DAVID “SPENGLER” GOLDMAN: WHAT IF FACEBOOK IS REALLY WORTH $100 BILLION
http://www.atimes.com/atimes/Global_Economy/NE22Dj03.html
What if Facebook is really worth $100 billion?
By Spengler
“What if Internet stocks aren’t a bubble?” [1] was the title of my inaugural essay in January 2000, with the observation that an economy based on downloading pop music and porn was a possible future state of the world. “Re-ordering the priorities of the world economy around the vices of affluent people is nothing new,” I observed. “We went through all of this before in the 17th century.”
Facebook’s initial public offering May 18 with a $100 billion valuation, to be sure, is not quite as whimsical as the Internet stocks of a dozen years ago, which had losses rather than earnings. Facebook does earn $1 billion a year. Total US advertising expenditures last year were $144 billion according to Kantar Media, and global ad spending was nearly $500 billion. Facebook users provide data which the firm can process in order to target ads to the right recipients, so that the website stands to gain market share, or so the story goes.
It’s Big Brother running the Matrix on Madison Avenue. Supercomputers with artificial intelligence programs will sift our communications for clues as to our commercial proclivities. Auto companies will know when to pitch SUV’s rather than electric vehicles, and purveyors of timeshares in St Helena or shrunken heads will identify the eight dozen individuals in the world most inclined to buy their products. Advertisers will replace expensive broadcast advertising with targeted Internet ads that follow Facebook users from their home page to their favorite websites.
I don’t believe a word of it, although I’m not an objective observer. I confess an antipathy to Facebook. My publisher insisted that I create a Facebook account, but I sign in rarely. I’ve friended some of the same folk with whom I otherwise exchange e-mail. And I look at the “ads and sponsored stories you may like,” for example, reverse mortgages, survivalist guides, and long-term care insurance. They’ve read my birthday, to be sure, but the computer doesn’t seem to have processed anything else.
Where are the ads targeted to my tastes – harpsichords, assault rifles, kosher cookbooks, and cat toys? Perhaps I haven’t posted enough for the Matrix to process my profile. Still, I suspect that the more people use Facebook, the less the computers really will know about them.
There still are people who believe that the Internet exalts individual choice and will promote a new age of individualism – the ever-optimistic George Gilder, for example. The contrary might be true: the Internet draws its users into ever-deeper conformity. The only news site in the Web to bear a big valuation in the last couple of years was the celebrity-and-soft-porn purveyor, the Huffington Post, a wired competitor to People Magazine.
What makes Facebook so popular? The answer, I think is that Facebook exalts the insignificant. People who spend their spare time at shopping malls around chain stores and restaurants or with mass-market entertainment feel like the ant in Woody Allen’s 1998 film – Antz (1998) – who tells an ant psychiatrist, “I feel so insignificant!” (The ant psychiatrist responds, “That’s a breakthrough. You are insignificant.”).
Facebook allows them to feel significant despite their conformity, by broadcasting to the world their responses to commercial culture.
Facebook’s success therefore depends on conformity. Why is Facebook so valuable? Because everyone (even this writer, reluctantly) is on Facebook. Why aren’t people still on Myspace, or a dozen other social media contenders?
Because the nature of the communication itself requires everyone to be on the same system, just as Microsoft a generation ago forced everyone to use its operating system and software. It is not just the so-called Network Effect, but Facebook’s raison d’etre: to advertise one’s conformity to commercial culture in a way that preserves the illusion of individuality.
It seems incongruous that Facebook projects the image of nonconformity. As Brad Stone and Douglas MacMillan wrote May 17 in Business Week, “In its offering prospectus, Facebook repeatedly describes its corporate culture as ‘the hacker way’; on its new campus, a 57-acre office park abutting San Francisco Bay in Menlo Park, Calif, there’s a building with a big sign that reads ‘The Hacker Company.’ Those slogans don’t mean Facebook is teaming up with Anonymous or breaking into NORAD. They’re talking about achieving a goal in an unconventional way.”
