them subsidized. The advertisers can establish better relationships with the authors, essentially treating them like business partners.
- Retra 11y ago
  Why would anybody offer a pay-to-avoid-advertising scheme unless they were paying significantly more than the advertisers? Furthermore, if people thought their content were valuable intellectual property, they wouldn't be posting it for free on some corporations website. So you're having to resolve a conflict between where an economic process is assumed to work based on perceptions, and where the actual value of things isn't. I suppose you could run something like that as a co-op; users pay a subscription fee, and in exchange, they get actual shares in the company and the right to sell their own attention to advertisers.
  - williamcotton 11y ago
    Well, considering that it is incredibly cheap to host and distribute digital media these days, individuals could still pay significantly more than the advertisers and it wouldn't cost them more than a few dollars a month. This co-op that your describing is basically the approach taken by certain songwriters and recording artists with Tidal, but again, we're talking about shares in the aggregator and purposefully deciding not to treat what is published as property in a marketplace. Songs played on terrestrial radio, for example, work very differently. You're right, if songwriters thought their content was valuable intellectual property, they wouldn't let a radio station play it for free, and they don't. Radio stations have to pay a percentage of their advertising profits as performance royalties to the songwriters. What's interesting is that Facebook seems to be headed towards a private version of this and is starting to share ad-revenue with content creators, mainly because when you don't do this, the content that people click on is so filled up with advertisements that it ruins the experience. Imagine Top 40 radio without performance royalties... the songs would probably be nothing but jingles as the songwriters would have to embed their profit making mechanisms directly in to the content itself!
- prostoalex 11y ago
  > What if the model was flipped, so instead of advertisers paying Facebook to cover their operation costs, individual users covered their own operation costs, Why would that be a good deal for Facebook? With current revenue scheme they cover operation costs, R&D, various projects that do not directly contribute any revenue, various internal projects that fail and no one else hears about them, growth and marketing campaigns, various campuses and real estate around the globe and even then have some profits left over. Why would any software company willingly cut its R&D funnel and profits that can be used as a rainy day fund? > Right now there's no way to price how much a user is worth and how much they actually cost, which seems like a very strange way to run a business. I'm sure there is if you have access to internal data, and entire departments in the company know not only operational cost per user, but can segment the costs by country and/or product (feed vs platform vs messaging vs video).
DevX101 11y ago
Auto parts manufacturers get paid even though I can't drive an axle.
deleted 11y ago
[deleted]
- crazypyro 11y ago
  How is a platform that supports over a billion people not a meaningful investment into the content? Even if they are not directly producing content, they are more like an aggregation/distribution content system. That's not really a fair comparison.
  - deleted 11y ago
    [deleted]
jebblue 11y ago
>> The thing that so many people fail to realize is that the data isn't valuable in and of itself. It is valuable to the company you're giving it to since they get paid by the advertising. They also get money from their partners who we so graciously agree to allow them to "share" it with which happens to be for profit for them. >> The data is a means to an end, which is showing you relevant ads. >> If everyone stopped using Facebook tomorrow, the value of all the information Facebook has gathered would be negligible. They can still sell your information to whomever they want which means even in your scenario they would still be making tons of money, I'm guessing here, hundreds of millions IMHO. So your arguments are not correct.
- austenallred 11y ago
  Right, that's why I said it's not valuable in and of itself. It helps them make money, no doubt, but there's not much of a market for that data alone. The only other potential buyers would be the people who already have a platform to display ads. But let's play devil's advocate and say they could sell the data for $100M (I think that's extraordinarily high). Given Facebook's 1.4 Billion monthly active users, that values the data at about $.14 per user. Facebook's market cap is $270B ($187.5 per user). In other words, using obviously sketchy numbers, your attention is worth approximately 2,800 times more than your data.
wahsd 11y ago
The thing that so many people fail to realize is that the internet needs a totally different structure or service that operates on a totally different premise that retains data with their owner, their person. I relish seeing the day that Facebook is jettisoned for a system of distributed and individual ownership of profiles and data, like the internet should be. Humanity strayed at some point when the nefarious actors like Zuckerberg and his predecessors came in and started stealing your data, stealing your person, removing the information from you that your liberty and freedom is built on. You are not a free person when you are on the internet, your person is being smeared and skimmed everywhere you go and things against your choosing or even awareness are being done to your person and identity by people and for reasons you did not authorize. That's not liberty, that's not freedom.
- austenallred 11y ago
  You know no one forces you to use Facebook, right?
  - aw3c2 11y ago
    Society kinda does. If all your peers use it to communicate, you would be a hermit if you did not participate.
    - michael_h 11y ago
      I don't participate and am not a hermit. When I want to communicate, I use the phone or SMS. If my peers want to contact me, they use the same. My wife has an account. Sometimes I'll scroll through it for a bit, just to see. It seems like people mostly use it as a semi-broadcast medium, rather than a communication mechanism amongst a tight group of peers. The less armchair punditry in my life the better. If people like it, that's great for them, but I can't do it. My wife attempted to use the messenger thing for a while, but it was such an unreliable software disaster-pile that she had to drop it.
      - aw3c2 11y ago
pdeuchler 11y ago
What? How is this even remotely true?! Do you have any sort of factual backing behind this viewpoint? Facebook has years and billions of data points on human interaction between friends, lovers, acquaintances, and enemies. Facebook can determine your lifestyle, sexual orientation, socio economic status, and whether or not you're married just from your friend list. Facebook has one of the largest sources of demographic information on the planet, and each of those demographics has told facebook exactly what their hopes, dreams, interests, and fears are. This is an absolutely ridiculous line of reasoning that willfully ignores the fact that knowledge, and more importantly knowledge about you, is almost pure power. By this same logic Gmail is only worth money because they have a tiny bar above your inbox that people look at, as opposed to having an enormous machine learning corpus of people's intimate communications. If anything, the simple fact that algorithmic traders are using Facebook's open graph data to find an edge on the stock market is blatant proof that the real money is in the data. >>> If everyone stopped using Facebook tomorrow, the value of all the information Facebook has gathered would be negligible. Just like if everyone stopped using the internet today all the information the NSA has gathered would be negligible, right?

