A Collection Recap: The Facebook Files

A few times a year, I revisit some collection commentary, and Facebook has been a topic of discussion a few times in the past months. In honor of the company’s recent news, I re-present a few pieces of Facebook commentary. If you would like the full comments, the archive is here.

From March 11, 2018, “Conservative and Feminist?”

(This was 6 days before the data scandal broke.)

Analysts have been declaring Facebook dead for a few years. Facebook has been laughing at them. Until now. For the first time since opening to the public, Facebook shed active users, and time on platform is dropping. The easy answer is the algorithm changes [the company just rolled out], but that isn’t quite right. It is not just that Facebook changed how our posts go out, it is what the change shows that they think of their customers.

Facebook has been running a new payola scam. Pay-to-play. Unlike the vintage radio scandal, however, Facebook steered businesses into positions where only their pay-to-play would work. For a few years Facebook hooked entrepreneurs, writers, and artists with easy publicity. These professional pages gained followers. But when Facebook wanted to make money off advertising, they did not offer these pages benefit of their algorithm to grow their audience. I would have paid for that. Instead, they ransomed the page’s followers. “You have 1000 followers, but if you want to still reach more than half of them, you’ll have to pay up.” Payola.

Payola is hard to regulate, which usually doesn’t matter because the public hates the game, so players keep it small and quiet. But FB got cocky. People had been frustrated with the need to “boost” to reach existing followers already. The recent algorithm change was a drastic cut with little warning. It put companies out of business.

Zuckerberg can take all the listening tours he wants. Sandberg can give women in the workplace speeches until all professional parking lots have maternity spots. (That was one of her big moments in Lean In, closer parking for pregnant women.) Company actions show contempt for customers. FB was planning on business page owners simply reverting to their personal profile when the algorithm changed. Somehow they did not connect the dots between upsetting business owners with upset regular users. The only thing missing now is the upstart platform that everyone can escape to.

From April 8 2018, “What’s Wrong With Conservatives?”

Grow Up

Peggy Noonan: “We’ve always had a thing for youth, but this respect for immaturity is new.” It’s an excellent read, but I take issue with a point at the end. Mark Zuckerberg, one of the immature, is going to Congress to talk about regulating social media. Noonan says, “Mr. Zuckerberg invited Congress to regulate him. Wondering why, it has occurred to me it’s because he knows Congress is too stupid to do it effectively.” I disagree. This is Facebook’s “drawbridge up” moment. They’ve hit their growth ceiling and gotten into trouble. They want regulation to slow potential competition down. Dragging a new platform’s growth is their best protection against failure at this precarious moment. If people had another Facebook like option, they’d already be gone. And Zuckerberg isn’t worried about Congress’s stupidity. He’s counting on it. He’s probably got a team ready to offer up for a regulatory board, and each one of them has a secret stock deal that vests upon their retirement from the regulatory authority. They keep FB safe, they get a nice payoff. It’s the regulatory capture game, only like everything internet, it will play out 10x speed.

From April 29, 2018, “The End of Free Internet”

Not much has changed here, except it turns out that, yes, Facebook’s first quarter numbers were not-quite-right. They were hiding a decline, specifically a decline in active hours on the site, which just happens to be the thing the company has monetized, as Lou Kerner pointed out in January, again in April, and then yesterday. Incidentally, in addition to the decline in hours on site, the Facebook quarterly conference call also spooked investors by providing new data. In his introduction, Mark Zuckerberg told the audience that the company included users of all of their other platforms, such as Whatsapp and Instagram, for the first time. He said they did it because it better reflects the number of people using their products. That could be true. But introducing new data is a bluffer’s tell. Savvy analysts ask, “Why are you giving me this info now?” and with Zuckerberg’s low credibility after months of dodging scandals, the savvy analyst is probably looking for what he might hide with those numbers rather than what the numbers might show. That is how the quarterly conference call started. The rest of the call failed to assure people that Facebook wasn’t hiding bear-ish numbers and so the stock started diving during the call, and by the turn of 24 hours, Facebook had posted the largest single day market loss in history. Just a historical reminder, the next two on that list were Intel and Microsoft during the dot-com bust of 2000.

The End of Free Internet

Megan McArdle has been great on journalism lately. This week she explains why we, the public, will think that journalism has gotten expensive soon. We never paid its real cost:

For more than a century, magazines and newspapers were what’s known as a “two-sided market”: We sold subscriptions to you, our readers, and once you’d subscribed, we sold your eyeballs to our advertisers. That was necessary because, unbeknownst to you, your subscription dollars often didn’t even cover the cost of printing and delivering the physical pieces of paper. They rarely covered much, if any, of the cost of actually reporting and writing the stories printed on those pages. And you’d probably be astonished at how expensive it is to report a single, relatively simple story.

But that was okay, because we controlled a valuable pipeline to reader eyeballs — a pipeline advertisers wanted to fill with information about their products. You guys got your journalism on the cheap, and advertisers got the opportunity to tell you about the fantastic incentive package available to qualified buyers on the brand-new 1985 Chevy Impala.

When Facebook soaked up all the advertisers (and FYI, I don’t think those first quarter numbers announced this week are as glowing as the reviews suggest), that advertising subsidy, if you will, disappeared. So writers either do this philanthropically (hi!), find a benefactor or lots of them (see everyone on Patreon), or start charging the audience the real cost of the service. It’s the end of the free internet — at least if you want the good stuff.

To sign up for the Sunday Collection, go here.