Ah, Facebook. The company everyone loves to hate. The service where just about everyone you know maintains an account, while simultaneously lamenting the quantity of time they spend engaging with the site. It's always either too much or too little. But the common theme is that no one seems to really like Facebook. They don't seem to enjoy browsing through the news feed. And yet we are all still members. Well, almost all of us. But that's because it's free, right?
I recently read an article at The Atlantic which called out this "free" service as a Faustian bargain (a deal with the devil). The author has, in the past "referred to this bargain, in which people get content and services for free in exchange for having persuasive messages psychographically targeted to them, as the “original sin” of the internet." To be fair, Facebook is not the first place to operate on this business model, nor will it be the last. Twitter, TripAdvisor, and Google, which includes the search engine, GMail, and the very blog I am publishing this on, are all additional services that give away the "product" for free to me and you in exchange for nothing more than our data. Because the data is the real product, and they can sell it for who knows how much money...
Actually, I'd like to know how much money they can sell my data for. Let's do some digging together, shall we? First stop, Facebook themselves. Two clicks into it, and I've already found this sales pitch, prominently displayed at the top of their advertising help page: "here are two primary things you get from a Facebook ad: 1) The ability to reach a certain number and type of people. 2) As many of the results you care about (as expressed by the type of boost/promotion you choose on your Page or the optimization event choice you make in ad set creation) as possible from those people." OK, so it's clear that they are quite proud of their ability to deliver extremely targeted ads... After some more digging, I find an example where they tout the ability to let me deliver ads only to homeowners who are interested in cooking and who are also parents. Now I don't know about you, but I never added any of those things to my profile page. And yet, somehow Facebook knows.
I can see I am about to derail what I had intended to be a purely economic/financial article and veer off into the jungle of ethics and privacy. So I will stop here before attempting to answer the question of whether or not a company should be able to do this (because at this point, we know they can and do, which is good enough for me to move on to the numbers). Facebook is all about beating around the bush when it comes to actual pricing (though they are quite forthcoming about the abilities at targeting ads), so I think I've gone as far as I can go on that page. Time for our next stop: Facebook's latest earnings report.
Facebook made almost $40 billion in advertising revenue in 2017. According to Statistia, Facebook has 2.2 billion monthly active users. That averages out to a little less than $19 per user, per year. That is just over $1.50 per month. Now granted, this includes people from all over the world, where $1.50 gets you a heck of a lot more. But you gotta figure the advertising costs to show ads to poor farmers in sub-Saharan Africa who love to cook and have kids are going to be a heck of a lot less than in other parts of the world, too. So $1.50 a month seems fair to me.
So there you have it. You are worth about $19 a year to Facebook. In exchange for the ability to sell your information, you receive the ability to send unlimited amounts of message, likes, updates, pokes, prods, passive-aggressive character attacks, and whatever else people do on that platform. Is that a fair deal? I certainly think so, or else I'd have deleted my account before posting this. But it begs the question - if Facebook started offering a subscription service, would you take them up on the offer? If they eliminated ads, took down "sponsored posts", and promised to never log any of your activity and sell it to an advertiser, would you pay $1.50 a month for that?
It's a fun hypothetical question, but I promise you that it will only ever be a hypothetical question. Facebook will never offer you this option. How can I be so sure? Well, let's run the same numbers, but this time based on 2016. Total monthly users were around 1.9 billion, while revenue from advertising was a little under $28 billion. That maths out to around $14.50 a year, per user. Apply a little more math and you see that while they only increased the number of users by 14%, they increased revenue by 48%. Each year, you are worth more and more to them. There's simply no way they will abandon their current business model with growth aligned that way.
If you ever had any doubts, rest assured, you are the product that Facebook is selling. And last year they made about $19 off of you. Are you OK with that? Will that, along with all the recent headlines, cause you to #deletefacebeook? Oops, there I go getting all philosophical again. Time to wrap this up and lurk on my news feed again.
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