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Wile E. Even Has Business Cards

Facebook and the Problem of Product Integrity

Facebook is replacing the messenger button with a shop button, if this has not yet reached your FB server, it will soon. What? Isn’t Facebook a place for friends, why break the walled garden of the community to bring in an open web. Although the story of the coming classified ads infused version of Facebook has been circulating for months now, it is only recently that the publics of the internet really got interested. Within mere hours Facebook was apologizing as they had no idea what was actually being transacted on their network: guns, drugs, and sex — to say the least. A representative for FB was spinning that the posts were only allowed because of a technical issue, not a total lack of product integrity.

What do I mean by product integrity? (partial list)

After FB fired their news division, the newsfeed newstrend product has devolved into a fake news springboard.

For years, FB’s censors removed breastfeeding pictures but not any number of offensive images.

To justify the terrible state of news, Zuckerberg came out with his theory of the public sphere, which featured a strong tendency toward dialectical resolution of arguments and free speech absolutism — a mid 1990s dream of the Internet that has since been left behind.

Perhaps most importantly, the math that FB used to sell video advertising was deeply flawed, counting all seconds of viewing and dividing by the number of non-bounced viewers. To translate that into a practical example, people used to get tons of junk mail. Facebook is in all reality a junk mailer, they send tons of video to your phone/computer. They claimed that every second spent determining that it was in fact junk mail before being thrown in the trash was in fact a sincere read.

So, Trash the Product?

I have written on other occasions about the problem of false balance — a poorly written newspaper won’t be forgiven, one with an editorial perspective may be even be embraced. You can never fix the problem by trashing the product.

The problem at FB is that people aren’t clicking and liking as much as they used to. FB seems to be about the equivalent of CBS for primetime attention. That is a multi-billion dollar company, but not a mega giant that exceeds the value of Toyota, also Walmart, and all oil companies. This is not a problem unique to Facebook: Apple, Google, Amazon, and Mircosoft are also dramatically overvalued.

Since we now know that the video advertising product wasn’t worth nearly as much as we thought, why not jam the classified ads product into the interface? Why bother to check the quality of the product — after all everything that Facebook touches turns to gold. On the news of the video ad calculation busting the stock went up.

But the stock market doesn’t care?

I am a big believer in fundamental (rather than technical) analysis, it is the primary framework under which I publish industry work. Fundamental analysis as derived from Benjamin Graham offers a chance to translate communication research into business and sometimes economics. The starting point is the story of Mr. Market — which is the opposite of an efficient market theory. Although the prices of the market may generally follow the fundamentals, at any given time the price offered by the stock market may have little to do with the underlying business. Understanding these cleavages is a key task for industry studies.

There are two answers to the question of this section. First, getting at the reasons why the market remains inflated on FB is fascinating to me. It is a major topic of my upcoming book. Second, Wile E. Coyote falls eventually. Just because FB is able to stay ahead of the bounded rationality of the market right now doesn’t mean they will stay ahead. What will the market do when the next round of FB reports comes out with dramatically lower revenue? FB isn’t planning on doing transaction facilitation for this classified ads feature, so it is a pure ad play, which we know is already on thin ice.

Sure, converting FB to become Twitter+Craigslist with the pooled attention of an affinity network could work. But as a host on CNBC noted adding the raw internet into the FB experience seems to break the social contract of the platform — that it is only for you and your friends. The other hosts didn’t care, because “they have to do something with all this attention.” Losing product integrity is the last thing they should be doing.

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