6 ms·

its “cost of materials” is close to zero largely because those users have no idea how much their data is worth Ten dollars a year on average. Facebook had $7B

its “cost of materials” is close to zero largely because those users have no idea how much their data is worth Ten dollars a year on average. Facebook had $7B in revenues last year from 700M users. That's assuming all of Facebook's value comes from users' data which is not entirely fair. Even if you're an American (making your info more valuable on average to advertisers), you still spend more on toothpaste, hopefully. I get valuing privacy but where did the myth that your data is worth a lot originate? Most people will give their details for a coupon. Not because they don't know data's value but because they do and it's almost nothing. You need to aggregate millions upon millions of users to eke out a profit. Regardless, I like this bit of cold accounting applied to your own life. she calculated how much had already been invested in JLM in its 35 years of pre-corporate existence. Her mother figured out how much it had cost to raise her as a child; college education expenses were added in, as was a modest inheritance and her earnings to date. Adjusted for inflation, the total came to just over $1m, and Ms Morone confesses to being dismayed at how little output this investment had produced.

bjelkeman-again 12y ago
The interesting thing is that I value data about me higher than what Facebook's (and other) advertisers are willing to pay. But my will to keep that data out of their hands is just considered an externality by them. The sad thing IMHO is that the onus is on me, to try to be anonymous.
- vilhelm_s 12y ago
  I guess they could try to Coase it out, but I have a feeling people would not like that either. :) "Dear Mr Bjelkeman-Pettersson, we have accumulated a quite interesting collection of data about you. It sure would be a shame if this information would leak to any irresponsible third parties. However, for a small annual fee we are willing to implement a stringent privacy policy..."
  - bjelkeman-again 12y ago
    I wonder how long until this actually arrives in my inbox?
YokoZar 12y ago
A similarly cold calculation I recently did was to compare my lifetime productivity to the aggregate value of all my blood products. As a regular plasma donor, it wasn't until age 27 that my total labor output had finally surpassed my use as spare parts, and that was because of a relatively high salary. That calculation doesn't yet include the expected value of my harvested organs should I die, and while it's harder to put a price on organs than blood (which is sold to hospitals) it's reasonable to presume they're extremely expensive. Morbid as it is, this perhaps shouldn't be too surprising in a world where there are individuals earning 1000 times as much as others. If it were possible to directly trade lifespan, a 1000x earner could double his lifespan by shaving 1% off 100 people, compensate them with 2x their lifetime earnings, and still have 800 times as much as the typical person left over.
- ytNumbers 12y ago
  It is morbid. It's also a twilight zone episode. http://en.wikipedia.org/wiki/The_Self-Improvement_of_Salvadore_Ross http://en.wikipedia.org/wiki/The_Self-Improvement_of_Salvado...
- sliverstorm 12y ago
  In such a circumstance we might even hazard that's a win for everyone. 1000x earners are presumably doing something great for the world to be worth that much.
  - dredmorbius 12y ago
    There are plenty of ways to earn high financial returns without returning much to society. Externalities and rent-seeking are two planet-sized holes in market economic theory.
    - jqm 12y ago
      I'd go so far as to say there may be almost an inverse correlation between earnings and use to society. (medical profession excepted).
Tycho 12y ago
Yeah it's a ridiculous meme.
KaoruAoiShiho 12y ago
IMO your data is actually worth much less than $10 because most of what advertisers are paying for is eyeballs / your attention, not your data. Data is a small value add. Facebook ads are not worth more (I think it's actually less) than traditional ads where no data is sold.
- chime 12y ago
  > IMO your data is actually worth much less than $10 because most of what advertisers are paying for is eyeballs / your attention, not your data. The data tells them which eyeballs to target.
- dredmorbius 12y ago
  Conversation I had with a Google engineer is that the personal data portfolio adds little value. The current query and your location data are the most relevant. Given that Google's personal data tracking has creeped me out and onto another search provider who doesn't do that (DDG), it's cost them, net net.
  - snowwrestler 12y ago
    This is true for Google because they run search advertising, which gives a clear intent signal to which the algorithms can react. User searches for "laptop"? Show the laptop ads. Personal data is more important to Facebook because they do not have search intent to advertise against. Personal data are really the only criteria for targeting ads there. Twitter is somewhere in between. You can target ads to "look alike" personal data criteria, or to hashtags (which are essentially a keyword search).
    - dredmorbius 12y ago
      Look at the current online majors: Google, Amazon, Apple, and Facebook. Google has search intentionality. They benefit from the fact that they're aware of when you're likely to be looking specifically for something. Plus tremendous marketshare in search -- on the order of 80% or so. Amazon has purchase intentionality. Fewer transactions, but where they are, Amazon has disintermediated advertising because they're fulfilling the transaction. Also tremendous marketshare in commerce. Their margins on sales however are low. Apple is a slightly different beast: hardware, plus some software/information goods (largely entertainment sales). And no, I haven't peeked at their financials. Profits on the hardware side are tremendous, though marketshare is relatively low. Marketshare on their software/information sales (software, music, video, books, games) is higher, margins tend to be low. Facebook is in the ads space, and lacks for intentionality though its' got a lot of loiter time. People spend hours on the site (or can). The focus should be less on transactions per page, as on opportunities per user. Focus on detecting when someone's in a purchase state and utilize that, as well, perhaps, as the relationships between users and vendors which can be provided. Of all the majors, I'd say FB's position is the weakest, and the degree to which the user experience seems to be deteriorating under increased conversion pressure seems to support this. Of possible breakouts: Google going into direct retail or direct retail partnerships, which seems to be happening with Google Shopping Express, could be a net win. Google's disadvantage is increasingly negative response to its data profiling. Abandoning this for other bases on which to generate revenues would be an interesting move. Amazon is a latent player in the hardware space. To date I've found its tablet and e-Reader products unappealing because the're too ostentatiously shopping malls thrust before the user. A much, much softer touch would be more successful for me. Jeff Bezos's personality may be the company's Achilles heel. Amazon also have an interactive an online component through their forums (and product ratings) which might be leveragable into social space, though I consider that a very long shot. Apple could branch into either retail or search. It's risk is getting out-competed in hardware, particularly in the iPhone/iPod space where Android is now eating its lunch. On the other hand, there's an opportunity in that Apple doesn't rely on the intrusive surveillance that Android is predicated on. That pivot is complicated by iOS being a closed rather than open operating system. I see the opportunity being frustrated by Apple's preference to keep its software platforms closed. Its laptop and desktop market could grow at the cost of further decline of Microsoft, though challenged by Chrome devices. Facebook has the most difficult transition of any of the four. It's not in retail, pushing advertising reduces the appeal of its other offerings, and it doesn't have a hardware offering. Yet. That last could be a breakout, though again, I see this as a long shot. Of the four, FB is the most likely to fail or decline. Google is probably well-poised to retain king-of-the-hill status. Apple is likely to remain as a center of the personal-electronics / entertainment market, though pinched by Android in small devices. Amazon could be vulnerable to an open-platform based retail system based around or promoted by Google, though it would take a lot to topple it. Expansion into devices would be useful but not a major game changer. Other disruptive elements: a decentralization of social networking space through open-protocol networks (e.g., Diaspora, Friendica), and self-hosting systems (e.g., FreedomBox). A federation of search, whether through meta-providers (e.g., DDG) or truly federated search (YaCy). An open handset or open hardware spec. All of low to modest probability, but not impossible.
waterlesscloud 12y ago
Sure, but the question then becomes- Is it really productive economics to allow Facebook to accumulate all that value rather than disperse it out to the users. Just because that value is a small amount for me as an individual doesn't mean that it's a good idea to just give it away.

