FB’s Fast Buck

Not sure what the Two Bergs have been talking about today, but the American one keeps insisting that the Australian one fundamentally misunderstands FB’s business model.

It’s easy really. Anything with an email address or telephone number can become a Facebook user and publish and read content. And 2.80 billion people were active monthly users as at 31 December 2020, leaving aside WhatsApp and Instagram. Not bad business if you can get it, given that doesn’t include any of China’s 1.5 billion people, and that FB’s 2020 net income was $US 29 Billion, with an operating margin of 38% and effective tax rate of 12%.

FB for Dummies would say that it relevantly offers:

  • to users, free content distribution and entertainment;
  • to commercial content publishers, a large audience and a way to monetize advertising space in their content;
  • to publishers and readers, targeted content matching, in return for which FB receives usage data from them;
  • to advertisers, targeted advertising in which advertisers pay FB to place ads next to content when read by a user with a matching profile.

Just by the way, advertisers paid FB $US 84 Billion in 2020. That was 98% of FB’s total revenue.

But maybe that’s fake news, and FB is not really in the advertising business. Its mission statement is “to give people the power to build community and bring the world closer together. People use Facebook to stay connected with friends and family, to discover what's going on in the world, and to share and express what matters to them”.

And it’s helpful to recall some of what Mark Zuckerberg said in 2019 on Understanding Facebook’s Business Model:

“… I want to explain the principles of how we operate. I believe everyone should have a voice and be able to connect … We’re very focused on helping people share and connect more, because the purpose of our service is to help people stay in touch with family, friends and communities.

… Ultimately, I believe the most important principles around data are transparency, choice and control … We believe regulation that codifies these principles across the internet would be good for everyone.

… Billions of people get a free service to stay connected to those they care about …  And small businesses … get access to tools that help them thrive.

… For us, technology has always been about putting power in the hands of as many people as possible … where everyone gets an opportunity to use their voice and an equal chance to be heard … That’s the world we’re building for every day, and our business model makes it possible”.

So there.

Forget about:

  • prioritizing fake news over real news by shutting down access to real news (in particular forget the fake news-fuelled violence in India, Nigeria, Myanmar and the US, and the fact that COVID and 5G conspiracy theories have run rampant on FB);
  • FB yesterday blocking access to the Australian Bureau of Meteorology and other governmental agencies and information, including public health, fire and rescue services and other community information.

It’s people power all the way for FB.

And why should FB pay anything to anyone who facilitated advertising earnings of only US$ 84 Billion last year.

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