Facebook’s (much deserved) media nightmare continued this week when it came under criticism for spamming members who signed up for two-factor authentication. This was followed by charges that its Protect VPN software (based on its Onava CDN) was essentially corporate spyware. The collective outrage over Facebook and its actions might result in a lot of talk, but it won’t really change Facebook, its ethos, and its ethics. Let me explain!
The companies have a core genetic profile and it is tough for them to deviate from it. That DNA defines every action, reaction, and a strategic move made by a company. The DNA represents a company’s ethos — and to a large extent, its ethics. Microsoft was and will always be a desktop software company, albeit one that is doing its best to adapt to the cloud and data-centric world. It has turned its desktop offerings into smart revenue streams on the cloud.
Google’s core DNA is search and engineering, though some would say engineering that is driven by the economics of search, which makes it hard for the company to see the world through any other lens. Apple’s lens is that of product, design, and experience. This allows it to make great phones and to put emphasis on privacy, but makes it hard for them to build data-informed services.
Facebook’s DNA is that of a social platform addicted to growth and engagement. At its very core, every policy, every decision, every strategy is based on growth (at any cost) and engagement (at any cost). More growth and more engagement means more data — which means the company can make more advertising dollars, which gives it a nosebleed valuation on the stock market, which in turn allows it to remain competitive and stay ahead of its rivals.
Just look at these charts and you start to see why Facebook is addicted to growth and engagement. Engagement gets attention, and attention is a zero-sum game. Time spent on Facebook (or Messenger, Instagram, or WhatsApp) means that’s attention not spent on Twitter, Snapchat, or anyone else who dares to compete with them.
Facebook’s challenge is that their most lucrative market — the US and Canada — are saturated. And to keep making money in these markets — already a ridiculous $27 in ARPU for the last three months of 2017 — they need us to give more time and attention to them.
In 2017 compared to 2016, the average price per ad increased by 29%, as compared with approximately 5% in 2016, and the number of ads delivered increased by 15%, as compared with approximately 50% in 2016. (From Facebook’s 2017 10k filing)
This is a crisis situation for Facebook because it doesn’t make as much money from markets outside of the US and Canada. For the same three months, it made $2.54 in ARPU in Asia-Pacific, $1.86 in rest of the world, and $8.86 in Europe.
The ARPU numbers, especially in the US and Canada, explain why the company is publicly talking about the challenges of fake news and how it is trying to remove such news from users’ feeds — and instead refocusing on friends and their stuff. It has to make polite noises around fake news (aka spam) in order to get people back into the fold and staying on the site longer.
I don’t think this change of heart on the part of Facebook and Mark Zuckerberg is not altruistic. However, it is pretty evident that they are trying hard to get us back onto Facebook, and more often. At the same time, the company is running a campaign to burnish its image and come across as a company under siege, as outlined in a recent Wired cover story. But Facebook isn’t the victim — it never is, and it never will be!
So now you know why Facebook does what it has been doing recently — sending various messages constantly to get you back on the service. I know first hand. I left Facebook and not a single day has gone by when I don’t get at least a couple of emails or some SMS messages trying to get me back with notes about what friends have posted recently, or birthdays or other milestones. I keep unsubscribing and they still keep coming. Now I’ve set up a spam rule: all emails from Facebook.com go straight into the spam folder.
Facebook’s DNA also explains why it is pushing Protect (the VPN) and what it brings to the table. First of all, it allows the company to keep tabs on what apps people are using in different parts of the world, which in turn gives it a leg up on who or what to copy or, potentially, acquire.
The VPN data also allows Facebook to better target its ads — much like how Google Mail and Google Chrome allows Google to better target what ads you see. By the way, Facebook isn’t the only one who is taking data from VPN mobile streams. Other data brokers buy data from other VPN apps. To be clear, just because others are doing it doesn’t make it right for Facebook to follow suit. I would love to see a US version of GDPR — a citizen data rights manifesto — to be put on the table.
How does Protect help Facebook?
Protect can tell that you browsed H&M’s North American site, visited NYTimes.com, and bought groceries on Farmstead. It can figure out how much time you spend on various sites and services and start to build a better profile of your online usage for smarter ad targeting and to place you in more and more buckets.
In other words, Protect brings more granular and refined data into Facebook’s system, which in turn allows Facebook to refine its algorithms and become more efficient at targeting of ads. It is especially more useful in the Asia Pacific region and other emerging markets where it is pretty tricky to create buckets and hyper-targeting. Overseas users of Facebook are using the social platform on phones that are usually pre-paid phones and don’t have as much personalized information available from third party sources to create profiles. Facebook needs to find more high-value customers in the hordes of users in Asia, Africa, and LatAm.
For 2017 , worldwide ARPU was $20.21 , an increase of 26% from 2016 . Over this period, ARPU increased by 41% in Europe, 36% in United States & Canada, 33% in Rest of World, and 22% in Asia-Pacific. (From Facebook’s 2017 10k filing)
Facebook’s ultimate goal is to make it expensive to buy hyper-personalized advertising — which is the Mount Olympus of advertising — and I am not surprised that Facebook is thinking about releasing touch screen smart speakers. It will be a great way to spy — sorry, I mean acquire more continuous data about you and further bucket you for future ad targeting.
This helps keep the ARPU growing, which in turn means Facebook will keep making more money. More money, in turn, allows it to keep Wall Street happy, crush rivals, and suck up all the talent in the market. And yes, it will also accept fake accounts and spam on its platform even if it compromises elections, as long as it makes money.
That may be a very simplified version of a sequence of events, but the fact of the matter is money and obsession with growth and engagement are what makes Facebook go around. That is embedded in its psyche, its DNA, and it will never change.
Facebook’s stated mission is to connect the world. They have already done that in the US, but their subsequent actions show that their real agenda is to extract user data — not strengthen connections. Just read their 10k filing and you’ll see it in black and white.
The increase in the ads delivered was driven by an increase in users and their engagement and an increase in the number and frequency of ads displayed on News Feed, partially offset by increasing user engagement with video content and other product changes.
Facebook is about making money by keeping us addicted to Facebook. It always has been — and that’s why all of our angst and headlines are not going to change a damn thing.