16 ms·

Facebook's fake account problem

265 points by thinkcomp 7y ago

NoblePublius 7y ago
I was getting a half dozen obviously fake friend requests on IG every day until I set my account to private. These were invariably users like “TatianaXXX6969” or “SexySvetlana1727288”. Seems like the easiest kind of fake account to block (so much for AI and ML). I deleted my FB two years ago and I think IG is next.
- namanyayg 7y ago
  The easiest fake accounts to block have already been blocked, these ones would've been created with more nuance.
  - ceejayoz 7y ago
    I get them all the time, and there's not much nuance to them.
  - NoblePublius 7y ago
    Why not just build “don’t let anyone with an account less than X” message me?
paulgb 7y ago
While this raises some good points, it's worth mentioning the history between Aaron Greenspan and Facebook: https://www.nytimes.com/2007/09/01/technology/01facebook.html https://www.nytimes.com/2007/09/01/technology/01facebook.htm...
- vageli 7y ago
  > While this raises some good points, it's worth mentioning the history between Aaron Greenspan and Facebook: > https://www.nytimes.com/2007/09/01/technology/01facebook.htm.. https://www.nytimes.com/2007/09/01/technology/01facebook.htm.... I wasn't aware of this. Thank you!
- jessaustin 7y ago
  “I actually did think about integrating it into houseSYSTEM before you even suggested it, but I decided that it’s probably best to keep them separated at least for now.” Oooh, there's a blast from the past. Why do so many Harvard undergrads talk like this? (I was as guilty as anyone.)
  - icebraining 7y ago
    I'm curious, what's particular about that quote? Nothing jumps to me, but I'm a non-native speaker.
    - jessaustin 7y ago
      First, the superfluous "actually". In the late 1990s, every Yard conversation was peppered with "actually". I was on the phone with an HR person for my first job out of school, I dropped an "actually" on her, and she (rightfully) read me the riot act. (So, actually, the idiom could have changed by now... it apparently hadn't changed much at the time Zuck attended.) Second, the implicit comparison between the great stupendous thing that "I" did with the minimal barely-worth-mentioning thing that "you" did. As if "thinking" and "deciding" were somehow so much more important than "suggesting". We can be certain that if the conversation roles were reversed then the implied relative importance of the different actions would also have been reversed. This was just a particular flavor of a more general rhetorical activity we called "flexing", back then. Lots of intimidated kids, attempting to intimidate in turn.
      - icebraining 7y ago
        Thanks!
    - 6gvONxR4sf7o 7y ago
      It's kinda defensive in an 'I'm smarter than you' way. Replace "actually did think" with "thought." "Actually" says "no you're wrong." Remove "before you even suggested it." Saying you did it first attempts to position yourself as smarter. Adding "even" diminishes it. Making those changes, you end up with a less insecure, less posturing version, "I thought about integrating it into houseSYSTEM, but I decided that it’s probably best to keep them separated at least for now."
- MetalGuru 7y ago
  This is hilarious. It was so obvious that there had to be some personal reason this guy is so disgruntled. He's clearly consumed by envy.
na85 7y ago
FTA: >In other words, Facebook is growing the fastest in the locations worldwide where one finds the most fraud. In other other words, Facebook isn’t growing anymore at all—it’s shrinking. Look I hate Facebook as much as the next guy but this is clearly specious logic. The existence of fraudulent accounts does not preclude growth in new accounts.
- deleted 7y ago
  [deleted]
DisruptiveDave 7y ago
About a year ago we had to pretty much shut down FB advertising as we simply could not come close to rectifying the click numbers they were reporting to us. That trust broke down much further when you considered conversions and more human-like activity down our funnels. That said, for another business, FB is absolutely killing it for us. The difference is in target market size and niche.
- thinkloop 7y ago
  > The difference is in target market size and niche. Are the target market size and niche smaller or bigger for the one that works?
  - DisruptiveDave 7y ago
    Smaller. And easier to identify.
- PMan74 7y ago
  Which is the bit I don't get. Even if FB say they have a trillion users, so what. Advertisers will advertise and pay based on the results they are seeing just like you did. Eric Schmidt made pretty much the same point about Google fake clicks. https://searchenginewatch.com/sew/news/2058286/eric-schmidt-claims-the-ppc-model-self-correcting-in-terms-of-click-fraud https://searchenginewatch.com/sew/news/2058286/eric-schmidt-... Granted this is trickier if you don't have an easy way to determine if your advert has converted to a result e.g. somebody who is just looking to raise brand awareness.
- Bombthecat 7y ago
  Jeah, tried several times. With several different pictures, text, angle, color, font etc to advertise on facebook. 11k views one click or no click mostly lol. I guess it is too niche. (African bangles and stuff, hand made)
5trokerac3 7y ago
> So what is that magical ingredient, that secret sauce, that “genius” trade secret, that turned an over-funded money-losing startup into one of America’s greatest business success stories? False. Facebook made $50M in profit the year before it took its Series A. It has always been a profitable company[0]. [0] https://www.macrotrends.net/stocks/charts/FB/facebook/profit-margins https://www.macrotrends.net/stocks/charts/FB/facebook/profit...
- jasode 7y ago
  >It has always been a profitable company[0]. No, Facebook was founded in 2004 and it took 5 years to make its first profits in 2009: https://www.theatlantic.com/business/archive/2009/09/facebook-turns-a-profit-users-hits-300-million/26721/ https://www.theatlantic.com/business/archive/2009/09/faceboo... Your cited chart only begins at 2009 instead of 2004. Also, if we count Accel Partners $12.7 million in 2005 as the "Series A" investment, Facebook was not yet profitable at that point. (https://fortune.com/2011/01/11/timeline-where-facebook-got-its-funding/ https://fortune.com/2011/01/11/timeline-where-facebook-got-i...)
  - 5trokerac3 7y ago
    > According to the S-1, Facebook made a modest $382,000 in revenue 2004, $9 million in revenue in 2005, $48 million in revenue in 2006 and $153 million in revenue in 2007, with no reporting of net loss.[0] Seems like we're both wrong. FB was profitable before '09, but it did have a couple years of loss. [0] https://techcrunch.com/2012/02/01/facebook-ipo-facebook-ipo-facebook-ipo https://techcrunch.com/2012/02/01/facebook-ipo-facebook-ipo-...
    - jasode 7y ago
      No sure where the journalist (Alexia Tsotsis) got the data to write: "$382,000 in revenue 2004, $9 million in revenue in 2005, $48 million in revenue in 2006 and $153 million in revenue in 2007, with no reporting of net loss." Those figures are not anywhere in the actual S-1: https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm https://www.sec.gov/Archives/edgar/data/1326801/000119312512... In fact, page 40 of the S-1 clearly shows a 2007 loss of -$138 million which contradicts what the Techcrunch author wrote.
mrfredward 7y ago
Lying to advertisers would not make Facebook a ponzi scheme. A ponzi scheme is when early investors get paid with "profits" that are actually later investors' money. No one is doubting that Facebook is making genuine revenue, although they may be misleading people to earn that revenue.
- weego 7y ago
  early investors get paid with "profits" that are actually later investors' money But seriously, that's actually what happens in the real world in % of "successful" startups. I think context is important in pointing to something as a ponzi scheme
  - bongobongo 7y ago
    Capitalism is a Ponzi scheme.
- blaser-waffle 7y ago
  > Lying to advertisers would not make Facebook a ponzi scheme. That would just be Fraud. And on a long enough timeline, publicly traded companies may eventually come to that point.
adventured 7y ago
Some embarrassingly very ignorant statements here by Greenspan. > a company that was out of users in 2012 managed to find a wellspring of nearly infinite and sustained growth that has lasted it, so far, half of the way through 2019. So what is that magical ingredient, that secret sauce, that “genius” trade secret, that turned an over-funded money-losing startup into one of America’s greatest business success stories? Facebook has been wildly profitable since approximately the end of 2008. Five years after its founding, in 2009 - long before Greenspan's setup premise - they turned a $229m profit on $777m in sales. For fiscal 2011 that was a billion in profit. Any start-up in world history would be envious of that extreme profitability so early into existence. In terms of millions of daily active users or users in general, Facebook wasn't suffering in terms of growth in 2012 or 2013. Greenspan is flat-out lying here. They went from 483 million daily active users at the end of 2011, to 665 million at the end of 1Q13. They added 135m daily actives in 2012, 28% DAU growth after eight or nine years. A strong number given their immense size at that point.
anm89 7y ago
As much as I dislike Facebook these days as far as I can tell this does not even have a surface similarity to a ponzi scheme.
jasode 7y ago
>Advertisers pay Facebook on the assumption that the people viewing and clicking their ads are real. But that’s often not the case. Actually, advertisers already know there are lots of fake (Facebook/Twitter/Snapchat) accounts. Likewise, advertisers also know that newspaper & magazine circulation numbers are inflated (even though the circulation #s are "audited"). Ad buyers also know that tv audience sizes are inflated as well. What matters in the end is if there's a positive ROI on the ad spending. The advertisers can measure the uptick on sales and if the ads worked, they renew their ad spend on Facebook. The majority of Facebook revenues come from repeat business of advertisers who already know about fake users. In contrast, if the majority of Facebook revenue were to come from 1st time ad buyers that were easily fooled by fake accounts, that's when the false user count would drastically affect revenue. I'm the last person to defend Facebook but just wanted to highlight how advertisers think. For the Facebook ponzi scheme to fall apart, the ads have to stop working. This has happened before. In the 1990s, advertisers were buying Yahoo banner ads. But after the initial novelty of naive web surfers clicking on them, advertisers quickly realized banner ads were worthless. As a result, Yahoo revenues plunged.
