Janus Face(book)

Paul Raven @ 27-01-2011

When corporations get big, stuff starts getting weird. Facebook is now sufficently large and internationally ubiquitous to be playing a part (albeit a passive/enabling part) in the recent spate of revolutions in the Middle East… but that involvement puts them on the same playing field as nation-states.

For example, Tunisian Facebook users reported some account hacks, which led Zuckerberg’s people to block the government-ordered man-in-the-middle attack that was behind said hacks [via TechDirt]. Now, on one level that’s just a company looking after the interests and privacy of its client-base… but on another level, that’s a non-nation-state entity blocking a nation-state’s attempts to control its citizens. Not entirely unprecedented, of course (East India Companies, anyone?), but the post-geopolitical implications are… well, let’s just say a lot of old certainties have pretty much disappeared, especially for less-developed nations with a recent history of despotism, but increasingly for the old “first world” titans, too.

My inner cynic suspects that there’s more than a hint of good PR strategy involved, though; Facebook has suffered from the inevitable bad press that comes with becoming big news real fast, but they’ve earned much of that opprobrium fair and square… and largely through a cavalier attitude to the privacy of their userbase, ironically enough. Their latest we-opted-you-in-while-you-weren’t-looking move is a real doozy; take it away, Ars Technica:

Better go check your Facebook profile pic to make sure it’s suitable for advertising—the company has begun using real users’ postings in ads being shown to their friends. The effort is eerily similar to parts of the now-defunct Facebook Beacon, but Facebook is now calling them “sponsored stories,” and users won’t be able to opt out of their posts being used to advertise to friends.

The new “feature” started showing up quietly on Wednesday morning without any kind of fanfare from Facebook, but users began to notice it right away. Things posted by their friends; check-ins at businesses and “Likes” clicked from other websites started being highlighted in the right-hand column with the other ads, under the headline of “Sponsored Story.”

It’s the lack of opt-out that will rile people as this story gains traction (which, given similar stories last year, I fully expect it will). Furthermore, the Facebook T&C clickwrap now says that any content you post there – pictures, status updates, blog posts, whatever – becomes Facebook’s IP to do with as it pleases. Makes sense from a business point of view, enables them to keep the service free to use, and probably won’t bother the vast majority of people… but I’ll be switching off all my feed imports from now on. For me at least, Facebook’s utility is outweighed by my feeling that if my content’s worth anything to anyone, I should be getting some cut of the deal… but in countries hungry for political change, whose citizens find themselves with an unprecedented tool-set for self-organisation, the balances tip in the other direction.

How Facebook decides to wield this power will be worth watching closely. We spoke before about wanting to become “citizens of the Internet”; if we think of “the Internet” as a sort of federation of city-states, Facebook starts looking remarkably like a panopticon remix of Brave New World.


Goldfacebookman: bubblenomics ahoy!

Paul Raven @ 06-01-2011

So, Goldman Sachs is investing in Facebook. Lots of furore in the media: Facebook’s worth US$50billion, you know! Well, given recent events, I’m not sure I’d trust Goldman Sachs to accurately value anything other than their own scaly skin, but there you go. My cynicism is largely uninformed and instinctive, but smarter folk than I are looking beyond the gloss:

… you can look at the economics and note that Goldmans is buying under 1% of an illiquid stock, thus valuing the whole 100% at $50bn, and that to justify such a valuation at maturity (at say c 5x revenue valuation, like Google) would imply revenues of $10billion. Given that it already claims c 500m users (1/8th of the world’s online population, because as we know, there are no false accounts on Facebook) it is hard to believe much more than a doubling of users, so say 1 billion users. So, $10 bn over 1 bn users is $10 per user per annum (vs c $4 today), or say $1 / month. Sounds possible, except you have to remember that many users hardly use the system, and social media ads tend to have CPM in the fractions of pennies, so you are having to believe they can ship hundreds of thousands of Ads to each person each month, or can sell online goods – ie demi-freemium funding – but that typically only attracts c 5% of users, so you are looking at $20 per month per paying instead.

My take – Don is right, the good assets are expensive, but $50bn is a valuation based on a microstake. Goldman Sachs are not fools, but this is basic bubblenomics – and bubbles are built on the Bigger Fool Theory, ie there will be bigger fools who will buy these shares from Goldman. When you see private Facebook shares being sold to the “Man on the Street” its time to run for the hills.

Here’s the kicker:

The one sure thing you can tell from this is that Facebook clearly can’t self fund itself enough for what it needs, even on $2bn turnover a year.

And here rephrased by Ian Betteridge:

A web site which has 500 million users, 1/8th of the entire population of the Internet, doesn’t have a business model capable of supporting itself.

Ouch. More interesting still is that Goldman are inventing some brand new voodoo finance stunts specifically for this gig:

What Goldman Sachs is proposing to do is create a $1.5 billion, so-called “special-purpose vehicle” — a term that could only have been conjured on Wall Street — that would allow its high-net-worth clients to invest in Facebook.

The participants in Goldman’s Facebook “special-purpose vehicle” would not be considered Facebook owners “of record,” but rather “beneficial” owners. In other words, for the purposes of the Securities Exchange Act, Goldman’s Facebook “special-purpose vehicle” would constitute one owner “of record,” no matter how many Goldman clients participate.

