Facebook’s Vindication?

About six weeks ago the reality of Facebook collapsed. The issue was not so much that they were selling advertising or advertising related information, but the seeming lack of control of the platform. Did Zuckerberg know what sort of company Palantir was? No. Did he have seemingly any idea about who had access to API information? Also, no. My position on Facebook can be summarized as: there is no one driving the bus, also there is only one bus. Given the dynamics of this market those selling affinity network products are monopolists and to the degree that we work for these companies for the benefit of platform access, they are a monopsony. Facebook was worried to the degree that they are running television advertisements about getting back to their original market position.

Earnings continue to be strong, which is taken as a sign that Facebook is healthy or that important revelations about the platform are seemingly trivial. The answer on all counts is: no.

What do earnings mean?

Earnings account for the degree to which parties were willing to buy advertising on Facebook. This is not an index of the degree to which people enjoy using Facebook. Adaptive strategies for poor corporate behavior are unlikely to be directly expressed in platform earnings. The users are paid in engagement, not in cash. Equilibrium may never form in this case.

Did you Delete Facebook?

No. The reasoning ins clear here. Social media are an important source of social support, especially for those with fewer access points for social support by other channels. It isn’t just that Facebook is fun — it helps you deal with your crises. The only people really deleting Facebook are people with rich off-line social networks or other online networks that are quite robust. In short, folks can adapt to the reality of a less friendly version of Facebook because they are disclosing less than they had in the past or are vaguebooking.

How long would it take for this to become a clear problem?

Maybe never?

The reason why Facebook needs users is for an ongoing flow of content. Ideally, advertisements will be embedded in affectively similar content. Do advertisers know if their content is well positioned? No. Is the circle closed? Do advertisers know if seeing an advertisement on Facebook was proximial to a purchase decision? No.

The entire point of retargted advertising is that an engagement with an advertisemetn proximal to a purchase decision (conversion) should be rewarded as it would be something about that occasion or text that would have faciliated the actual purchase.

Given the opacity of the market and the relative milquetoast position of the Facebook feed, it is possible that advertisers would not perceive a problem on Facebook and thus leave their spend intact.

Consider Google…

For the record, Google is much larger than Facebook, and spends far more on buying buildings and installing cables. Google also pays for traffic, this accounts for 21% of their ad income. Beyond this, the vast majority of Google’s advertising revenue comes from Google webpages. Further, Google’s other bets are increasingly looking busts. Immortality serum might help folks look at more advertisements in the distant future?

At first this doesn’t seem that remarkable — but it really points at the real story here: the online ad economy is no longer a lush garden but a desert with a handful of meaningful oaises. The networks associated with Google are less than a quarter of Google’s ad business. Beyond Google, IAB’s ads.txt product, along with stronger monitoring by buyers has changed the game. Blockchain innovations are especially profound here — with real verification buyers could be confident to buy somewhere other than Google and Facebook.

The deeper story here is that there are just a few safe places to buy advertisements online. It isn’t that ad buyers are somehow telepathically aware of some facts about the public, but that they face real challenges in planning their buys. At least with Facebook you know what you are getting. In this sense, the monopoloy at Facebook is undisruptable. Anything less than Facebook from the user’s or the buyer’s perspective is unacceptable.

Do Facebook’s earnings vindicate their handling of the privacy crisis? No, the tell us more about the weakness of the online ad business as a whole — and if Google tells us anything it is that the market is changing.

Associate Professor of Social Media, Oregon State: These are my opinions, not theirs. Read my book: Selling Social Media (Bloomsbury Academic), 2018.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store