- ransom1538 7y ago
  "What matters in the end is if there's a positive ROI on the ad spending." This would make logical sense. BUT! it turns to not be the case. Larger accounts: Pepsi, Johnson&Johnson, Tmobile, etc tend to just take a massive budget and blow it on ads. They don't necessarily care about the ROI or click tracking. They just want to shove banners in front of people's faces before the quarter ends. What is nuts -- is that these large accounts (we used to call it dumb money) are almost all of the ad revenue. Accounts that care about click ROI tend to be low budget -- that is why facebook/google will push these people into self service ad portals.
  - jiveturkey 7y ago
    > Larger accounts [...] don't necessarily care about the ROI or click tracking. Well, sure. They are going for brand awareness. There's an entire field of study around it. Large accounts are not enough to keep FB and the like afloat. The small accounts do care about conversion rate, etc.
Proven 7y ago
Fake accounts aren't a Ponzi
SmellyGeekBoy 7y ago
Hard to take seriously when the author doesn't know what a "ponzi scheme" actually is.
aaronarduino 7y ago
> Aaron Greenspan is short Facebook stock. The author seems to be talking up his portfolio. Although there may be truth to this article, it seems the author is attempting to move the stock price with negitive press.
- icebraining 7y ago
  He's just putting his money where his mouth is.
caiocaiocaio 7y ago
This is the first time, in my life, that I've seen an article criticizing Facebook's business practices without having a 'like on Facebook' icon. Fortunately there is a Twitter icon, so you can rest safe knowing this outraged person is still giving free publicity to a social media company.
- icebraining 7y ago
  It's a shared blog, so the presence of particular icons doesn't indicate the author's feelings towards any in particular.
rsweeney21 7y ago
I advertise on Facebook and I have no idea what the Facebook user growth numbers are - and I don't care. We advertise on Facebook because it works. We pay money to Facebook and acquire new users for our product in return. Facebook actually under-reports the ROI for us (we acquire 2x more customers through Facebook ads than Facebook says we do), because ad blockers block the Facebook tracking pixel.
paulpauper 7y ago
Misleading title, weak arguments, no evidence. Just click bait . Facebook saw huge growth since 2012 by acquiring Instagram and monetizing mobile, and also from increased advertising. Facebook does not need more accounts to grow, but rather by making more money from existing users.Terrible article.
lxe 7y ago
For those out of the loop and feel like this essay feels a bit “bitter,” Aaron Greenspan, the article’s author claims that he invented the idea behing Facebook back in 2003.
intopieces 7y ago
My naive question here re: fake accounts + advertisers is why should I care? If these big corporations want to blow their money shouting about gay scuba diving into the ether, what's the harm?
Nasrudith 7y ago
That is some massive reification for fake accounts - just because they are named the same doesn't mean they are similiar. There is a massive difference between "letting people create accounts for their pets, spammers put up fake accounts" and "fake financial accounts out of whole cloth to create false profits".
grayed-down 7y ago
I was enjoying the article right up to the forth from last paragraph. It was like treating yourself to a fast food burger and then finding a hair in it. After that you ball it up and throw it in the trash and never go back to where you bought it.
- advisedwang 7y ago
  What was so bad about that paragraph? Seems like a reasonable open ended wrap-up to me?
- Nicksil 7y ago
  What about it turned you off? This is a genuine question; I am sincerely interested in your point-of-view.
  - RIMR 7y ago
    I'm going to say it was the moment the article (rightfully) referred to the President as a fascist.
  - grayed-down 7y ago
    "...a role in putting a fascist, white supremacist in the White House" It's a petulant and a false statement on so many levels. The president is neither a fascist nor a racist. And anyone claiming someone is such should be willing to provide a careful definition of these terms along with unambiguous examples of committed actions pursuant to such definitions.
    - hobs 7y ago
      If the part where he said "go back to where you came from" didn't register as racist to you, you should check yourself. Here's a packaged sample of Donald Trump's racism: https://www.vox.com/2016/7/25/12270880/donald-trump-racist-racism-history https://www.vox.com/2016/7/25/12270880/donald-trump-racist-r...
      - 7y ago
neilv 7y ago
Similar post from a few hours earlier, with 43 comments currently: https://news.ycombinator.com/item?id=20505885 https://news.ycombinator.com/item?id=20505885
- seltzered_ 7y ago
  Also, back in 2010 Joseph Perla wrote a similarly titled article, but less targeted around fake accounts and more around the supply of advertisers trying ads when fb was growing (was a couple years before its IPO): http://www.jperla.com/blog/post/facebook-is-a-ponzi-scheme http://www.jperla.com/blog/post/facebook-is-a-ponzi-scheme (discussions: https://news.ycombinator.com/item?id=1293119 https://news.ycombinator.com/item?id=1293119, https://news.ycombinator.com/item?id=2116062 https://news.ycombinator.com/item?id=2116062 ) https://hn.algolia.com/?query=facebook%20ponzi&sort=byPopularity&prefix&page=0&dateRange=all&type=story https://hn.algolia.com/?query=facebook%20ponzi&sort=byPopula...
  - thinkcomp 7y ago
    I'm the author (Aaron Greenspan). Funnily enough, Joseph Perla used to be my roommate in Palo Alto. But I had nothing to do with him writing that piece, and I think he later ended up working for Facebook. So maybe his convictions weren't quite so strong.
    - ljlolel 7y ago
      It's true I wrote that independently. Hi Aaron!
      - thinkcomp 7y ago
        Hey!
  - ljlolel 7y ago
    I republished this in 2012 during the IPO actually and it was quite popular then too. That was right before FB made me an offer I couldn't refuse. Note that I do believe that FB has changed since 2012 (and I may have helped launch FB Videos which are definitely driving influence and probably make useful ad time) and many people do effectively reach new users with FB ads. In terms of FB's growth slowing, that is likely given that it has the majority of the world's population online already, and Instagram is growing fast still (and entirely owned by FB).
cabaalis 7y ago
I stopped reading when he got to the part about Facebook bringing fascism to America. The current president is fairly unique in terms of his tone, speech. But "fascist" != "not my side of the aisle." I'll leave it to the Washington post from a couple years ago to provide a direct comparison. [1] It could be argued that this is an old article prior to governance, but I don't see much different now. 1. https://www.washingtonpost.com/posteverything/wp/2016/10/21/how-fascist-is-donald-trump-theres-actually-a-formula-for-that/?noredirect=on&utm_term=.ebb23c51e771 https://www.washingtonpost.com/posteverything/wp/2016/10/21/...
- caiocaiocaio 7y ago
  I know, right! I mean, concentration camps, repeated claims that the head of state cannot do anything illegal and is above the law because he can pardon himself, repeated claims it should be illegal to criticise the head of state, repeated threats to shut down major media outlets for criticizing the head of state, and more recently a claim that the head of state should never be removed from office? That doesn't sound like fascism to me at all. Perfectly good old traditional democracy in action if you ask me.
  - ameister14 7y ago
    That sounds like an attempt at dictatorship or monarchy but not necessarily fascism. There's no strength through unity arguments, no pushing to seize economic power through state instruments and in general no consolidation of power in the executive branch. I get that you might want to call the guy a nazi because he's racist, but that doesn't make him a fascist.
- save_ferris 7y ago
  The president is vocally anti-free press, constantly making false claims about immigrants, telling members of congress who are native citizens to "go back where they came from", vacationing more than any other prior president, and has failed to condemn white nationalism within his base. There's plenty of facist behavior going on in this administration.
save_ferris 7y ago
This was an interesting piece. The author pretty clearly states upfront that he's been criticizing MZ for years, which I found to be strangely refreshing as opposed to trying to claim a neutral position. As far as the account fraud is concerned, I've wondered about this throughout the tech industry for pretty much my whole career. Most companies I've worked for have done all kinds of things to pad usage and retention stats in order to appease investors, ranging from ethically innocuous to "holy shit I need to start looking for a new gig". Online advertising in particular has been the worst at this in my professional experience. What's being communicated to the advertiser isn't the whole truth: it's a selectively, surgically crafted subset of the truth. The first time I saw "The Big Short", I couldn't help but think about how similar the ad company I worked for behaved like the credit rating agencies. We knew that if our reporting showed that we were ineffective, we'd lose customers, so we did all kinds of things to make the reporting look good. The accusation that one of the largest companies in the world is doing pretty much the same thing doesn't surprise me at all.
- puranjay 7y ago
  Is there any independent audit of any advertising platform's data at all? Like Facebook tells me that 10,000 people saw my ads and I have no real way of verifying that. And I'm supposed to believe that Facebook is being honest even though Facebook has all the incentive to falsify numbers
  - georgeecollins 7y ago
