Wed, Oct 24, 2012 - Page 9 News List

How Facebook’s social networking dominance failed to monetize

In May, Mark Zuckerberg was worth US$20 billion. Last month, that figure had fallen to US$9 billion. What went wrong?

By Tim Adams  /  The Observer, LONDON

One of the things Facebook has added to the culture in the few years of its existence has been a redefinition of some of the most common elements of our language. It has, according to the Oxford English Dictionary, changed our understanding of the words “like” and “friend,” not to mention “poke.”

The shifting of linguistic usage extends pointedly to the purpose of the company itself. As David Kirkpatrick, Facebook’s authorized biographer, said: one characteristic of the first eight years was a tendency for Zuckerberg and his inner circle to sit around late at night and try to establish exactly what business they were in. These reported conversations are remarkable in a way for their lack of clarity. Early on, Zuckerberg liked to refer to his creation as “a directory of people” in these discussions (arguably not the most marketable of propositions); Sean Parker, the company’s maverick first president, used to suggest Facebook was “a device you carried around and pointed at people and it would tell you all about them.” Later, Zuckerberg resolved that it was a product “to help people understand the world around them.”

Yet if that was its higher purpose, the business Facebook has been in from the start is disclosure. Its products are its users and their friends, who willingly supply personal data about themselves and their habits and tastes on a scale previously unimaginable. Its clients are corporations which can exploit that information to understand an individual’s desires and to sell them things based on that knowledge.

Zuckerberg’s genius has been to find a way to not only track and store all of that data, but also to make it accountable to an identifiable individual, all in the process of “sharing.” Facebook rightly makes great capital of its uniquely “granular” privacy tools while whispering all the time about the liberating virtues of total transparency and openness. In this it shares a philosophy with its great rival, Google. As Google co-founder Sergey Brin once observed of the implicit contract of internet usage: “If you have something you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.”

Given that its product is its community, you would have thought that Facebook’s announcement earlier this month that it had signed up its one billionth user might have sparked a rally in its share price. However, that announcement produced not a blip in the markets, which maintained stubbornly that Facebook was worth less than half what it had been on May 18. To celebrate the remarkable statistic that one in six people on the planet was now a Facebook user, Zuckerberg said on his home page another new definition of what his company had become.

“We belong to a rich tradition of people making things that bring us together,” he said. “We honor the humanity of the people we serve. We honor the everyday things people have always made to bring us together: chairs, doorbells, airplanes, bridges, games.”

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