j03m1 11y ago

+1billion

williamcotton 11y ago

What if the model was flipped, so instead of advertisers paying Facebook to cover their operation costs, individual users covered their own operation costs, and perhaps the advertisers directly subsidized individual users at the time of publication? This would mean that people who wanted to pay could turn off advertising and just use Facebook as pay-as-they-go service. I dunno what kind of accounting they're doing at Facebook, but with their current approach of having advertising indirectly subsidizing users, there is no price discovery mechanism. Right now there's no way to price how much a user is worth and how much they actually cost, which seems like a very strange way to run a business. This type of accounting, where the content itself is given a cost and a value, would mean it we're finally treating what people publish as intellectual property instead of the "user being the product". --- Edit, to expand on perhaps the advertisers directly subsidized individual users at the time of publication: Ah, I think you're assuming that I'm saying they should go to a completely paid-for-in-cash-by-users model... which I'm not! I'm just saying that if they flipped the model, and covered the operations costs directly from users, that the books would make more sense. This would make the accounting significantly more complex, so I wasn't making an argument for simplicity, rather as much detail and accuracy as possible! This information can be later analyzed and acted upon in simple ways. This doesn't mean that there can't be a free to use service on top of a model like this. It just means that advertisers are literally paying on behalf of users for hosting, distribution and other operating costs. This would mean that there wouldn't be advertisements on the read-side, in the "stream", rather on the write-side, when publishing... like with sponsored posts... Like, I personally choose to make my post sponsored by the Buffalo Bills because I love giving my money to the Buffalo Bills and the NFL (which I really do). Or maybe some low-rent ads make you watch a 20 second video before paying for you to upload 200 photos from your phone, but at least you don't have to associate yourself with them. We're smart enough to create the kinds of incentive structures that have made intellectual property function in a market economy for hundreds of years, we just need to revisit some deep fundamentals about how we buy and sell information. It'll work out better for everyone. Facebook could take a percentage of the business for having created the market that introduced the advertisers to the authors. The authors are now free to do business as they please, directly covering their own costs or choosing to have them subsidized. The advertisers can establish better relationships with the authors, essentially treating them like business partners.

Retra 11y ago
Why would anybody offer a pay-to-avoid-advertising scheme unless they were paying significantly more than the advertisers? Furthermore, if people thought their content were valuable intellectual property, they wouldn't be posting it for free on some corporations website. So you're having to resolve a conflict between where an economic process is assumed to work based on perceptions, and where the actual value of things isn't. I suppose you could run something like that as a co-op; users pay a subscription fee, and in exchange, they get actual shares in the company and the right to sell their own attention to advertisers.
- williamcotton 11y ago
  Well, considering that it is incredibly cheap to host and distribute digital media these days, individuals could still pay significantly more than the advertisers and it wouldn't cost them more than a few dollars a month. This co-op that your describing is basically the approach taken by certain songwriters and recording artists with Tidal, but again, we're talking about shares in the aggregator and purposefully deciding not to treat what is published as property in a marketplace. Songs played on terrestrial radio, for example, work very differently. You're right, if songwriters thought their content was valuable intellectual property, they wouldn't let a radio station play it for free, and they don't. Radio stations have to pay a percentage of their advertising profits as performance royalties to the songwriters. What's interesting is that Facebook seems to be headed towards a private version of this and is starting to share ad-revenue with content creators, mainly because when you don't do this, the content that people click on is so filled up with advertisements that it ruins the experience. Imagine Top 40 radio without performance royalties... the songs would probably be nothing but jingles as the songwriters would have to embed their profit making mechanisms directly in to the content itself!
prostoalex 11y ago
> What if the model was flipped, so instead of advertisers paying Facebook to cover their operation costs, individual users covered their own operation costs, Why would that be a good deal for Facebook? With current revenue scheme they cover operation costs, R&D, various projects that do not directly contribute any revenue, various internal projects that fail and no one else hears about them, growth and marketing campaigns, various campuses and real estate around the globe and even then have some profits left over. Why would any software company willingly cut its R&D funnel and profits that can be used as a rainy day fund? > Right now there's no way to price how much a user is worth and how much they actually cost, which seems like a very strange way to run a business. I'm sure there is if you have access to internal data, and entire departments in the company know not only operational cost per user, but can segment the costs by country and/or product (feed vs platform vs messaging vs video).