    Game companies that buy ads for mobile installs-- a huge advertising market-- pay per install. Of course fraudulent companies create fake installs from fake accounts. But when you get an app installed a thousand times it is possible to judge the quality of those installs. Where they are, if they are real people, etc. It is clear that the results vary wildly and from my subjective perspective ad fraud is at least as bad as it has ever been.
    - blazespin 7y ago
      Yeah, I always find it bizarre when people make these naive claims. Of course number of impressions are a proxy for reality, but when the rubber hits the road advertisers know what value they are getting. They are leveraging the microtargeting and the cookie tracking an God knows what else zuck has cooked up. Facebook, Google etc are fundamentally profitable places to advertise -when done intelligently. Smart, repeat advertisers pay Facebook a lot of money for this privilege.
blunte 7y ago
While I do believe that Facebook is indeed lying (about virtually any question you mask it, including user numbers), I think it is meaningful to ask: "Are advertisers getting enough performance out of Facebook ads to justify the expense?" The answer could be Yes. It's also possible that many of the companies aren't managing their expenses well, and that they don't know (but still have enough cash, whether from stock market "play money" or VC (SV play money)). There's no effective answer to the implied question, "How can we stop Facebook from being evil?" Even if the poisonous head of the snake is cut off, there is enough financial interest for remaining executives (and board) to continue along the same general path. My answer is this: smart startups identify the key value features of Facebook and implement them independently. This is a long play, but it could work. One example is how Facebook is used for communication and coordination of groups that share common interests. In this example, it's really just a little bit of communication features missing from meetup.com to replace this (and be better than what Facebook offers).
- feocco 7y ago
  I think there's a equivalent replacement for nearly every feature. There's not an equivalent service with as many users. I try to run my hobby groups and there's resistance to using new services when FB can handle it all. Even if it's not as good. It's like, always buying from Amazon cause it's easy, even if there's a cheaper/better product elsewhere. The effort factor. Even with digital minimalist individuals, they'd rather manage a single app than multiple. Regardless of the high cost of FB in attention terms. tl;dr- wat do w/ friends who don't want to use alternative
- PaulHoule 7y ago
  I'm not sure that advertising markets are efficient. Many people who advertise get a certain gratification in hearing their name (or business name) on the radio. More than one salesperson for newspaper advertising I have talked to tells me that their best line for retaining customers is that "if your newspaper ads disappear people will assume you went out of business." Political campaigns will spend hundreds of millions in election years, enough to drive up the cost of TV advertising for car dealerships, causing a drop in car sales. Often the audiences for ads are not consumers, but shareholders, politicians, employees, business partners, etc. Why else did IBM and GE run so many "lights on and nobody home" ads before shareholders finally made them stop? Why else do I see so many ads for cable providers that don't do business anywhere near my area? Does this play a role in why mall stores are dying (e.g. they believed their own illusions and didn't realize they were out of touch with consumers?) When Warren Buffet dies those GEICO ads will be the first thing to go, but they help keep the news media sweet and uncritical of a once superstar investment firm that now burns shareholder dollars while contributing to everything wrong with our economy.
bsaul 7y ago
the same kind of accusation was poisonning google ads for a long time but it was called click fraud. numerous customers were suing google over billing them for fake clicks. Ultimately, google proved to be better than other sources of online advertising regarding fraud detection, and so people continued to buy ads. The problem is the same for facebook. Major advertiser track clicks up to purchases over months , sometimes years. So they are perfectly aware of which users are bogus, which impression are actually never seen, etc. Ultimately the only thing that counts is whether the investment is worth it.
- thinkcomp 7y ago
  This is about more than just click fraud. False claims of user growth have propelled Facebook's stock upward. That's securities fraud.
  - simonebrunozzi 7y ago
    I don't have a clear opinion on the topic you wrote about (it's fascinating, but it's also controversial, and I would need to spend much more time reading many other details, to be able to have an informed, strong opinion), but if you are so convinced that this is securities fraud, wouldn't suing Facebook be an option? Have you considered it?
  - bsaul 7y ago
    Do you think the market actually looks for users growth on facebook.com that much, now that it has passed the billion mark, has proved to be profitable with ads, and is making a huge chunk of its latest growth using other sites and apps (mainly instagram and whatsapp) ? I wouldn’t say fb is totally pure, but hyping number is i think the general rule with companies whether they are public or private. That’s why we have analysts, notation agencies, and why stock exchange requires publishing hard facts, which analysts can cross and match with high scrutiny.
throwaway713 7y ago
He keeps referencing total number of user accounts. This is a bad number to track, precisely because of fraud, duplicate, and unused accounts. A better number is something like monthly or daily active users. Then you can randomly sample a subset of these users and manually determine the number of fake accounts to give you a confidence interval on the total number of real daily active users, which for investor/shareholder purposes, is much better to use than total accounts anyway.
- thinkcomp 7y ago
  I go into more detail in the report I wrote in January, which also points out that the perfectly constant DAU/MAU relationship Facebook reports cannot possibly be true as growth continues to slow/reverse. See https://www.plainsite.org/realitycheck/facebook.html https://www.plainsite.org/realitycheck/facebook.html.
olivermarks 7y ago
I always log in and out of FB on a computer in one browser type and don't have it on any phones. One thing that always strikes me as odd: Click your picture or add an account, and Add account and in big type: Create a new account. It's free and always will be (un etc fields, birthdate) The whole front page is set up to encourage multiple accounts and presumably easy to automate the creation of thousands of fake accounts, which as we know is very prevalent. Great hard hitting article Aaron.
- oiasdjfoiasd 7y ago
  lol, what? they make it easy to create an account if you don't have one.
- kevin_thibedeau 7y ago
  Many stock camera apps access Facebook on startup. Even if you aren't logged in I wouldn't doubt that FB can gather enough data to correlate your account to the phone.
  - olivermarks 7y ago
    even when I never access FB from my phone via app or browser? I do have instagram on my phone, often wondered whether that has a back door to FB
PaulHoule 7y ago
This explains quite a few things about Facebook. Sheryl Sandberg hasn't been thrown overboard because if she is thrown overboard she might talk. Mark Zuckerberg won't allow the appointment of an independent Chairman of the Board because one thing about people who run Ponzi scams is that they try to keep as small a circle of people as possible in control so that news won't leak out.
rjkennedy98 7y ago
Really enjoyed the article, but have to point out the obvious: Fraud =/= Ponzi scheme. Ponzi schemes are a payout model where money from later investors is used to pay off earlier investors.
- blacksqr 7y ago
  Yes, I've noticed that "Ponzi scheme" seems to have entered common parlance as meaning any kind of fraud.
_bxg1 7y ago
At the risk of sounding like a devil's advocate (that isn't my intention), if there really were this much fraud, wouldn't it shake out in the economics? i.e. if you aren't getting your money's worth from the Facebook ads you're buying, wouldn't you notice?
- thinkcomp 7y ago
  If Facebook tells you that you got 1000 impressions, 100 clicks and 50 likes, how are you going to prove them wrong?
  - _bxg1 7y ago
    You can look at your total sales before/after using Facebook ads, or even do A/B testing where you only show Facebook ads to people within a certain region and compare sales with other regions. It's muddy, but possible, and at a certain scale it becomes obvious.
    - phillipcarter 7y ago
      I don't think it really works like that. Most people (and organizations) are likely fine operating under the assumption that because they saw some sales increase, and they invested in Facebook ads, the Facebook ads had something to do with that. And if sales go down, it could be a number of other factors. Additionally, targeted ads on Facebook or Google are pretty much table stakes in the ad business now. Many (or most) firms probably think it would be silly not to use them.
  - jdross 7y ago
    If you've ever worked with FB ads, you know that you can directly attribute sales ($ hitting your account) to ad groups ($ leaving your account) You bid to hit a certain CAC (customer acquisition cost) and to the extent any numbers are inflated, it would just quickly result in a lower bid price per inflated number
    - mochomocha 7y ago
ssharp 7y ago
I don't see the evidence here as being compelling at all. Even if you could prove that Facebook is filling the gaps between new users and churned users by creating fake accounts, you also have to draw a line between those fake accounts and the company's bottom line. Fake accounts don't buy products, so if advertisers are making decisions off of CAC, numbers potentially inflated by fake accounts (reach, clicks, engagement, etc.) are secondary. Facebook's ad power comes from their egregious data collection and lack of privacy concerns. The more they know about you, the more relevant your ads will be and the more likely someone seeing your ad will be to buy. And if advertisers can draw a line that says "if I spend $50 on Facebook ads, I'll increase my bottom-line line $100", they'll spend money until it's no longer profitable to do so. That said, it's not like all Facebook advertisers are acting rationally in that manner. I don't know what % of Facebook revenue to coming from unsophisticated advertisers, so it's possible that they could be making a lot of money from people focusing on fuzzy metrics like reach.
