Facebook, the most cynical tech giant ever
For all its vaunted idealism, Silicon Valley can be just as cynical as any other area of commerce. The tech companies set up to profit from spam and search-engine trickery are too numerous to count. But Facebook’s short history makes one thing clear: There has never been a tech company that built so much fortune from the exploitation of ordinary people while giving so little in return.
Yes, Microsoft was vilified – and rightly so – for crushing competitors and forcing customers into an inferior operating-system software, but its iron-fisted dominance helped shape an immature and inchoate computer-software industry into a single standard that made PCs everyday devices in offices and homes. Microsoft’s brutal strong-arm tactics were directed at rivals. Its sin against its customers was that its software, for decades, just wasn’t that good.
Facebook, by contrast, built the best social network of its time, so good it left rivals like MySpace in the dust. And that should have been enough to make Facebook a Silicon Valley success story. Once it came time to make money, Facebook exploited its users’ personal data to a degree that no company had ever achieved before.
Over the years, Facebook has curtailed some of its more blatantly exploitative practices, but only after a string of controversies forced its hand. It reluctantly let users control their privacy settings, and then it had to simplify those settings after many found them unnecessarily complex. (Some say they’re still too complex.)
Facebook also backed off changes in its terms of service that allowed it to license users’ data even after they left the site. But even now, regulators are objecting to Facebook’s insistence that users grant the company a “non-exclusive, transferable, sub-licensable, royalty-free, worldwide license” to any photo, video or passing thought they see fit to publish on the site. Facebook has not only redefined the social Web – it’s redefining the very definition of “sharing.”
Even if Facebook has lost some privacy battles, it still seems to be winning the war on private moments. It has, as one of its earliest backers wished, conditioned users to accept the creepiness of advertisers stalking their personal lives. And Facebook just keeps raising the creepiness bar.
But why must we users be used this way? It’s not because we all long to be closet exhibitionists for Madison Avenue but only because it pays a handsome profit to Facebook and its early investors. We are digital sharecroppers, but it’s not our work lives being exploited for the gain of others, it’s our personal lives. One out of every 5 cents of revenue Facebook brings in goes to its bottom line. We have handed the fruits of our labor over to Goldman Sachs, Digital Sky, Accel Partners and Zuckerberg himself. And in return we get memories that Facebook expects to license and sub-license.
Facebook’s passive-aggressive friendship
We are witnessing a fascinating changing-of-the-guard moment in tech. The old Internet, represented this week by once-mighty Yahoo, is fumbling with another leadership crisis it must solve before it can even think about restoring some semblance of relevance. The new Internet, Facebook, is ruled by a young man in a hoodie who is on the verge of creating a massive public company that, as was the nascent Yahoo back in the early ’90s, will be an Internet darling longer on potential than track record, but running hard on an open field.
The common thread might seem to be the “If it’s big, it’s gotta be BIG” illusion that got us all in trouble at the turn of the millennium, when Internet investment hysteria equated today’s eyeballs with tomorrow’s profits. But it’s always about the profits, and the people who promise them. This time that person is Mark Zuckerberg, who as the books on the Facebook IPO closed Tuesday, well in advance of Friday’s first trade, seems to have convinced Wall Street that his seven-year-old company could be worth more than $100 billion — the richest-ever launch in Silicon Valley.
When you value your company at 100 times revenues, investors are banking on the belief that Zuckerberg has perfected the unstable compound that is social abandon and advertiser hunger.
Search remains pretty much the top use of the Web (as opposed to the Internet) – the gateway to everything else. The other big use is now social, which was invented on the Web but whose chops will be tested in the app schoolyard that is the mobile Internet.
But thus far, advertising works better on search than social. Google makes about $40 billion a year, almost 100 percent on ads. Facebook is reporting last year’s revenues at just north of $1 billion $3.7 billion. Google has a market cap of roughly $200 billion – so it’s twice as big as Facebook’s IPO valution and makes 40 times the money more than 10 times the money.
While Facebook is very successful, the question is: at what? It’s great at creating a community of time-wasting freeloaders, but it needs to be good as an advertising medium to be worth anything to the institutions falling all over themselves to get in on the ground floor of its stock.
To compare the new and the old way of tech, let’s just say, for the sake of argument, that there are two kinds of Internet companies – Googles and Facebooks.
Instagram’s Facebook filter
The startup had millions of users, but, from the beginning, just one customer.
The predominant way of interpreting Facebook’s billion-dollar purchase of Instagram, in light of the social-networking giant’s forthcoming IPO, is that Mark Zuckerberg had to pick up the photo-sharing app to boost his company’s mobile engagement. That would allow him to guard the mobile flank against incursions from Google, Twitter, and whatever other social-media tools might next arise.
