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Facebook isn't optimizing for value-per-user accounting accuracy. They're maximizing profits. Say they could charge per user, and they would know each user was

Facebook isn't optimizing for value-per-user accounting accuracy. They're maximizing profits. Say they could charge per user, and they would know each user was worth exactly $.20/year. That would make for easier accounting, certainly - they could pin that down to an exact number. But what if alternative is more complex, but much higher? It would be something like "Most users are worth $14/yr, some are worth $6/yr, and some are worth $.10/yr." The value per user varies widely, but they can pin the average value per user down to $7/year. They choose the latter because $7 > $.2; they'd rather have more profits than simpler accounting.

williamcotton 11y ago
Spending time and money optimizing for accounting accuracy is one of the best ways to help maximize profits! I'm having a hard time following your examples. Are you saying that they can make a fictional $7/user-per-year appear higher than the actual $0.20/user-per-year? The goal wouldn't be to have an accurate average, rather the goal would be to segment the market in to different buckets, and then perhaps use different user acquisition strategies (with differing costs) for these different kinds of users. The point is, no matter how management decided to use this more accurate information about their business, they would be able to make better decisions.
- austenallred 11y ago
  I'm not sure what you're saying anymore; I thought you were advocating that they charge per user to make the accounting more simple, instead of a more variable advertising model. Now I think you're advocating best accounting practices? I'm sure they have great internal accounting.
  - williamcotton 11y ago
    [tried to move to parent, but I lost the ability to edit before I could go back and add the whitespace... so I'm putting it back here so it is easier to read... sorry, I have no idea what I'm doing!!] 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.

williamcotton 11y ago

Spending time and money optimizing for accounting accuracy is one of the best ways to help maximize profits! I'm having a hard time following your examples. Are you saying that they can make a fictional $7/user-per-year appear higher than the actual $0.20/user-per-year? The goal wouldn't be to have an accurate average, rather the goal would be to segment the market in to different buckets, and then perhaps use different user acquisition strategies (with differing costs) for these different kinds of users. The point is, no matter how management decided to use this more accurate information about their business, they would be able to make better decisions.

austenallred 11y ago
I'm not sure what you're saying anymore; I thought you were advocating that they charge per user to make the accounting more simple, instead of a more variable advertising model. Now I think you're advocating best accounting practices? I'm sure they have great internal accounting.
- williamcotton 11y ago
  [tried to move to parent, but I lost the ability to edit before I could go back and add the whitespace... so I'm putting it back here so it is easier to read... sorry, I have no idea what I'm doing!!] 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.