- blazespin 7y ago
  I doubt it. Such naive advertisers don't make much profit and can't afford to really contribute to Facebook's bottom line.
- philistine 7y ago
  So the whole aspect of Zuck lying and the stock price being apparently propped up by its fake growth is irrelevant?
- astrodust 7y ago
  Facebook advertising is really trash. If you spend $50 on Facebook ads you'll increase your bottom line by -$50.
  - a13n 7y ago
    That might be your experience but I know people who turn $10k campaigns into $80k LTV. Billions of dollars don't get spent for years on end without an ROI.
Mvandenbergh 7y ago
First: advertisers know about fake accounts. Second: it's not like investors are somehow unaware that FB cannot grow forever. In 2013 the PE ratio was more than 120, and it is now 30. That is investors adjusting their expectations about future growth.
nindalf 7y ago
There are so many ways in which I'd like to contradict this article, but I'll stick to just one. > While they reveal a problem escalating at an alarming rate and are constantly being revised upward .. in Q2 2017 In Q4 2017 the method for measuring the prevalence of fake accounts was changed to something more accurate. The number of fake accounts wasn't "escalating at an alarming rate", it was comparable to the number in the previous quarter. Source: I worked on that change.
- malloreon 7y ago
  does facebook refund advertisers all the money spent advertising to fake accounts?
sharadov 7y ago
Saying it's a Ponzi scheme is a stretch, any business knows that FB provides the most targeted ads because of all the user data they have access to.
- MegaButts 7y ago
  I hear this all the time, but every time I ask for the data (I have actually asked people whose job is to do marketing for businesses) I'm told "just trust me." I am not saying they are lying, it would be truly surprising to believe such an elaborate house of cards could stand for so long. But I am asking for evidence.
  - mehrdadn 7y ago
    What's your explanation for why they would make such a claim if it weren't true?
    - MegaButts 7y ago
      People lie to keep their jobs all the time. They might also just not know, but because it's standard practice to use Facebook for advertising they just do it and say it's a necessity. What reason do they have to obfuscate the data unless the data shows something they don't want you to see?
      - mehrdadn 7y ago
        > What reason do they have to obfuscate the data unless the data shows something they don't want you to see? I mean, it seems like an internal corporate metric. I would expect to be refused that simply on the basis of it not being my business?
        MegaButts 7y ago
        I've asked people at companies I work for. I've asked people at companies I've invested in. So in those cases, I already signed all the legal documents and NDAs. I've also asked people who did it for companies after they shut down. The only thing that's obvious is nobody wants to share the data. I suspect it's because the data is not as positive as we're supposed to believe.
Sindrome 7y ago
Interesting to discover the author is a classmate of Zuckerbro and claims to have invented Facebook. Which seems to have led to a career of writing articles like these.
- harryh 7y ago
  I'm fairly certain that his "career" is mostly based on living off the money he got from this: https://www.adweek.com/digital/facebook-announces-settlement-of-legal-dispute-with-another-former-zuckerberg-classmate/ https://www.adweek.com/digital/facebook-announces-settlement...
6cd6beb 7y ago
>namely, genocide, a role in putting a fascist, white supremacist in the White House A lot of people stopped reading the article right there. Writers like this only reach a certain audience.
harryh 7y ago
It's important to understand that Greenspan (who, incidentally, comments on hacker news a fair bit as https://news.ycombinator.com/user?id=thinkcomp https://news.ycombinator.com/user?id=thinkcomp and submitted this link) is not an unbiased observer here. He's had an ongoing feud with Zuck/FB for years and years and years. From reading his writings on this, and other topics, it's clear that he is extremely bitter about virtually all things related to Facebook. See this from over a decade ago: https://venturebeat.com/2007/09/02/who-founded-facebook-aaron-greenspan/ https://venturebeat.com/2007/09/02/who-founded-facebook-aaro... He also undertook a multi-year quixotic series of lawsuits against California and other entities over what he felt were unfair regulations on money services businesses. https://www.upcounsel.com/blog/aaron-greenspan-versus-silicon-valley https://www.upcounsel.com/blog/aaron-greenspan-versus-silico...
galkk 7y ago
Where are the arguments? He is bad, I'm saying so, listen to people with experience like me.
galkk 7y ago
This is much cleaner than Greenspan’s article
Zhenya 7y ago
It's interesting that at footer of the page in hebrew it says: אריכות ימים חברתית דרך האמת וחדשנות "Social longevity through truth and innovation"
ChicagoBoy11 7y ago
Argument could potentially be interesting save for the fact that the pudding really is in advertiser repeat business. The metrics (of click per ads, fake accounts, what have you), are utterly irrelevant. If advertisers keep coming back for me, Facebook has a viable business. And, until now, that seems to be the case. Maybe there's just tremendous lag in the feedback loop for business to see that there's no value in FB advertising and they'll experience a reckoning down the line, but it's been around FOR A WHILE, and ad revenue is strengthening, not declining. Again, it's important to disassociate that and the claims that it is a Ponzi scheme and unsustainable business. Both of these things can (and I think probably are) true: Facebook can have a much bigger privacy/fake account problem than it lets on AND also have very real, sustainable revenue from advertising. These things aren't mutually exclusive.
Mugwort 7y ago
I know people who spend large budgets on Facebook and Google ads. What I hear almost universally is that they aren't effective, yet everyone feels compelled to pay for FB ads and Google ads because they see everyone else doing it. The customers I have spoken too feel that it simply isn't working but they're afraid to stop buying the ads for fear of slipping into online oblivion. Numerous people have shared the same experience with me and nobody is happy. Now there is the chance that I just happen to know only statistical outliers, the people who pay a lot of money and feel they aren't getting anything in return but feel compelled to continue. Maybe I just happen to know a dozen or so very unlucky resentful people. I don't have solid "evidence". It's all anecdotal. That said, this experience I've just described is most likely common and hardly unique.
cs702 7y ago
Time will tell whether the author, Aaron Greenspan, who knew and interacted with Zuckerberg at Harvard, is right or wrong. Given the lack of good, transparent data, it's hard for me to judge the prevalence of ad fraud. I suspect it's hard for many ad buyers too. In the meantime, the OP and comments here remind me of the reaction of a media executive, Mel Karmazin, upon realizing, back in 2003, that Google could measure the effectiveness of advertising: > Karmazin and the networks continued to charge steep rates because, Karmazin says, "advertisers don't know what works and what doesn't. That's a great model." But it's a model, the Google executives told him, that is horribly inefficient. Karmazin, before departing, trained his eyes on his Google hosts and blurted, only half in jest, "You're fucking with the magic!"[a] Perhaps new media companies like Facebook have come to the realization that they too should not be "fucking with the magic," to use Karmazin's colorful language. -- [a] https://www.npr.org/templates/story/story.php?storyId=120389927 https://www.npr.org/templates/story/story.php?storyId=120389...
deleted 7y ago
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phantom_oracle 7y ago
Excluding the personal attacks, which dilute what would have been a good alternative look at Facebook, I suggest everyone interested in this topic to look at the other parts that make up the click-fraud industry: - Clickfarms in China that have shady people using some automation and thousands of smartphones to perform fake clicks for the Chinese ad market - Pied Piper style farms with people in poor countries sitting all day creating accounts (it was exaggerated in the series) - The ad giants constant "battle" with click-fraud - Shady tactics used by smaller app/websites to get people to accidentally click on ads I wouldn't personally denounce all online advertising though. It has its place the same way print media advertising does. It's market-value is questionable though (which is derived from questionable "effectiveness" sales pitches we're told about online advertising)
dang 7y ago
Whatever one thinks of the article or its case, this is an interesting thread. I've turned off the flags on it and, because some people were presumably flagging because of the baity title, replaced that with a representative phrase from the article.
foobar_ 7y ago
Can't algorithms for spam mail detection be useful for detecting fake users and bots ?
rotrux 7y ago
This is no longer news.
alanh 7y ago
I'm no FB apologist, but I take issue with this: > fake account problem … Google Trends shows worldwide "Facebook" queries down 80% from their November 2012 peak. Except that much of this downturn in people googling "Facebook" is explainable by the shift to mobile. Surely no one needs to Google "Facebook" to open the Facebook app on their phone’s home screen. (For that matter, one doesn't even need the app icon when one is receiving push notifications from FB. No legit notifs? No problem, FB will synthesize fake ones.)
jeffrufino 7y ago
How do you fix this? do you KYC everyone?