That may be true – and it may even be the way Zuck thought about the deal when he swallowed hard and ponied up the purchase price. But that way of analyzing Facebook’s pickup, and the pickup of dozens of other startups, not just by Facebook but by Google, Twitter, LinkedIn and others, is probably not telling the whole story. Here’s a different theory, one that better describes the tech world that we, the users of the Internet, now inhabit: Instagram may have had millions of us as its users, but it was really built for just one customer: Facebook.
Silicon Valley, for too long, has confused the issue of what it means to be a user of a website, service or app, and what it means to be a customer of the app. Intuitively, you’d think they would be one and the same: The person using the app is the person consuming the app. But increasingly, apps are being made to grab the attention of the hegemonic companies in tech. Whatever it takes to get bought.
Sure, startup CEOs are careful to refer to their user bases as just that – users – but even when money changes hands, those users are cattle to be herded toward a cell on a venture capitalist’s spreadsheet, to help the VC decide whether to fund another pivot, engineering acquisition, rack of servers, whatever. Users are just another dart, basically, that startups have to hurl at the bull’s-eye and ensure success.
A colleague of mine tells a story: You can tell when a tractor was made to be purchased by a farmer, and you can tell when a tractor was made to be purchased by a corporation to be used by its employees. Tractors whose users are also the customers come equipped with every convenience, from a satellite radio to Wi-Fi to all the cupholders a farmer could dream of. They drive well, and their controls are intuitive, because that’s what the average tractor driver wants, and what the tractor competition provides. Tractors bought by companies, for earthmoving, rock breaking and the like, come equipped with nothing but a hard seat and a prayer. Employees – mere users – don’t get any say on the amenities, or lack thereof.
Copious revamps social commerce service with a new twist
Pinterest has yet to provide many details about how it intends to make money from its fast-growing image-sharing social service.
But that’s not stopping others from trying to capitalize on the online service’s rich catalog of product images.
Copious, a social commerce start-up, launched a new version of its website on Monday that lets consumers buy many of the bags, shoes and other fashion accessories that get shared by Pinterest’s millions of users every day.
Pinterest is just one of several online social media services, including Twitter and Facebook, that the Copious site connects to, allowing consumers to create a personalized online storefront that changes as frequently as your Facebook newsfeed.
The idea is to create a shopping experience based around people you follow and their actions, rather than around static categories of merchandise. Instead of browsing pre-set selections of shoes or sweaters, a visitor to Copious sees an ever-changing mix of items, based upon whatever the friends and bloggers they follow are sharing or commenting on at that moment.
The result is a shopping experience that’s constantly morphing, supposedly giving consumers a reason to come keep coming back.
“Conversation is always ongoing. That’s why people go back to Facebook on a daily basis, but don’t necessarily go back to Amazon.com on a daily basis,” said Jim Rose, the co-founder and CEO of Copious.
Kleiner-backed Cooliris launches new website for photo-sharing service
Another photo sharing website has come into play. But this one is not new and already has a fairly decent following in the all-important mobile space.
LiveShare, the brainchild of Palo Alto startup Cooliris, is currently available as an app on iOS and Android mobile devices. But the company has now created a presence outside of these mobile platforms by launching a Web-based platform, which makes the service a bit more independent.
The website, which went live today, is targeted mainly at students, digital moms, young professionals and ex-pats who want to communicate effectively, Cooliris co-founder and Chief Executive Soujanya Bhumkar said. The app, in particular, has some streed cred amongst the ex-pat community.
It’s fast (really!), you can choose your group of friends each time for a particular photo or stream of photos, and everyone can comment on the pictures. Even those who are not on LiveShare can be roped in through email addresses.
Interest in photo sharing social services has spiked since Facebook made known its $1 billion purchase of two-year old Instagram. It remains to be seen if LiveShare manages to catch on.
Cooliris, which started off as a service to view photo and video content on the Web in a more visually appealing “3D Wall”, has raised $28 million from big names such as Kleiner Perkins Caufield & Byers, DAG Ventures, The Westly Group and international carrier Deutsche Telekom’s venture arm, T-Venture.
The company also recently created a new division — Adjitsu — which provides tools to make three-dimensional animated ads in mobile apps. That division is already seeing a lot of interest from both advertisers and ad networks, and growing at a rapid pace, Bhumkar said.
Unmetric gets funding to help brands gauge their social media clout
What would you get if social media ego measurement tool Klout had a baby with comScore, the Web traffic measurement firm? It would probably be Unmetric, a new “social media benchmark” tool that helps brands measure their social media engagement.
If you’re a big brand-owner all those Facebook Likes and Twitter Retweets by your customers and ‘fans’ are fine but what do they really mean in terms of engagement and customer sentiment? More importantly, how do they stack up against your rivals? These are some of the questions Unmetric hopes to help answer after raising $3.2 million in Series A financing led by Nexus Venture Partners.