The aura of non-conformity disguises the utterly generic content that users provide. We can post whatever pointless thoughts occur to us about entertainment, fashion, celebrities, or whatever might seem to occur to us at random. But it is not at all random. It is only a multiple choice test within a predefined range of possibilities.
We hesitate to like (that is, push the Facebook “like” button) things that might embarrass us. We want to like things that make us seem more attractive to others; that implies we will pretend to like the things we think that we are expected to like.
Rather than divine the personal tastes of its users, Facebook’s supercomputers will get stuck in a positive feedback loop. Its users simply feed their fascination with commercial culture back to the computers, which will spew out “personalized ads” that simply reinforce the message of the commercial mainstream.
Fads that might have taken weeks to propagate will sprout and decay within days. Like Brian in Monty Python’s eponymous “Life,” Facebook tells its users, “You’ve got to think for yourselves! You’re all individuals!” And like the man in the back of the crowd in the movie, each Facebook user replies, “I’m not.”
No one is likely to learn much about anyone else by reading their Facebook page, or, indeed, by becoming their Facebook “friend”. A Facebook page is constructed to maximize our appeal and white out our warts. We learn as little from the pages of Facebook “friends” as prospective employers learn about job candidates from a resume.
We learn about people by playing sports with them, or drinking with them, or praying with them, cramming for final exams with them, working with them, or marching alongside them in the military – from situations, that it is, which cannot easily be controlled and which elicit spontaneous responses for better or worse.
A Facebook page is a pre-arranged display window whose purpose is to block our gaze from the real person behind it.
That is Facebook’s curse.
It attracts hundreds of millions of users by providing them with a platform for narcissism and the means to lie about themselves more persuasively, but it hopes to make money by learning what it is that they really like, the better to show them advertisements. Sadly, the system is worth a great deal of money, but not 100 times earnings.
By no means do I mean to imply that people actually are insignificant, except to the extent they mold themselves to mass-market culture. Nothing displays more individuality than children and their parents. Tolstoy said that all happy families are happy in the same way, but unhappy families are all unhappy in different ways. Tolstoy was being dense.
All families are unhappy, which implies that they all are different. Everything important that we do in life, we do alone, and in our own way, for there is no-one else to do it for us.
To the extent that social media become a substitute for unpredictable interaction with real human beings with something real at stake, Facebook and its imitators diminish us.
That’s why it would please me to watch Facebook fail like the whole generation of Internet entrepreneurs that got rich briefly in the late 1990s. Of course, it won’t repeat the Internet bust; it has actual revenues. Its founders will remain super rich, if not the investors who bought in to last week’s IPO).
Suppose that Facebook really was able to mine all the data that its users shovel into the system and design personalized advertising that made us more malleable consumers? The computers would elicit from us even a more urgent need for instant gratification. The world economy would spin around the wobbly gyroscope of consumer impulses.
We have done this sort of thing before. As I noted in my inaugural essay in January 2000, the economy of the 16th through 18th centuries decimated the population of four continents to satisfy Europe’s desire for luxury goods:
Item: After the conquest of the New World, Spain’s entire capture of precious metals went to India and China to pay for luxury cloth and spices. That did for approximately 90 percent of the indigenous pre-Colombian population.
Item: The African slave trade instituted by the Portuguese and later the British first produced sugar in Brazil and the Caribbean, to be turned into cheap intoxicants for the European market. Tobacco was a second absorber of slave labor. Cotton became important much later. Production of these vices did for a third of the West African population.
Item: In order to sell cheap cotton cloth to India, the East India Company arranged for Indians to grow opium and for Chinese to buy it. All the silver mined in Latin America, which two centuries earlier had passed to China to pay for silks, found its way back to Europe to pay for opium. That did for untold millions of Indians and Chinese.
Does the Internet shrink the world? How can we compare it to an earlier technological revolution, namely ocean navigation – including breakthroughs in astronomy, shipbuilding, time measurement, map-making? At the end of the day, silks, cottons, coffee, tea, spices, sugar, rum and tobacco ruined four continents as the world’s capital flowed to Western Europe.
The difference this time around is that instead of ruining an outlying empire, we will ruin ourselves.
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