265 points by thinkcomp 7y ago

I was getting a half dozen obviously fake friend requests on IG every day until I set my account to private. These were invariably users like “TatianaXXX6969” or “SexySvetlana1727288”. Seems like the easiest kind of fake account to block (so much for AI and ML). I deleted my FB two years ago and I think IG is next.

namanyayg 7y ago
The easiest fake accounts to block have already been blocked, these ones would've been created with more nuance.
- ceejayoz 7y ago
  I get them all the time, and there's not much nuance to them.
- NoblePublius 7y ago
  Why not just build “don’t let anyone with an account less than X” message me?

paulgb 7y ago

While this raises some good points, it's worth mentioning the history between Aaron Greenspan and Facebook: https://www.nytimes.com/2007/09/01/technology/01facebook.html https://www.nytimes.com/2007/09/01/technology/01facebook.htm...

vageli 7y ago
> While this raises some good points, it's worth mentioning the history between Aaron Greenspan and Facebook: > https://www.nytimes.com/2007/09/01/technology/01facebook.htm.. https://www.nytimes.com/2007/09/01/technology/01facebook.htm.... I wasn't aware of this. Thank you!
jessaustin 7y ago
“I actually did think about integrating it into houseSYSTEM before you even suggested it, but I decided that it’s probably best to keep them separated at least for now.” Oooh, there's a blast from the past. Why do so many Harvard undergrads talk like this? (I was as guilty as anyone.)
- icebraining 7y ago
  I'm curious, what's particular about that quote? Nothing jumps to me, but I'm a non-native speaker.
  - jessaustin 7y ago
    First, the superfluous "actually". In the late 1990s, every Yard conversation was peppered with "actually". I was on the phone with an HR person for my first job out of school, I dropped an "actually" on her, and she (rightfully) read me the riot act. (So, actually, the idiom could have changed by now... it apparently hadn't changed much at the time Zuck attended.) Second, the implicit comparison between the great stupendous thing that "I" did with the minimal barely-worth-mentioning thing that "you" did. As if "thinking" and "deciding" were somehow so much more important than "suggesting". We can be certain that if the conversation roles were reversed then the implied relative importance of the different actions would also have been reversed. This was just a particular flavor of a more general rhetorical activity we called "flexing", back then. Lots of intimidated kids, attempting to intimidate in turn.
    - icebraining 7y ago
      Thanks!
  - 6gvONxR4sf7o 7y ago
    It's kinda defensive in an 'I'm smarter than you' way. Replace "actually did think" with "thought." "Actually" says "no you're wrong." Remove "before you even suggested it." Saying you did it first attempts to position yourself as smarter. Adding "even" diminishes it. Making those changes, you end up with a less insecure, less posturing version, "I thought about integrating it into houseSYSTEM, but I decided that it’s probably best to keep them separated at least for now."
MetalGuru 7y ago
This is hilarious. It was so obvious that there had to be some personal reason this guy is so disgruntled. He's clearly consumed by envy.

na85 7y ago

FTA: >In other words, Facebook is growing the fastest in the locations worldwide where one finds the most fraud. In other other words, Facebook isn’t growing anymore at all—it’s shrinking. Look I hate Facebook as much as the next guy but this is clearly specious logic. The existence of fraudulent accounts does not preclude growth in new accounts.

deleted 7y ago
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DisruptiveDave 7y ago

About a year ago we had to pretty much shut down FB advertising as we simply could not come close to rectifying the click numbers they were reporting to us. That trust broke down much further when you considered conversions and more human-like activity down our funnels. That said, for another business, FB is absolutely killing it for us. The difference is in target market size and niche.

thinkloop 7y ago
> The difference is in target market size and niche. Are the target market size and niche smaller or bigger for the one that works?
- DisruptiveDave 7y ago
  Smaller. And easier to identify.
PMan74 7y ago
Which is the bit I don't get. Even if FB say they have a trillion users, so what. Advertisers will advertise and pay based on the results they are seeing just like you did. Eric Schmidt made pretty much the same point about Google fake clicks. https://searchenginewatch.com/sew/news/2058286/eric-schmidt-claims-the-ppc-model-self-correcting-in-terms-of-click-fraud https://searchenginewatch.com/sew/news/2058286/eric-schmidt-... Granted this is trickier if you don't have an easy way to determine if your advert has converted to a result e.g. somebody who is just looking to raise brand awareness.
Bombthecat 7y ago
Jeah, tried several times. With several different pictures, text, angle, color, font etc to advertise on facebook. 11k views one click or no click mostly lol. I guess it is too niche. (African bangles and stuff, hand made)

5trokerac3 7y ago

> So what is that magical ingredient, that secret sauce, that “genius” trade secret, that turned an over-funded money-losing startup into one of America’s greatest business success stories? False. Facebook made $50M in profit the year before it took its Series A. It has always been a profitable company[0]. [0] https://www.macrotrends.net/stocks/charts/FB/facebook/profit-margins https://www.macrotrends.net/stocks/charts/FB/facebook/profit...

jasode 7y ago
>It has always been a profitable company[0]. No, Facebook was founded in 2004 and it took 5 years to make its first profits in 2009: https://www.theatlantic.com/business/archive/2009/09/facebook-turns-a-profit-users-hits-300-million/26721/ https://www.theatlantic.com/business/archive/2009/09/faceboo... Your cited chart only begins at 2009 instead of 2004. Also, if we count Accel Partners $12.7 million in 2005 as the "Series A" investment, Facebook was not yet profitable at that point. (https://fortune.com/2011/01/11/timeline-where-facebook-got-its-funding/ https://fortune.com/2011/01/11/timeline-where-facebook-got-i...)
- 5trokerac3 7y ago
  > According to the S-1, Facebook made a modest $382,000 in revenue 2004, $9 million in revenue in 2005, $48 million in revenue in 2006 and $153 million in revenue in 2007, with no reporting of net loss.[0] Seems like we're both wrong. FB was profitable before '09, but it did have a couple years of loss. [0] https://techcrunch.com/2012/02/01/facebook-ipo-facebook-ipo-facebook-ipo https://techcrunch.com/2012/02/01/facebook-ipo-facebook-ipo-...
  - jasode 7y ago
    No sure where the journalist (Alexia Tsotsis) got the data to write: "$382,000 in revenue 2004, $9 million in revenue in 2005, $48 million in revenue in 2006 and $153 million in revenue in 2007, with no reporting of net loss." Those figures are not anywhere in the actual S-1: https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm https://www.sec.gov/Archives/edgar/data/1326801/000119312512... In fact, page 40 of the S-1 clearly shows a 2007 loss of -$138 million which contradicts what the Techcrunch author wrote.

mrfredward 7y ago

Lying to advertisers would not make Facebook a ponzi scheme. A ponzi scheme is when early investors get paid with "profits" that are actually later investors' money. No one is doubting that Facebook is making genuine revenue, although they may be misleading people to earn that revenue.

weego 7y ago
early investors get paid with "profits" that are actually later investors' money But seriously, that's actually what happens in the real world in % of "successful" startups. I think context is important in pointing to something as a ponzi scheme
- bongobongo 7y ago
  Capitalism is a Ponzi scheme.
blaser-waffle 7y ago
> Lying to advertisers would not make Facebook a ponzi scheme. That would just be Fraud. And on a long enough timeline, publicly traded companies may eventually come to that point.

adventured 7y ago

Some embarrassingly very ignorant statements here by Greenspan. > a company that was out of users in 2012 managed to find a wellspring of nearly infinite and sustained growth that has lasted it, so far, half of the way through 2019. So what is that magical ingredient, that secret sauce, that “genius” trade secret, that turned an over-funded money-losing startup into one of America’s greatest business success stories? Facebook has been wildly profitable since approximately the end of 2008. Five years after its founding, in 2009 - long before Greenspan's setup premise - they turned a $229m profit on $777m in sales. For fiscal 2011 that was a billion in profit. Any start-up in world history would be envious of that extreme profitability so early into existence. In terms of millions of daily active users or users in general, Facebook wasn't suffering in terms of growth in 2012 or 2013. Greenspan is flat-out lying here. They went from 483 million daily active users at the end of 2011, to 665 million at the end of 1Q13. They added 135m daily actives in 2012, 28% DAU growth after eight or nine years. A strong number given their immense size at that point.

anm89 7y ago

As much as I dislike Facebook these days as far as I can tell this does not even have a surface similarity to a ponzi scheme.