Thus, it would appear that Goldman Sachs and Facebook are attempting to avoid SEC disclosure rules and allow Facebook to remain private for as long as possible, but still make it easy for Goldman’s rich clients to invest in the company.

The SEC is apparently keeping an eye on things, but you’ll forgive me, I hope, for not taking that as an assurance that some seriously shady shit won’t go down anyway. Are our memories really so short? Ooooh, look – shiny!


SocNets and nation-states: a comparison

Paul Raven @ 29-07-2010

Via Bruce Sterling, a piece at The Economist compares Facebook’s population and social character to that of a nation-state:

In some ways, it might seem absurd to call Facebook a state and Mr Zuckerberg its governor. It has no land to defend; no police to enforce law and order; it does not have subjects, bound by a clear cluster of rights, obligations and cultural signals. Compared with citizenship of a country, membership is easy to acquire and renounce. Nor do Facebook’s boss and his executives depend directly on the assent of an “electorate” that can unseat them. Technically, the only people they report to are the shareholders.

But many web-watchers do detect country-like features in Facebook. “[It] is a device that allows people to get together and control their own destiny, much like a nation-state,” says David Post, a law professor at Temple University. If that sounds like a flattering description of Facebook’s “groups” (often rallying people with whimsical fads and aversions), then it is worth recalling a classic definition of the modern nation-state. As Benedict Anderson, a political scientist, put it, such polities are “imagined communities” in which each person feels a bond with millions of anonymous fellow-citizens. In centuries past, people looked up to kings or bishops; but in an age of mass literacy and printing in vernacular languages, so Mr Anderson argued, horizontal ties matter more.

Sterling himself describes it as “handwavey and misleading”, but there’s a core of pertinence: huge horizontal networks of people, disconnected from geographical restraints, with the potential for a self-sustaining internal economy. Facebook couldn’t play on the world stage just yet, but it’s early in the day for the network-as-collective-entity… and late in the evening for the nation-state.


Diaspora: open-source distributed Facebook equivalent

Paul Raven @ 13-05-2010

I’m surprised it hasn’t happened before (as it’s an idea I predicted in rudimentary form for an article in Focus back in 2007, and I’m hardly at the cutting edge of web software thinking), but the Facebook privacy backlash has prompted a small gang of geeks to build an open-source distributed social network platform that gives you back full control over your personal data [via MetaFilter].

Diaspora is intended to be installed on a webserver, with every installation serving as a node in a peer-to-peer network – a complete reversal of the centralised model that Facebook and similar systems currently work on. Most of the current objections I’m seeing hinge on the fact that the majority of SocNet users don’t yet have their own server and domain name, and aren’t technologically able to maintain one themselves: the former is a matter of cost, and the price of webhosting is falling constantly; the latter is a matter of demand, and the turnkey installation scripts for software like WordPress which are available from many bargain basement hosting outfits suggests that, if the demand increases, the barriers to entry will lower rapidly.

That said, not everyone cares about their privacy online. Whether that matters or not is a debate for another time, but while the situation persists, the free-to-use no-technological-hassle SocNets will always have the upper hand in the casual user sphere. If Diaspora is to succeed, it’ll have to demonstrate tangible advantages over the competition in addition to the more abstract USP plus-points of enhanced privacy.

Fingers crossed… although, as science fiction fans, I think we should all get behind a piece of software that shares a name with a Greg Egan novel. 😉


Facebook profiles are not two-faced

Paul Raven @ 02-03-2010

According to recent research, Facebook profiles actually reflect their owner’s personality more accurately than a brief face-to-face encounter might manage to do:

Back’s team administered personality inventories that evaluated 133 U.S. Facebook users and 103 Germans who used a comparable social-networking site. Inventories focused on the extent to which volunteers endorsed ratings of extraversion, agreeableness, conscientiousness, emotional instability and openness to new experiences.

The subjects — who ranged in age from 17 to 22 — took the inventory twice, first with instructions to describe their actual personalities and then to portray idealized versions of themselves.

Then, undergraduate research assistants — nine in the United States and 10 in Germany — rated volunteers’ personalities after looking at their online profiles. Those ratings matched volunteers’ actual personality descriptions better than their idealized ones, especially for extraversion and openness.

Not everyone is entirely convinced, however:

Adriana Manago, a psychology graduate student at UCLA, calls the new findings “compelling” but incomplete. College students on Facebook and other online social networks often augment what they regard as their best personal qualities, Manago holds. In her view, these characteristics aren’t plumbed by broad personality measures like the ones measured in Back’s study. And students’ actual personality descriptions may have included enhancements of their real characteristics, thus inflating the correlation between observers’ ratings and students’ real personalities, Manago notes.

“Online profiles showcase an enhanced reflection of who the user really is,” Manago proposes. In a 2008 study, she and her colleagues found that 23 college students sometimes used another online social networking site, MySpace, to enhance their images, say by Photoshopping acne out of a picture or posting a video of themselves driving a sports car at high speeds.

Somehow this revelation is both cheering and depressing at the same time… I wonder how those results would differ for older age brackets?


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