bjelkeman-again 12y ago

The interesting thing is that I value data about me higher than what Facebook's (and other) advertisers are willing to pay. But my will to keep that data out of their hands is just considered an externality by them. The sad thing IMHO is that the onus is on me, to try to be anonymous.

vilhelm_s 12y ago
I guess they could try to Coase it out, but I have a feeling people would not like that either. :) "Dear Mr Bjelkeman-Pettersson, we have accumulated a quite interesting collection of data about you. It sure would be a shame if this information would leak to any irresponsible third parties. However, for a small annual fee we are willing to implement a stringent privacy policy..."
- bjelkeman-again 12y ago
  I wonder how long until this actually arrives in my inbox?

YokoZar 12y ago

A similarly cold calculation I recently did was to compare my lifetime productivity to the aggregate value of all my blood products. As a regular plasma donor, it wasn't until age 27 that my total labor output had finally surpassed my use as spare parts, and that was because of a relatively high salary. That calculation doesn't yet include the expected value of my harvested organs should I die, and while it's harder to put a price on organs than blood (which is sold to hospitals) it's reasonable to presume they're extremely expensive. Morbid as it is, this perhaps shouldn't be too surprising in a world where there are individuals earning 1000 times as much as others. If it were possible to directly trade lifespan, a 1000x earner could double his lifespan by shaving 1% off 100 people, compensate them with 2x their lifetime earnings, and still have 800 times as much as the typical person left over.

ytNumbers 12y ago
It is morbid. It's also a twilight zone episode. http://en.wikipedia.org/wiki/The_Self-Improvement_of_Salvadore_Ross http://en.wikipedia.org/wiki/The_Self-Improvement_of_Salvado...
sliverstorm 12y ago
In such a circumstance we might even hazard that's a win for everyone. 1000x earners are presumably doing something great for the world to be worth that much.
- dredmorbius 12y ago
  There are plenty of ways to earn high financial returns without returning much to society. Externalities and rent-seeking are two planet-sized holes in market economic theory.
  - jqm 12y ago
    I'd go so far as to say there may be almost an inverse correlation between earnings and use to society. (medical profession excepted).