jasode 7y ago

>Advertisers pay Facebook on the assumption that the people viewing and clicking their ads are real. But that’s often not the case. Actually, advertisers already know there are lots of fake (Facebook/Twitter/Snapchat) accounts. Likewise, advertisers also know that newspaper & magazine circulation numbers are inflated (even though the circulation #s are "audited"). Ad buyers also know that tv audience sizes are inflated as well. What matters in the end is if there's a positive ROI on the ad spending. The advertisers can measure the uptick on sales and if the ads worked, they renew their ad spend on Facebook. The majority of Facebook revenues come from repeat business of advertisers who already know about fake users. In contrast, if the majority of Facebook revenue were to come from 1st time ad buyers that were easily fooled by fake accounts, that's when the false user count would drastically affect revenue. I'm the last person to defend Facebook but just wanted to highlight how advertisers think. For the Facebook ponzi scheme to fall apart, the ads have to stop working. This has happened before. In the 1990s, advertisers were buying Yahoo banner ads. But after the initial novelty of naive web surfers clicking on them, advertisers quickly realized banner ads were worthless. As a result, Yahoo revenues plunged.

ransom1538 7y ago
"What matters in the end is if there's a positive ROI on the ad spending." This would make logical sense. BUT! it turns to not be the case. Larger accounts: Pepsi, Johnson&Johnson, Tmobile, etc tend to just take a massive budget and blow it on ads. They don't necessarily care about the ROI or click tracking. They just want to shove banners in front of people's faces before the quarter ends. What is nuts -- is that these large accounts (we used to call it dumb money) are almost all of the ad revenue. Accounts that care about click ROI tend to be low budget -- that is why facebook/google will push these people into self service ad portals.
- jiveturkey 7y ago
  > Larger accounts [...] don't necessarily care about the ROI or click tracking. Well, sure. They are going for brand awareness. There's an entire field of study around it. Large accounts are not enough to keep FB and the like afloat. The small accounts do care about conversion rate, etc.

Proven 7y ago

Fake accounts aren't a Ponzi

SmellyGeekBoy 7y ago

Hard to take seriously when the author doesn't know what a "ponzi scheme" actually is.

aaronarduino 7y ago

> Aaron Greenspan is short Facebook stock. The author seems to be talking up his portfolio. Although there may be truth to this article, it seems the author is attempting to move the stock price with negitive press.

icebraining 7y ago
He's just putting his money where his mouth is.

caiocaiocaio 7y ago

This is the first time, in my life, that I've seen an article criticizing Facebook's business practices without having a 'like on Facebook' icon. Fortunately there is a Twitter icon, so you can rest safe knowing this outraged person is still giving free publicity to a social media company.

icebraining 7y ago
It's a shared blog, so the presence of particular icons doesn't indicate the author's feelings towards any in particular.

rsweeney21 7y ago

I advertise on Facebook and I have no idea what the Facebook user growth numbers are - and I don't care. We advertise on Facebook because it works. We pay money to Facebook and acquire new users for our product in return. Facebook actually under-reports the ROI for us (we acquire 2x more customers through Facebook ads than Facebook says we do), because ad blockers block the Facebook tracking pixel.

paulpauper 7y ago

Misleading title, weak arguments, no evidence. Just click bait . Facebook saw huge growth since 2012 by acquiring Instagram and monetizing mobile, and also from increased advertising. Facebook does not need more accounts to grow, but rather by making more money from existing users.Terrible article.

lxe 7y ago

For those out of the loop and feel like this essay feels a bit “bitter,” Aaron Greenspan, the article’s author claims that he invented the idea behing Facebook back in 2003.

intopieces 7y ago

My naive question here re: fake accounts + advertisers is why should I care? If these big corporations want to blow their money shouting about gay scuba diving into the ether, what's the harm?

Nasrudith 7y ago

That is some massive reification for fake accounts - just because they are named the same doesn't mean they are similiar. There is a massive difference between "letting people create accounts for their pets, spammers put up fake accounts" and "fake financial accounts out of whole cloth to create false profits".

grayed-down 7y ago

I was enjoying the article right up to the forth from last paragraph. It was like treating yourself to a fast food burger and then finding a hair in it. After that you ball it up and throw it in the trash and never go back to where you bought it.

advisedwang 7y ago
What was so bad about that paragraph? Seems like a reasonable open ended wrap-up to me?
Nicksil 7y ago
What about it turned you off? This is a genuine question; I am sincerely interested in your point-of-view.
- RIMR 7y ago
  I'm going to say it was the moment the article (rightfully) referred to the President as a fascist.
- grayed-down 7y ago
  "...a role in putting a fascist, white supremacist in the White House" It's a petulant and a false statement on so many levels. The president is neither a fascist nor a racist. And anyone claiming someone is such should be willing to provide a careful definition of these terms along with unambiguous examples of committed actions pursuant to such definitions.
  - hobs 7y ago
    If the part where he said "go back to where you came from" didn't register as racist to you, you should check yourself. Here's a packaged sample of Donald Trump's racism: https://www.vox.com/2016/7/25/12270880/donald-trump-racist-racism-history https://www.vox.com/2016/7/25/12270880/donald-trump-racist-r...
    - 7y ago

neilv 7y ago

Similar post from a few hours earlier, with 43 comments currently: https://news.ycombinator.com/item?id=20505885 https://news.ycombinator.com/item?id=20505885

seltzered_ 7y ago
Also, back in 2010 Joseph Perla wrote a similarly titled article, but less targeted around fake accounts and more around the supply of advertisers trying ads when fb was growing (was a couple years before its IPO): http://www.jperla.com/blog/post/facebook-is-a-ponzi-scheme http://www.jperla.com/blog/post/facebook-is-a-ponzi-scheme (discussions: https://news.ycombinator.com/item?id=1293119 https://news.ycombinator.com/item?id=1293119, https://news.ycombinator.com/item?id=2116062 https://news.ycombinator.com/item?id=2116062 ) https://hn.algolia.com/?query=facebook%20ponzi&sort=byPopularity&prefix&page=0&dateRange=all&type=story https://hn.algolia.com/?query=facebook%20ponzi&sort=byPopula...
- thinkcomp 7y ago
  I'm the author (Aaron Greenspan). Funnily enough, Joseph Perla used to be my roommate in Palo Alto. But I had nothing to do with him writing that piece, and I think he later ended up working for Facebook. So maybe his convictions weren't quite so strong.
  - ljlolel 7y ago
    It's true I wrote that independently. Hi Aaron!
    - thinkcomp 7y ago
      Hey!
- ljlolel 7y ago
  I republished this in 2012 during the IPO actually and it was quite popular then too. That was right before FB made me an offer I couldn't refuse. Note that I do believe that FB has changed since 2012 (and I may have helped launch FB Videos which are definitely driving influence and probably make useful ad time) and many people do effectively reach new users with FB ads. In terms of FB's growth slowing, that is likely given that it has the majority of the world's population online already, and Instagram is growing fast still (and entirely owned by FB).

cabaalis 7y ago

I stopped reading when he got to the part about Facebook bringing fascism to America. The current president is fairly unique in terms of his tone, speech. But "fascist" != "not my side of the aisle." I'll leave it to the Washington post from a couple years ago to provide a direct comparison. [1] It could be argued that this is an old article prior to governance, but I don't see much different now. 1. https://www.washingtonpost.com/posteverything/wp/2016/10/21/how-fascist-is-donald-trump-theres-actually-a-formula-for-that/?noredirect=on&utm_term=.ebb23c51e771 https://www.washingtonpost.com/posteverything/wp/2016/10/21/...

caiocaiocaio 7y ago
I know, right! I mean, concentration camps, repeated claims that the head of state cannot do anything illegal and is above the law because he can pardon himself, repeated claims it should be illegal to criticise the head of state, repeated threats to shut down major media outlets for criticizing the head of state, and more recently a claim that the head of state should never be removed from office? That doesn't sound like fascism to me at all. Perfectly good old traditional democracy in action if you ask me.
- ameister14 7y ago
  That sounds like an attempt at dictatorship or monarchy but not necessarily fascism. There's no strength through unity arguments, no pushing to seize economic power through state instruments and in general no consolidation of power in the executive branch. I get that you might want to call the guy a nazi because he's racist, but that doesn't make him a fascist.
save_ferris 7y ago
The president is vocally anti-free press, constantly making false claims about immigrants, telling members of congress who are native citizens to "go back where they came from", vacationing more than any other prior president, and has failed to condemn white nationalism within his base. There's plenty of facist behavior going on in this administration.

save_ferris 7y ago

This was an interesting piece. The author pretty clearly states upfront that he's been criticizing MZ for years, which I found to be strangely refreshing as opposed to trying to claim a neutral position. As far as the account fraud is concerned, I've wondered about this throughout the tech industry for pretty much my whole career. Most companies I've worked for have done all kinds of things to pad usage and retention stats in order to appease investors, ranging from ethically innocuous to "holy shit I need to start looking for a new gig". Online advertising in particular has been the worst at this in my professional experience. What's being communicated to the advertiser isn't the whole truth: it's a selectively, surgically crafted subset of the truth. The first time I saw "The Big Short", I couldn't help but think about how similar the ad company I worked for behaved like the credit rating agencies. We knew that if our reporting showed that we were ineffective, we'd lose customers, so we did all kinds of things to make the reporting look good. The accusation that one of the largest companies in the world is doing pretty much the same thing doesn't surprise me at all.

