Facebook is not free

The economics of much of the Internet is built on two valuable commodities: your time, and your content

When Facebook changed its interface earlier this fall, the social networks lit up with comments from users saying how much they hated the new way information was being presented to them on the site. People were upset that Facebook was doing things without considering its hundreds of millions of users. That outrage made sense to me. What didn't make sense was the large number of people who responded with variations of, "Shut up! It's free." That is fundamentally wrong.

Facebook is not free. While you don't have to pay to join the site, you nonetheless give Facebook two things that are much more valuable: your time and your intellectual property. Facebook gives you access to its system for free because it is in Facebook's interest that you spend time on the system and click links. So, what is your time worth? Quite a bit, when you consider that being on Facebook is keeping you from doing other things. You could be patching your roof or washing your car. Spend enough time on Facebook and you might end up paying someone else to do those things for you. Certainly, you could spend that time with your family. You might even be able to use that time to start a new business.

Those things help determine what your time is worth to you. But what is your time worth to Facebook? Again, quite a bit. If you spend your time clicking on the links that Facebook presents to you, you are helping to drive up the price that Facebook can charge for displaying those ads. And Facebook is very good at displaying links that you are likely to click on. What makes it so good is the other side of the Facebook formula: all that content that you provide to Facebook for free. For example, if your content indicates that you are engaged to be married, you can bet that you will see a wide variety of ads related to weddings and starting a family. Those advertisers are paying a premium to target you. This is how you make Facebook valuable.

Now, it's true that a lot of people never click on Facebook ads, but that doesn't mean those people aren't of value to Facebook. Most of them still create the sort of content that Facebook can't come up with on its own but that is the key to attracting other people to the site and keeping them there. The status updates that you post, the pictures that you upload and the videos and other Web pages that you link to all play a part in making the site sticky. Companies like The New York Times spend millions achieving stickiness with premium staff-generated content; Facebook (and quite a few other websites) depends entirely on what you bring to the site. Facebook makes it easy for you to let your friends see pictures of your new baby, but every time you do something like that, you are giving Facebook what it wants: eyeballs. And I already noted how your content is digitally evaluated so that Facebook can serve up the sorts of ads you are likely to click on. Why do you suppose that, after posting those baby pictures, you suddenly had all those links showing up to companies selling baby carriers and diapers?

OK, so let's say you never post any content, and you go on the site only occasionally to read some of your friends' status updates. Don't be hard on yourself -- you still have value in Facebook's eyes. You are a part of the big number that Facebook can tout (750 million users was the figure I heard most recently), and you're still part of the overall traffic that makes Facebook look like a lively place that advertisers are going to want to be a part of.

Facebook has monetized you. It developed an infrastructure that not just posts your content, but also microanalyzes that content to essentially determine how you think, and it then lets advertisers bid on you. Are you the customer or the product? Don't worry about it; you are both.

Most people do seem to understand all of this, at least on some level. Consider the Facebook hoax that was making the rounds a few weeks ago. There was a rumor that Facebook would begin to charge a fee for using the service. People who took the hoax seriously were outraged. Why? I think it's because we all know just how invested we are in Facebook. If a free e-mail service like Gmail started charging people, its users could switch to Yahoo. If Facebook were to alienate its users (its bread and butter) by charging for what had been free, I promise you that Google+ would love to have them. But these people realize that they have created unique value on Facebook that is priceless to them. Facebook makes it fairly easy to upload content, but next to impossible to extricate that same content. You can't just migrate your content elsewhere. The strong reaction to the idea of Facebook charging for its service suggests that we all know that our content has great value, and that the time we invested in organizing it is valuable.

Facebook is a great example of the economy that underlies much of the Internet. But it is hardly alone. The bulk of the most profitable Web companies are "free" sites that sell advertising. They sell your clicks, which in the aggregate create billions of dollars of wealth. What's more, YouTube (to take one example) depends on your videos for its content. Its parent company, Google, wouldn't have a business model if it didn't have access to all those websites that other people have spent time and money creating.

Facebook, YouTube, Google, LinkedIn, Reddit, etc. are all thriving companies because people love to share their own content for "free." Meanwhile, news sites, which spend hundreds of millions of dollars to put reporters around the world, are often struggling, or even bankrupt. So, yes, Facebook might not charge you, but it is far from being free. Facebook has made you its product. It has sliced and diced every aspect of what you look at, what you post, what you say your interests are, who your friends are. It has become Big Brother, not to control you, but to sell you to the highest bidder.

Let's all admit that this is true. Perhaps someday even Facebook itself will admit it, and we'll start getting from it the kind of customer support that we deserve as "paying" customers.

Ira Winkler is president of Internet Security Advisors Group and author of the book Spies Among Us. He can be contacted through his Web site, irawinkler.com.

Copyright © 2011 IDG Communications, Inc.

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