Tycho 12y ago

Yeah it's a ridiculous meme.

KaoruAoiShiho 12y ago

IMO your data is actually worth much less than $10 because most of what advertisers are paying for is eyeballs / your attention, not your data. Data is a small value add. Facebook ads are not worth more (I think it's actually less) than traditional ads where no data is sold.

chime 12y ago
> IMO your data is actually worth much less than $10 because most of what advertisers are paying for is eyeballs / your attention, not your data. The data tells them which eyeballs to target.
dredmorbius 12y ago
Conversation I had with a Google engineer is that the personal data portfolio adds little value. The current query and your location data are the most relevant. Given that Google's personal data tracking has creeped me out and onto another search provider who doesn't do that (DDG), it's cost them, net net.
- snowwrestler 12y ago
  This is true for Google because they run search advertising, which gives a clear intent signal to which the algorithms can react. User searches for "laptop"? Show the laptop ads. Personal data is more important to Facebook because they do not have search intent to advertise against. Personal data are really the only criteria for targeting ads there. Twitter is somewhere in between. You can target ads to "look alike" personal data criteria, or to hashtags (which are essentially a keyword search).
  - dredmorbius 12y ago
    Look at the current online majors: Google, Amazon, Apple, and Facebook. Google has search intentionality. They benefit from the fact that they're aware of when you're likely to be looking specifically for something. Plus tremendous marketshare in search -- on the order of 80% or so. Amazon has purchase intentionality. Fewer transactions, but where they are, Amazon has disintermediated advertising because they're fulfilling the transaction. Also tremendous marketshare in commerce. Their margins on sales however are low. Apple is a slightly different beast: hardware, plus some software/information goods (largely entertainment sales). And no, I haven't peeked at their financials. Profits on the hardware side are tremendous, though marketshare is relatively low. Marketshare on their software/information sales (software, music, video, books, games) is higher, margins tend to be low. Facebook is in the ads space, and lacks for intentionality though its' got a lot of loiter time. People spend hours on the site (or can). The focus should be less on transactions per page, as on opportunities per user. Focus on detecting when someone's in a purchase state and utilize that, as well, perhaps, as the relationships between users and vendors which can be provided. Of all the majors, I'd say FB's position is the weakest, and the degree to which the user experience seems to be deteriorating under increased conversion pressure seems to support this. Of possible breakouts: Google going into direct retail or direct retail partnerships, which seems to be happening with Google Shopping Express, could be a net win. Google's disadvantage is increasingly negative response to its data profiling. Abandoning this for other bases on which to generate revenues would be an interesting move. Amazon is a latent player in the hardware space. To date I've found its tablet and e-Reader products unappealing because the're too ostentatiously shopping malls thrust before the user. A much, much softer touch would be more successful for me. Jeff Bezos's personality may be the company's Achilles heel. Amazon also have an interactive an online component through their forums (and product ratings) which might be leveragable into social space, though I consider that a very long shot. Apple could branch into either retail or search. It's risk is getting out-competed in hardware, particularly in the iPhone/iPod space where Android is now eating its lunch. On the other hand, there's an opportunity in that Apple doesn't rely on the intrusive surveillance that Android is predicated on. That pivot is complicated by iOS being a closed rather than open operating system. I see the opportunity being frustrated by Apple's preference to keep its software platforms closed. Its laptop and desktop market could grow at the cost of further decline of Microsoft, though challenged by Chrome devices. Facebook has the most difficult transition of any of the four. It's not in retail, pushing advertising reduces the appeal of its other offerings, and it doesn't have a hardware offering. Yet. That last could be a breakout, though again, I see this as a long shot. Of the four, FB is the most likely to fail or decline. Google is probably well-poised to retain king-of-the-hill status. Apple is likely to remain as a center of the personal-electronics / entertainment market, though pinched by Android in small devices. Amazon could be vulnerable to an open-platform based retail system based around or promoted by Google, though it would take a lot to topple it. Expansion into devices would be useful but not a major game changer. Other disruptive elements: a decentralization of social networking space through open-protocol networks (e.g., Diaspora, Friendica), and self-hosting systems (e.g., FreedomBox). A federation of search, whether through meta-providers (e.g., DDG) or truly federated search (YaCy). An open handset or open hardware spec. All of low to modest probability, but not impossible.

waterlesscloud 12y ago

Sure, but the question then becomes- Is it really productive economics to allow Facebook to accumulate all that value rather than disperse it out to the users. Just because that value is a small amount for me as an individual doesn't mean that it's a good idea to just give it away.