Chicago-based Unmetric will debut its Unmetric Score, tailored for Fortune 500 companies, based on weighted data from at least 24 qualitative and quantitative metrics measuring online brand performance versus competitors. The Unmetric Score will be somewhat similar to the Klout Score but Lux Narayan, Unmetric’s Chief Executive, hopes its own score will have, er…more clout (sorry).
As far as marketers and advertisers are concerned these are still very much the early days of social media as they try to engage with their customers in more tw0-way conversations in a range of these fledgling platforms. Even Narayan admits it’s too early to declare what the value of a “like” on Facebook really means in itself. But he believes a “like” for example offers a very important tool for brands in the new world.
“A Like is a right for the brand to engage in a conversation with their customer,” said Narayan.
Unmetric’s customers include Citibank and Nestle and measures data on more than 3,000 brands already.
Who’s Facebook going to buy next? Put your money on Foursquare
The news Facebook is buying mobile photo app start-up Instagram has sparked off speculation that social networking giant might go on a buying spree in the run-up, and after, its expected $100 billion initial public offering in a few weeks.
Irish betting house Paddy Power, in a fairly transparent PR stunt, has sent out the odds it’s offering punters who want to bet who would be next on Facebook’s list. In a sure sign that the list of names was rustled up overnight right after the news (a bit like today’s blog actually) the list starts off with more than a modicum of respectability with solid names like location-based check-in app company Foursquare at odds of 4 to 1 and note-taking service Evernote at 9 to 2. It follows with some other interesting names like Dropbox, Spotify and Pinterest all in single digit odds.
But towards the end of its list Paddy Powers seem to have run out of ideas and suggest odds as low as 40 to 1 of Facebook buying YouTube. Really? From Google’s cold dead hands? Even weirder it has the same odds of Facebook buying two failed social networks MySpace and British network Friends Reunited.
The odds on Facebook’s next acquisition according to PaddyPower. 4/1 Foursquare 9/2 Evernote 5/1 Dropbox 7/1 Spotify 8/1 Pinterest 16/1 Rara 16/1 Audiboo 25/1 Tumblr 25/1 Flickr 40/1 YouTube 40/1 MySpace 40/1 Friends Reunited
I’m no bookie but 1000-1 might be fairer odds of those latter deals happening. But then again, PaddyPower has odds at just a 100 to 1 of Al Gore winning this year’s Democratic Presidential nomination.
Still, who would have bet a less than two year old start-up with around a dozen employees led by a non-engineer with no revenues could sell for $1 billion? Anything’s possible.
Psssttt, Hey you, at Yahoo – You wanna make 25 grand?
Here’s one good thing about being a Yahoo employee: if you quit and join Yammer, a social networking service for businesses, in the next 60 days you’ll pocket a $25,000 signing bonus.
That’s the offer that was tweeted on Thursday by Yammer CEO David Sacks.
“They’ve got a lot of great engineers there,” Sacks said in an interview with Reuters. “The talent has been misused by senior management which has made a lot of bad decisions.”
Of course, when Sacks (whose credits include producing and financing the 2005 film Thank You For Smoking) isn’t whispering sweet come-ons to Yahoo employees, he’s holding a gun to their heads. Infuriated by Yahoo’s controversial decision to sue Facebook for patent infringement, he vowed a day earlier that he would never hire another Yahoo employee that doesn’t leave the company in the next 60 days.
Sacks later revised his ultimatum, so that the blacklist applies only to Yahoo senior managers and not rank-and-file employees. But he noted on Thursday that people who continue to work at Yahoo do so at their own peril.
“There will be a growing stigma attached to working at Yahoo as long as it continues to pursue this type of patent troll strategy,” Sacks said.
Regardless of how Yahoo workers feel about their employer’s litigation strategy, it’s not hard to imagine that many in Sunnyvale are brushing up their resumes. The struggling Internet company is said to be preparing for a massive reorganization that could slash thousands of jobs.
Vevo relaunches with closer Facebook ties
Vevo, the music video company, has relaunched the popular site with a more personalized, social, long-play viewing experience getting closer and further away from that MTV experience at the same time. One of the big changes is that you can now only get the full benefits of Vevo with a Facebook login in, which allows you to create a personalized Facebook playlist and share the videos you’ve watched with your friends on Facebook.
Vevo was the second most watched online video service in the U.S. in January with more than 51.5 million unique visitors watching an average of 62 minutes of video that month according to comScore. It is also YouTube’s number 1 partner.
A reminder that Vevo is owned by Universal Music Group, Sony Music Group and the Abu Dhabi Media Company, It also features music videos from EMI and many independent labels but not Warner Music Group, the third largest label owner.
