On May 25, as his brainchild company went public, Mark Zuckerberg's face filled the multistory video screen adorning the Times Square Reuters Building, his image a grinning vision of triumph—little brother as Big Brother.
In the 30 seconds after the bell rang at the NASDAQ exchange, more than 80 million shares were traded, and with the IPO (or, really, the night before, when underwriting banks bought the stock from Facebook), Zuckerberg made $25 billion.
But he wasn't making any money off me.
I joined Facebook in 2007, when you still had to identify your school to become a member. Carefully curated pics were promptly uploaded to my profile, and soon I was scrutinizing my future college classmates, accepting friend requests with bright-eyed, bushy-tailed pride. I was never really addicted to Facebook, but for several years I would log on at least once daily, friending old summer-camp acquaintances and lustfully stalking sweet Laxers (look it up).
After a while, however, I found posting and viewing spring-break beach shots (cellulite airbrushed out, cleavage brushed in) vaguely vulgar. The entire site seemed to be based around a strange, self-branding tango of exhibitionism and voyeurism. Still, I maintained my account to keep in touch with friends, to make sure my little sister didn't post any photos she would live to regret and to participate in the enduring who-looked-hot/-not dialogue with my peers.
Initially, I was even excited by the sharp-shot targeted ads. "Eee-gadz! I do want to check out that conflict-free diamond tennis bracelet, I do want to support Prop. 19 and I do want to invest in blue-light acne treatment!" I found myself cooing over and over again. But after a while, Facebook's apparent telepathy had me jittery. I was a twenty-something, prep-school-educated Californian with a hazily expressed penchant for all things acceptably unorthodox, and Mark Zuckerberg and his army of youthful-genius programmers had successfully pigeonholed me. I found myself fitting perfectly into the Facebook algorithm (or, rather, it fitting perfectly into me), and no number of Grateful Dead dancing-bear T-shirts could counterbalance it.
My attitude toward the site had already generally soured when I heard last February that Facebook was going public, but within a week of the news, I deactivated, permanently, and I'll tell you why.
- FACEBOOK IS PEOPLE Have you noticed more ads along your news feed? Blame Facebook's IPO.
Aside from Facebook's use of my clicking habits and social network connections to tailor ads, I had another unsettling realization. Facebook is a service and a product to its users. But they pay nothing to use it, and there is no native revenue stream. The value of the company—its main asset, to itself any and potential business partners—is the users themselves, and access to them and their information. What they were planning to sell shares of was me. It was you.
With 900 million users, and an initial $104 billion valuation, let's say each Facebook profile is worth about $100. Now, the relative worth of a profile varies, of course, based on level of engagement and other factors, but for argument's sake, to Facebook—and now to its shareholding public—you are worth about as much as a matinee ticket to a Broadway play. But that's just one you. It's the collective YOU that really matters.
Of course, data gathering as a for-profit enterprise is not unique to Facebook. For instance, the other company of comparable size whose main product and asset is its users is Google. But there's a key difference: Google is transitive, whereas Facebook is reflexive. In other words, Google and its data collection are outward moving, leading to other destinations on the web, other resources; Facebook's project builds entirely on the sum of its users interactions with one another.
In this sense, Google could be likened to a librarian, whose services we enlist in exchange for the concession that what books we ask for will be tracked. Facebook, on the other hand, is like a party that all your friends attend, but in order to be there yourself, you must agree to have all of your interactions recorded.
In this way, the data, the information and therefore the value of Facebook is internally generative: the more interactions, the more information, the more the collective YOU is worth. And the rate of addition to the data value is astonishing. According to Facebook's own numbers, more than 3 billion "likes" and comments are posted per day, along with the uploading of more than 300 million photos (per day!).
It's then either a postmodern joke or a Marxist irony (or both at once) that we are able to buy shares of us. But either way, I don't want you buying shares of me.
(Add to this the further irony that before the ostensible "public" offering of Facebook's stock, the vast majority was spoken for by the big-ticket clients of the banks that underwrote the IPO. And of the shares that were available to retail outlets, those were distributed preferentially to clients with the biggest accounts.)
In the weeks since the IPO, Facebook's stock has notoriously slid far below its offering price—and as of this writing is under $27 a share—but the daily stock prices are not the point at the moment. Even as Zuckerberg's personal fortune fluctuates in multibillion-dollar swings, his project is bigger.
Projected to have 1 billion users by year's end, the sheer size of the Facebook community makes it hard to grapple with. There are few commodities, aside from air and water, used by as many people. Only Coca-Cola and Microsoft, and maybe McDonald's, can claim comparable numbers. Fully half of all internet users are on Facebook, and that's a lot of eyes on ads.
But display advertising has proven to be a limited source of cash, and Facebook is focusing revenue streams from other sources. As the company itself noted in its SEC filing, "In 2009, 2010 and 2011 and the first quarter of 2011 and 2012, advertising accounted for 98 percent, 95 percent, 85 percent and 82 percent, respectively, of our revenue." (The company also gets a growing proportion of its revenue from fees paid by third-party apps and plug-ins, including 12 percent of overall revenue from Zynga alone, the company behind the popular game Farmville.)
The solution to the diminishing ad business, it seems, is tied to making Facebook into what Zuckerberg has called an "identity layer" for the entire web. That is to say that in his ideal version of the site (and world), everything you do on the internet will be through Facebook, including online transactions.
This is ambitious, but given the size of its user base, and how thoroughly it is already ingrained in people's internet habits, it's imminently achievable. Even a modest version of this in action would be a revenue juggernaut. If the company were to, say, realize a revenue rate of 1 cent a day per user, by taking a percentage of transactions from vendors, that would be roughly $10 million a day, or $3.5 billion a year.
This is troublesome when the head of the company has, let's say, "innovative" ideas about privacy. In 2010, Silicon Alley Insider obtained instant message conversations from when Zuckerberg was still at Harvard, in which he refers to users who have voluntarily given over their personal information as "dumb fucks." And indeed, the company was recently hit with a $15 billion class action lawsuit from a group of users claiming the company violated the U.S. Wiretap Act by tracking their internet use after they had logged out of Facebook.
The fact is, the more information Facebook gathers about you, and the more ways it has to monetize that information, the more the company is worth. Zuckerberg wrote in his letter to investors, "Facebook was not originally created to be a company. It was built to accomplish a social mission—to make the world more open and connected."
Even taking this at face value, it doesn't really matter anymore. Facebook is a company, and a publicly traded one. Even though Zuckerberg has a controlling interest in Facebook, it now has to be accountable to stockholders. The tension between user privacy and monetizing data in service of stock price is a real one—and seems unlikely to fall on the side of users.
I see congressional hearings in our future.
And what did Mark Zuckerberg, whose personal fortune is now bigger than the GDP of Jamaica, offer to the legions of users, whose time and information have imbued Facebook with its vast value? "In the past eight years," he said magnanimously, "all of you out there have built the largest community in the history of the world. You've done amazing things that we never would have dreamed of and I can't wait to see what you're all going to do going forward. So on this special day, on behalf of everyone at Facebook, I just want to say to all the people out there who use Facebook and our products, thank you."
He's right, it's all us. Which is a sweet sentiment, though not as sweet as the billions we earned him.
The crazy thing? Despite all this, I don't expect an exodus of conscientious objectors like me. A critical mass has been reached, and projections suggest the site will continue to grow in the foreseeable future. I am not fighting against Facebook; Facebook has already won. By next year, one-seventh of the world's population will have an account on the site.
At this point, Facebook is not a bubble that can burst—it has become a reality unto itself.
This article originally appeared in the New York Observer.