Viewpoint: Does Facebook Owe Its Users Money?

The tools of the tech industry are seductive, but they are hollowing out the economy

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Zef Nikolla / Facebook / Getty Images

Facebook CEO Mark Zuckerberg speaks during the Nasdaq opening bell in Menlo Park, Calif., on May 18, 2012

What you usually hear about Facebook going public is disappointment. The initial public offering got more publicity than any in recent history, yet the stock plunged quickly and has bobbed up only into mediocre territory since. You also hear about the anticipated solution: Facebook stock might finally perform well once the company finds a way to place more ads on mobile phones.

(MORE: Facebook’s IPO One Year Later: Mobile Growth, Legal Headaches and a Stalled Stock Price)

But that kind of short-term analysis masks the bigger issue, which is that a dumb ideology has forced most consumer-facing Internet companies to focus on a single business plan that doesn’t have a future.

The ideology was first adopted by Google around the turn of the millennium. Since computers would continue to get cheaper and cheaper, following Moore’s Law, why not make the services free? It’s the data that’s valuable, according to this line of thinking, so online companies can give away the computation and keep the data.

This was the opposite of the business formula of the earlier PC era. Before computers became cheap and everyone got online, those who owned personal computers also owned their own data. Google’s idea was to centralize the information-services industry by demonetizing it. No one can compete with free.

(WATCH: Jaron Lanier: Who Should Own the Future?)

If the new formula was to give away the computing but keep the most valuable data, how would money be made? Well, the term advertising was repurposed. Where it used to mean an act of communication, a romanticizing of a product, now it would mean micromanaging the options placed in front of people for pay.

It’s a fantastic business plan in the short term. Google, by owning gigantic computers, can outcompute smaller competitors. The more openly that information is shared, the more advantage Google gains. Google’s users are not its customers. Instead, the customers are the advertisers, who pay to place links in front of users, based on “Big Data” analysis of how the users can be most effectively manipulated.

Google’s customers, the advertisers, are practically locked into positions through an auction system. If a customer contemplates moving business to, say, Facebook, then it is a certainty that that customer’s next nearest competitor will win the abandoned position.

The idea of giving away computation but keeping the data in order to use giant computers to predict how to best manipulate people is really the only possible business plan if information is to be “free.” Every other company is forced into a shrinking pool to compete with Google.

This is Facebook’s core problem, not the shift to mobile. Even if it can win away some of Google’s empire, it is nuts that two companies that do completely different things should have to compete so directly. Search and social networking are different enough that they should not be limiting factors for each other’s commercial success.

(MORE: Facebook’s Stock Price Is the Least Important Thing About Facebook)

Moreover, it is ordinary people who provide the information that makes companies like Facebook so powerful and valuable, but they don’t get paid for what they contribute — their own data. Behind every tech network hides a crowd of disenfranchised people, and the network effects that have made these companies so powerful will continue to hollow out the “information economy.” It started with musicians and journalists, but surgeons, lawyers and all kinds of other skilled workers are next.

A universal micropayment system, in which people are paid when the data they add to a network is used by someone else, provides a way out of this trap. When the biggest companies have to pay for information, manipulating users will no longer be a business plan — and the companies will have to provide new kinds of value.

MORE: How Silicon Valley Is Hollowing Out the Economy — and Stealing From You to Boot

Lanier is currently a researcher with Microsoft Research, but this piece was not viewed by Microsoft in advance and does not reflect a Microsoft point of view (Microsoft was an early investor in Facebook). Lanier has also sold a start-up company to Google.

25 comments
BenWax
BenWax

Facebook doesn't need to pay its users for contributing content. Our payment IS Facebook. We get access to the biggest social networking site and hundreds of features - and we don't have to pay a single penny. If you don't think the reward of social networking is worth the information you voluntarily give up, that's fine, but in most cases the platform you get is worth the ads.

daspalash4
daspalash4

I fell Mark Zukerberg should pay something, or atleast recognize early supporters of his venture. It's like an early bird prize. FB should be able to repose trust and pay them because the people trusted on his brand. 

adjusterrick
adjusterrick

 Could it be that most Main St folks were smarter than the Wall Streeters by NOT buying into the fraud of the Facebook offering??? Facebook will go the way of all social fads.....bye!

JackPerisich
JackPerisich

The one that should be paying out is Netflix. They should be sharing their subscription money with the ISPs that have to spend more and more money to increase bandwidth so their users can stream videos. It's akin to taking water from everyone's faucet and then bottling it and selling it without paying the provider of the water. It is very abusive and borders on stealing. I'd like to see Netflix share revenue with ISPs and help them provide more bandwidth. A class action suit is very much in order.

Vijay Banga
Vijay Banga

People are facebook not the other way round

Reynold Nugter
Reynold Nugter

No, it's a free service. No one forces us to use it. Users use Facebook as it's provided. Don't like it, don't use it.

Dubey DrRam
Dubey DrRam

Social media needs to carry some sort of social responsibility

Dubey DrRam
Dubey DrRam

Facebook hollowing out social norms & value more

Dubey DrRam
Dubey DrRam

Some corner of us should not be globalized and marketable commodity

Ryan Bliss
Ryan Bliss

I don't know about paying users but they would help themselves in the long run if they cut page owners in on the as revenue. They are only alienating them by requiring payment to reach their own fans.

DerekZary
DerekZary

They do owe the user's because the user's are the first ones in charge of building up their system - and that is where it started that now advertisers are paying to be seen on facebook - why ? because it got popular , and it wouldn't have except FOR the USER'S...-.


Jelani Nkozi
Jelani Nkozi

buy the stock...im sure it will pay a yield over time.

ziraprod
ziraprod

They DO NOT owe the Users.. but they do owe the initial purchasers, in theory.

Eric Johnson
Eric Johnson

if you purchased FB under $20 it is paying you; you could have exercised long call options up near $30 and now are selling calls against it to make a premium while it has a temporary correction. don't worry fb will have its day again. you sound upset cause because you paid to much for the stock. try selling the $26/25/24 calls while its pulling back.

SusanBishopGraham
SusanBishopGraham

I am signing on for 1st time to a commercial publication, because I like "Time", and it is hard to find a paper copy lately when I want one! I would say the problem with this editorial, is that the game has completely changed & you cannot change it back by saying just that "this would be a good idea".  A whole generation has now grown up, who think that publishing their "stuff" for free-access ( whether that "stuff" is data, science, technique, art / music, memoir, or editorial opinion ) is a Good Idea.  Some guys might think withholding the data until there is payment is a good idea, but others beside them will publish it as open-access.  What this new concept will do to the quality of data, art, editorial, etc., is yet to be seen, really, but the accessible quantity is certainly up. ( Thus I read your article in Time, without requiring myself to find & buy a copy of the magazine.  ... 3 cheers for accessible-content.)

hectoplasma
hectoplasma

@BenWax you should read Jaron Lanier before admitting that our payment is facebook. A little naive from my perpective.

MMcCubbing
MMcCubbing

You're kidding, right? The ISPs *ARE* paid for that bandwidth. They're paid by their customers, the people who choose to use Netflix. Forcing Netflix to pay ISPs for access to the customers would set a dangerous precedent that would stifle innovation by preventing new start-ups from being able to afford the costs of business and discouraging existing companies from expanding into the online world.

ukjb
ukjb

@JackPerisich 
ISPs overcharge as it is and you want them to get MORE money? let me guess, you work for one of them...