puranjay 7y ago
Is there any independent audit of any advertising platform's data at all? Like Facebook tells me that 10,000 people saw my ads and I have no real way of verifying that. And I'm supposed to believe that Facebook is being honest even though Facebook has all the incentive to falsify numbers
- georgeecollins 7y ago
  Game companies that buy ads for mobile installs-- a huge advertising market-- pay per install. Of course fraudulent companies create fake installs from fake accounts. But when you get an app installed a thousand times it is possible to judge the quality of those installs. Where they are, if they are real people, etc. It is clear that the results vary wildly and from my subjective perspective ad fraud is at least as bad as it has ever been.
  - blazespin 7y ago
    Yeah, I always find it bizarre when people make these naive claims. Of course number of impressions are a proxy for reality, but when the rubber hits the road advertisers know what value they are getting. They are leveraging the microtargeting and the cookie tracking an God knows what else zuck has cooked up. Facebook, Google etc are fundamentally profitable places to advertise -when done intelligently. Smart, repeat advertisers pay Facebook a lot of money for this privilege.

blunte 7y ago

While I do believe that Facebook is indeed lying (about virtually any question you mask it, including user numbers), I think it is meaningful to ask: "Are advertisers getting enough performance out of Facebook ads to justify the expense?" The answer could be Yes. It's also possible that many of the companies aren't managing their expenses well, and that they don't know (but still have enough cash, whether from stock market "play money" or VC (SV play money)). There's no effective answer to the implied question, "How can we stop Facebook from being evil?" Even if the poisonous head of the snake is cut off, there is enough financial interest for remaining executives (and board) to continue along the same general path. My answer is this: smart startups identify the key value features of Facebook and implement them independently. This is a long play, but it could work. One example is how Facebook is used for communication and coordination of groups that share common interests. In this example, it's really just a little bit of communication features missing from meetup.com to replace this (and be better than what Facebook offers).

feocco 7y ago
I think there's a equivalent replacement for nearly every feature. There's not an equivalent service with as many users. I try to run my hobby groups and there's resistance to using new services when FB can handle it all. Even if it's not as good. It's like, always buying from Amazon cause it's easy, even if there's a cheaper/better product elsewhere. The effort factor. Even with digital minimalist individuals, they'd rather manage a single app than multiple. Regardless of the high cost of FB in attention terms. tl;dr- wat do w/ friends who don't want to use alternative
PaulHoule 7y ago
I'm not sure that advertising markets are efficient. Many people who advertise get a certain gratification in hearing their name (or business name) on the radio. More than one salesperson for newspaper advertising I have talked to tells me that their best line for retaining customers is that "if your newspaper ads disappear people will assume you went out of business." Political campaigns will spend hundreds of millions in election years, enough to drive up the cost of TV advertising for car dealerships, causing a drop in car sales. Often the audiences for ads are not consumers, but shareholders, politicians, employees, business partners, etc. Why else did IBM and GE run so many "lights on and nobody home" ads before shareholders finally made them stop? Why else do I see so many ads for cable providers that don't do business anywhere near my area? Does this play a role in why mall stores are dying (e.g. they believed their own illusions and didn't realize they were out of touch with consumers?) When Warren Buffet dies those GEICO ads will be the first thing to go, but they help keep the news media sweet and uncritical of a once superstar investment firm that now burns shareholder dollars while contributing to everything wrong with our economy.

bsaul 7y ago

the same kind of accusation was poisonning google ads for a long time but it was called click fraud. numerous customers were suing google over billing them for fake clicks. Ultimately, google proved to be better than other sources of online advertising regarding fraud detection, and so people continued to buy ads. The problem is the same for facebook. Major advertiser track clicks up to purchases over months , sometimes years. So they are perfectly aware of which users are bogus, which impression are actually never seen, etc. Ultimately the only thing that counts is whether the investment is worth it.

thinkcomp 7y ago
This is about more than just click fraud. False claims of user growth have propelled Facebook's stock upward. That's securities fraud.
- simonebrunozzi 7y ago
  I don't have a clear opinion on the topic you wrote about (it's fascinating, but it's also controversial, and I would need to spend much more time reading many other details, to be able to have an informed, strong opinion), but if you are so convinced that this is securities fraud, wouldn't suing Facebook be an option? Have you considered it?
- bsaul 7y ago
  Do you think the market actually looks for users growth on facebook.com that much, now that it has passed the billion mark, has proved to be profitable with ads, and is making a huge chunk of its latest growth using other sites and apps (mainly instagram and whatsapp) ? I wouldn’t say fb is totally pure, but hyping number is i think the general rule with companies whether they are public or private. That’s why we have analysts, notation agencies, and why stock exchange requires publishing hard facts, which analysts can cross and match with high scrutiny.

throwaway713 7y ago

He keeps referencing total number of user accounts. This is a bad number to track, precisely because of fraud, duplicate, and unused accounts. A better number is something like monthly or daily active users. Then you can randomly sample a subset of these users and manually determine the number of fake accounts to give you a confidence interval on the total number of real daily active users, which for investor/shareholder purposes, is much better to use than total accounts anyway.

thinkcomp 7y ago
I go into more detail in the report I wrote in January, which also points out that the perfectly constant DAU/MAU relationship Facebook reports cannot possibly be true as growth continues to slow/reverse. See https://www.plainsite.org/realitycheck/facebook.html https://www.plainsite.org/realitycheck/facebook.html.

olivermarks 7y ago

I always log in and out of FB on a computer in one browser type and don't have it on any phones. One thing that always strikes me as odd: Click your picture or add an account, and Add account and in big type: Create a new account. It's free and always will be (un etc fields, birthdate) The whole front page is set up to encourage multiple accounts and presumably easy to automate the creation of thousands of fake accounts, which as we know is very prevalent. Great hard hitting article Aaron.

oiasdjfoiasd 7y ago
lol, what? they make it easy to create an account if you don't have one.
kevin_thibedeau 7y ago
Many stock camera apps access Facebook on startup. Even if you aren't logged in I wouldn't doubt that FB can gather enough data to correlate your account to the phone.
- olivermarks 7y ago
  even when I never access FB from my phone via app or browser? I do have instagram on my phone, often wondered whether that has a back door to FB

PaulHoule 7y ago

This explains quite a few things about Facebook. Sheryl Sandberg hasn't been thrown overboard because if she is thrown overboard she might talk. Mark Zuckerberg won't allow the appointment of an independent Chairman of the Board because one thing about people who run Ponzi scams is that they try to keep as small a circle of people as possible in control so that news won't leak out.

rjkennedy98 7y ago

Really enjoyed the article, but have to point out the obvious: Fraud =/= Ponzi scheme. Ponzi schemes are a payout model where money from later investors is used to pay off earlier investors.

blacksqr 7y ago
Yes, I've noticed that "Ponzi scheme" seems to have entered common parlance as meaning any kind of fraud.

_bxg1 7y ago

At the risk of sounding like a devil's advocate (that isn't my intention), if there really were this much fraud, wouldn't it shake out in the economics? i.e. if you aren't getting your money's worth from the Facebook ads you're buying, wouldn't you notice?

thinkcomp 7y ago
If Facebook tells you that you got 1000 impressions, 100 clicks and 50 likes, how are you going to prove them wrong?
- _bxg1 7y ago
  You can look at your total sales before/after using Facebook ads, or even do A/B testing where you only show Facebook ads to people within a certain region and compare sales with other regions. It's muddy, but possible, and at a certain scale it becomes obvious.
  - phillipcarter 7y ago
    I don't think it really works like that. Most people (and organizations) are likely fine operating under the assumption that because they saw some sales increase, and they invested in Facebook ads, the Facebook ads had something to do with that. And if sales go down, it could be a number of other factors. Additionally, targeted ads on Facebook or Google are pretty much table stakes in the ad business now. Many (or most) firms probably think it would be silly not to use them.
- jdross 7y ago
  If you've ever worked with FB ads, you know that you can directly attribute sales ($ hitting your account) to ad groups ($ leaving your account) You bid to hit a certain CAC (customer acquisition cost) and to the extent any numbers are inflated, it would just quickly result in a lower bid price per inflated number
  - mochomocha 7y ago

ssharp 7y ago

I don't see the evidence here as being compelling at all. Even if you could prove that Facebook is filling the gaps between new users and churned users by creating fake accounts, you also have to draw a line between those fake accounts and the company's bottom line. Fake accounts don't buy products, so if advertisers are making decisions off of CAC, numbers potentially inflated by fake accounts (reach, clicks, engagement, etc.) are secondary. Facebook's ad power comes from their egregious data collection and lack of privacy concerns. The more they know about you, the more relevant your ads will be and the more likely someone seeing your ad will be to buy. And if advertisers can draw a line that says "if I spend $50 on Facebook ads, I'll increase my bottom-line line $100", they'll spend money until it's no longer profitable to do so. That said, it's not like all Facebook advertisers are acting rationally in that manner. I don't know what % of Facebook revenue to coming from unsophisticated advertisers, so it's possible that they could be making a lot of money from people focusing on fuzzy metrics like reach.

blazespin 7y ago
I doubt it. Such naive advertisers don't make much profit and can't afford to really contribute to Facebook's bottom line.
philistine 7y ago
So the whole aspect of Zuck lying and the stock price being apparently propped up by its fake growth is irrelevant?
astrodust 7y ago
Facebook advertising is really trash. If you spend $50 on Facebook ads you'll increase your bottom line by -$50.
- a13n 7y ago
  That might be your experience but I know people who turn $10k campaigns into $80k LTV. Billions of dollars don't get spent for years on end without an ROI.

