What’s the Big Idea?
Facebook shares start trading today, at a price that will value the company at close to $100 billion, or roughly the 2011 GDP of Sudan. The difference between this and other comparably enormous initial public offerings is that Facebook’s product, or service, is free. Its business model is based on the value to advertisers of the rich data its users provide by sharing their changing interests and relationship networks in real time.
The “big data” that Facebook and other networks gather is especially valuable because of its level of detail. It goes far deeper than registration demographics: geography, age, gender, education – enabling marketers to target you, the consumer, based on up-to-the moment details like your favorite music, what shoes you bought last week, or your shifting political opinions.
Jaron Lanier, a virtual reality pioneer (widely credited with inventing the term ‘virtual reality’), musician, author of You Are Not A Gadget, and vocal opponent of what he sees as the widespread social conformity and economic unsustainability of Web 2.0, sees a hidden cost in the “free” services of the social web.
Video: Jaron Lanier wants to see new technologies creating jobs and wealth, rather than undermining them.
Just as Napster and its offspring slashed the monetary value of music, making it easier than ever for musicians to share their songs but harder than ever to make a living from them, Lanier sees the new generation of free social tools as concentrating wealth in the hands of a few programmers and their investors, rather than distributing it – through micropayments – to the users who provide the content.
Jaron Lanier: It’s a second class kind of value. It’s not non value. It is real value, but it’s not the same kind that Facebook is raising in their IPO. It shrinks the economy gradually, so very gradually all the customers start to sink. Not all at once . . . It’s a gradual process.
Some of the folks who started Facebook are friends of mine and I’m always bugging them about this and they’ll see . . .
What’s the Significance?
The irony, says Lanier, is that businesses like Facebook ultimately undermine the spending power of their own user base. He cites the example of Walmart, which streamlined its buying and shipping processes so effectively that it put hundreds of competitors out of business, effectively impoverishing the communities in which it operates to a degree that has tarnished its brand and limited its future growth. Facebook’s “customers” don’t pay for the product itself, but our spending power is what makes us – and Facebook – valuable to marketers.
In our rush to embrace new technologies without reflecting upon their social and economic impact, Lanier argues, we’re valuing digitized efficiency over human welfare. Lanier is by no means a Luddite – he works at Microsoft on the Kinect Motion Sensor – he’s just interested in a future where people get paid for the things they create.
Figuring that he’d rather keep working on the Kinect, we asked Lanier what he would do if forced at gunpoint to take over Facebook tomorrow. Mark Zuckerberg, if you’re out there, I would love to hear a response.
Jaron Lanier: I would turn it into this commerce platform so that people can send money around for things and then I’d gradually start to adjust it so people are monetizing more and more, so people can put up their art to sell to others either with a Kickstarter type of a thing or an app store kind of a thing. It would have to be tweaked to find exactly the right model, but I would start to turn it into real commerce, so that people who were good at using Facebook start to make some money and the economy overall starts to expand instead of contract as a result of its existence. I think that’s a happier outcome. And it would create a better return for Facebook’s investors in the long term. Even in the short term.
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