Vevo’s changes are going down similar routes as many other ambitious online services which believe they need to have a significant social presence to grow and keep users involved sharing detailed traffic data voluntarily and adding value for advertisers and other partners.
In some senses you could argue there are ‘no surprises’ from the MTV of the early 21st Century.
Here’s Vevo executive Michael Cerda talking through the changes on Vevo’s blog:
from Paul Smalera:
What real Internet censorship looks like
Lately Internet users in the U.S. have been worried about censorship, copyright legalities and data privacy. Between Twitter’s new censorship policy, the global protests over SOPA/PIPA and ACTA and the outrage over Apple’s iOS allowing apps like Path to access the address book without prior approval, these fears have certainly seemed warranted. But we should also remember that Internet users around the world face far more insidious limitations and intrusions on their Internet usage -- practices, in fact, that would horrify the average American.
Sadly, most of the rest of the world has come to accept censorship as a necessary evil. Although I recently argued that Twitter’s censorship policy at least had the benefit of transparency, it’s still an unfortunate cost of doing global business for a company born and bred with the freedoms of the United States, and founded by tech pioneers whose opportunities and creativity stem directly from our Constitution. Yet by the standards of dictatorial regimes, Internet users in countries like China, Syria and Iran should consider themselves lucky if Twitter’s relatively modest censorship program actually keeps those countries’ governments from shutting down the service. As we are seeing around the world, chances are, unfortunately, it won’t.
Consider the freedoms -- or lack thereof -- Internet users have in Iran. Since this past week, some 30 million Iranian users have been without Internet service thanks to that country’s blocking of the SSL protocol, right at the time of its parliamentary elections. SSL is what turns “http” -- the basic way we access the Web -- into “https”, which Gmail, your bank, your credit card company and thousands of other services use to secure data. SSL provides data encryption so that only each end point -- your browser and the Web server you’re logging into -- can decrypt and access the data contained therein.
By blocking SSL, Iran has crippled Tor, a program that enables Internet users to anonymize not just their content but their physical location as well. Tor is a very common workaround for users in totalitarian regimes to access Twitter, Gmail, Facebook and other services. It’s hard to come up with an apt analogy for Iran’s unprecedented blockage -- it’s not just that the letters you send are read by the Post Office and photocopied for their records, it’s that the Post Roads themselves have been closed off, so you can’t even send a letter in the first place. That’s the net effect of blocking SSL in Iran.
The hacking group Anonymous has brought down all kinds of websites in protest, mostly over copyright, in the U.S. and Europe. I don’t advocate their targeting any country’s servers for retribution, but where is the outrage or public demonstration or media attention over the denials of Iranians’ basic freedoms to communicate, via the Internet?
Unfortunately, it’s still too easy for Internet companies and even the Internet’s founding fathers to dismiss the importance of the tools they created in fostering free and open public dialogue, especially in places like Iran. Recently, legendary engineer and Google Vice-President Vint Cerf published a New York Times op-ed entitled “Internet Access is Not a Human Right,” where he wrote: “Internet access is always just a tool for obtaining something else more important.” How wrong he is. Cerf’s line of thinking eviscerates the Internet -- the wonder of the modern world he helped build. Cerf argues that humans have the right to “lead healthy, meaningful lives,” including having “freedom from torture or freedom of conscience.” Yet, we live in the 21st century: It’s hard to see how, among people whose economies are developed enough to afford them communication devices, Cerf would excuse governments that curtail their citizens’ freedom and right to use the ultimate communications tool -- the global network of the Internet. In fact, in underdeveloped parts of the world, the cost to have a cell phone that connects to the Web can be quite affordable.
I’m not arguing semantics here -- if our society excludes the Internet from the fundamental rights of human communication, we also excuse totalitarian regimes like Iran’s from any repercussions when it comes to blocking that avenue of human contact. It’s a dangerous compromise to make in a world that only gets more digital with each passing day. And it also conveniently excuses the free world from having to do much of anything about it. We wouldn’t forgive Iran if it threw 30 million citizens into solitary confinement -- so why would we ignore it when the Iranian government effectively cuts the entire population off from the outside world, to stifle their voices during a critical electoral cycle?
The example of Iran is well taken in this article, but I would like to add one: I lived and taught in Zhuhai, China, from August 2007 to July 2009. As an expatriate, I didn’t seem to have my computer monitored and censored very much, but my students at United International College surely did.
We take our freedoms for granted. I don’t any more. I know what it is like to live in a country where “freedom of expression” is a sham. We shouldn’t let that happen here, which doesn’t mean condoning criminal activities on the net, but it does mean a conscious guarding of freedom of speech.