Mvandenbergh 7y ago

First: advertisers know about fake accounts. Second: it's not like investors are somehow unaware that FB cannot grow forever. In 2013 the PE ratio was more than 120, and it is now 30. That is investors adjusting their expectations about future growth.

nindalf 7y ago

There are so many ways in which I'd like to contradict this article, but I'll stick to just one. > While they reveal a problem escalating at an alarming rate and are constantly being revised upward .. in Q2 2017 In Q4 2017 the method for measuring the prevalence of fake accounts was changed to something more accurate. The number of fake accounts wasn't "escalating at an alarming rate", it was comparable to the number in the previous quarter. Source: I worked on that change.

malloreon 7y ago
does facebook refund advertisers all the money spent advertising to fake accounts?

sharadov 7y ago

Saying it's a Ponzi scheme is a stretch, any business knows that FB provides the most targeted ads because of all the user data they have access to.

MegaButts 7y ago
I hear this all the time, but every time I ask for the data (I have actually asked people whose job is to do marketing for businesses) I'm told "just trust me." I am not saying they are lying, it would be truly surprising to believe such an elaborate house of cards could stand for so long. But I am asking for evidence.
- mehrdadn 7y ago
  What's your explanation for why they would make such a claim if it weren't true?
  - MegaButts 7y ago
    People lie to keep their jobs all the time. They might also just not know, but because it's standard practice to use Facebook for advertising they just do it and say it's a necessity. What reason do they have to obfuscate the data unless the data shows something they don't want you to see?
    - mehrdadn 7y ago
      > What reason do they have to obfuscate the data unless the data shows something they don't want you to see? I mean, it seems like an internal corporate metric. I would expect to be refused that simply on the basis of it not being my business?
      - MegaButts 7y ago
        I've asked people at companies I work for. I've asked people at companies I've invested in. So in those cases, I already signed all the legal documents and NDAs. I've also asked people who did it for companies after they shut down. The only thing that's obvious is nobody wants to share the data. I suspect it's because the data is not as positive as we're supposed to believe.

Sindrome 7y ago

Interesting to discover the author is a classmate of Zuckerbro and claims to have invented Facebook. Which seems to have led to a career of writing articles like these.

harryh 7y ago
I'm fairly certain that his "career" is mostly based on living off the money he got from this: https://www.adweek.com/digital/facebook-announces-settlement-of-legal-dispute-with-another-former-zuckerberg-classmate/ https://www.adweek.com/digital/facebook-announces-settlement...

6cd6beb 7y ago

>namely, genocide, a role in putting a fascist, white supremacist in the White House A lot of people stopped reading the article right there. Writers like this only reach a certain audience.

harryh 7y ago

It's important to understand that Greenspan (who, incidentally, comments on hacker news a fair bit as https://news.ycombinator.com/user?id=thinkcomp https://news.ycombinator.com/user?id=thinkcomp and submitted this link) is not an unbiased observer here. He's had an ongoing feud with Zuck/FB for years and years and years. From reading his writings on this, and other topics, it's clear that he is extremely bitter about virtually all things related to Facebook. See this from over a decade ago: https://venturebeat.com/2007/09/02/who-founded-facebook-aaron-greenspan/ https://venturebeat.com/2007/09/02/who-founded-facebook-aaro... He also undertook a multi-year quixotic series of lawsuits against California and other entities over what he felt were unfair regulations on money services businesses. https://www.upcounsel.com/blog/aaron-greenspan-versus-silicon-valley https://www.upcounsel.com/blog/aaron-greenspan-versus-silico...

galkk 7y ago

Where are the arguments? He is bad, I'm saying so, listen to people with experience like me.

galkk 7y ago

This is much cleaner than Greenspan’s article

Zhenya 7y ago

It's interesting that at footer of the page in hebrew it says: אריכות ימים חברתית דרך האמת וחדשנות "Social longevity through truth and innovation"

ChicagoBoy11 7y ago

Argument could potentially be interesting save for the fact that the pudding really is in advertiser repeat business. The metrics (of click per ads, fake accounts, what have you), are utterly irrelevant. If advertisers keep coming back for me, Facebook has a viable business. And, until now, that seems to be the case. Maybe there's just tremendous lag in the feedback loop for business to see that there's no value in FB advertising and they'll experience a reckoning down the line, but it's been around FOR A WHILE, and ad revenue is strengthening, not declining. Again, it's important to disassociate that and the claims that it is a Ponzi scheme and unsustainable business. Both of these things can (and I think probably are) true: Facebook can have a much bigger privacy/fake account problem than it lets on AND also have very real, sustainable revenue from advertising. These things aren't mutually exclusive.

Mugwort 7y ago

I know people who spend large budgets on Facebook and Google ads. What I hear almost universally is that they aren't effective, yet everyone feels compelled to pay for FB ads and Google ads because they see everyone else doing it. The customers I have spoken too feel that it simply isn't working but they're afraid to stop buying the ads for fear of slipping into online oblivion. Numerous people have shared the same experience with me and nobody is happy. Now there is the chance that I just happen to know only statistical outliers, the people who pay a lot of money and feel they aren't getting anything in return but feel compelled to continue. Maybe I just happen to know a dozen or so very unlucky resentful people. I don't have solid "evidence". It's all anecdotal. That said, this experience I've just described is most likely common and hardly unique.

cs702 7y ago

Time will tell whether the author, Aaron Greenspan, who knew and interacted with Zuckerberg at Harvard, is right or wrong. Given the lack of good, transparent data, it's hard for me to judge the prevalence of ad fraud. I suspect it's hard for many ad buyers too. In the meantime, the OP and comments here remind me of the reaction of a media executive, Mel Karmazin, upon realizing, back in 2003, that Google could measure the effectiveness of advertising: > Karmazin and the networks continued to charge steep rates because, Karmazin says, "advertisers don't know what works and what doesn't. That's a great model." But it's a model, the Google executives told him, that is horribly inefficient. Karmazin, before departing, trained his eyes on his Google hosts and blurted, only half in jest, "You're fucking with the magic!"[a] Perhaps new media companies like Facebook have come to the realization that they too should not be "fucking with the magic," to use Karmazin's colorful language. -- [a] https://www.npr.org/templates/story/story.php?storyId=120389927 https://www.npr.org/templates/story/story.php?storyId=120389...

deleted 7y ago

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phantom_oracle 7y ago

Excluding the personal attacks, which dilute what would have been a good alternative look at Facebook, I suggest everyone interested in this topic to look at the other parts that make up the click-fraud industry: - Clickfarms in China that have shady people using some automation and thousands of smartphones to perform fake clicks for the Chinese ad market - Pied Piper style farms with people in poor countries sitting all day creating accounts (it was exaggerated in the series) - The ad giants constant "battle" with click-fraud - Shady tactics used by smaller app/websites to get people to accidentally click on ads I wouldn't personally denounce all online advertising though. It has its place the same way print media advertising does. It's market-value is questionable though (which is derived from questionable "effectiveness" sales pitches we're told about online advertising)

dang 7y ago

Whatever one thinks of the article or its case, this is an interesting thread. I've turned off the flags on it and, because some people were presumably flagging because of the baity title, replaced that with a representative phrase from the article.

foobar_ 7y ago

Can't algorithms for spam mail detection be useful for detecting fake users and bots ?

rotrux 7y ago

This is no longer news.

alanh 7y ago

I'm no FB apologist, but I take issue with this: > fake account problem … Google Trends shows worldwide "Facebook" queries down 80% from their November 2012 peak. Except that much of this downturn in people googling "Facebook" is explainable by the shift to mobile. Surely no one needs to Google "Facebook" to open the Facebook app on their phone’s home screen. (For that matter, one doesn't even need the app icon when one is receiving push notifications from FB. No legit notifs? No problem, FB will synthesize fake ones.)

jeffrufino 7y ago

How do you fix this? do you KYC everyone?