DevX101 11y ago

Auto parts manufacturers get paid even though I can't drive an axle.

deleted 11y ago

[deleted]

crazypyro 11y ago
How is a platform that supports over a billion people not a meaningful investment into the content? Even if they are not directly producing content, they are more like an aggregation/distribution content system. That's not really a fair comparison.
- deleted 11y ago
  [deleted]

jebblue 11y ago

>> The thing that so many people fail to realize is that the data isn't valuable in and of itself. It is valuable to the company you're giving it to since they get paid by the advertising. They also get money from their partners who we so graciously agree to allow them to "share" it with which happens to be for profit for them. >> The data is a means to an end, which is showing you relevant ads. >> If everyone stopped using Facebook tomorrow, the value of all the information Facebook has gathered would be negligible. They can still sell your information to whomever they want which means even in your scenario they would still be making tons of money, I'm guessing here, hundreds of millions IMHO. So your arguments are not correct.

austenallred 11y ago
Right, that's why I said it's not valuable in and of itself. It helps them make money, no doubt, but there's not much of a market for that data alone. The only other potential buyers would be the people who already have a platform to display ads. But let's play devil's advocate and say they could sell the data for $100M (I think that's extraordinarily high). Given Facebook's 1.4 Billion monthly active users, that values the data at about $.14 per user. Facebook's market cap is $270B ($187.5 per user). In other words, using obviously sketchy numbers, your attention is worth approximately 2,800 times more than your data.

wahsd 11y ago

The thing that so many people fail to realize is that the internet needs a totally different structure or service that operates on a totally different premise that retains data with their owner, their person. I relish seeing the day that Facebook is jettisoned for a system of distributed and individual ownership of profiles and data, like the internet should be. Humanity strayed at some point when the nefarious actors like Zuckerberg and his predecessors came in and started stealing your data, stealing your person, removing the information from you that your liberty and freedom is built on. You are not a free person when you are on the internet, your person is being smeared and skimmed everywhere you go and things against your choosing or even awareness are being done to your person and identity by people and for reasons you did not authorize. That's not liberty, that's not freedom.

austenallred 11y ago
You know no one forces you to use Facebook, right?
- aw3c2 11y ago
  Society kinda does. If all your peers use it to communicate, you would be a hermit if you did not participate.
  - michael_h 11y ago
    I don't participate and am not a hermit. When I want to communicate, I use the phone or SMS. If my peers want to contact me, they use the same. My wife has an account. Sometimes I'll scroll through it for a bit, just to see. It seems like people mostly use it as a semi-broadcast medium, rather than a communication mechanism amongst a tight group of peers. The less armchair punditry in my life the better. If people like it, that's great for them, but I can't do it. My wife attempted to use the messenger thing for a while, but it was such an unreliable software disaster-pile that she had to drop it.
    - aw3c2 11y ago

pdeuchler 11y ago

What? How is this even remotely true?! Do you have any sort of factual backing behind this viewpoint? Facebook has years and billions of data points on human interaction between friends, lovers, acquaintances, and enemies. Facebook can determine your lifestyle, sexual orientation, socio economic status, and whether or not you're married just from your friend list. Facebook has one of the largest sources of demographic information on the planet, and each of those demographics has told facebook exactly what their hopes, dreams, interests, and fears are. This is an absolutely ridiculous line of reasoning that willfully ignores the fact that knowledge, and more importantly knowledge about you, is almost pure power. By this same logic Gmail is only worth money because they have a tiny bar above your inbox that people look at, as opposed to having an enormous machine learning corpus of people's intimate communications. If anything, the simple fact that algorithmic traders are using Facebook's open graph data to find an edge on the stock market is blatant proof that the real money is in the data. >>> If everyone stopped using Facebook tomorrow, the value of all the information Facebook has gathered would be negligible. Just like if everyone stopped using the internet today all the information the NSA has gathered would be negligible, right?