Opinion: Facebook’s billion-dollar content grab
Originally published in The Montreal Gazette
Changes in private company valuations can be a bit like government debt. Throw around a few zeros on the right side and, soon enough, people stop keeping score.
MONTREAL – Changes in private company valuations can be a bit like government debt. Throw around a few zeros on the right side and, soon enough, people stop keeping score.
Facebook’s gross revenues from advertising were less than $4 billion in 2011, meaning that it was now valued at almost 25 times its gross revenues. The cleavage between real revenues and perceived value was growing rapidly. By means of comparison, Apple’s valuation is now close to $500 billion, but its 2011 revenues were $108 billion, a ratio of gross revenues to value of less than five. Could it be that the logic of the dot-com hype was repeating itself? Or was something much bigger going on beneath the surface of these astronomical numbers?
But that’s only part of the story. The reality is that, having developed a de facto monopoly on social networking, Facebook has included Terms and Conditions in its user contract that would have turned people away in droves had the marketplace for its services been a more competitive, decentralized one.
But wait, Facebook replies, the license does end when you delete the content or your account. Unless, the contract provision states, it has “been shared with others, and they have not deleted it.” Rewind that last part? Unless it’s been shared with others? Isn’t that the very raison d’être of the site? And who is the cryptic they who must also delete the content for Facebook to lose the license? Is it all of those who have been sent the content, or have somehow gained access to it? Arguably, yes. And the magic trick performed by Facebook’s legal department is complete. The license you grant to Facebook on the content you “own” is, for all intents and purposes, a perpetual one.
What we are witnessing is nothing less than the largest concentration of public content in the history of mankind. The potential uses of it are manifold: commercial licensing, data mining and selling, packaging it with other entertainment products, granting access to it to governments or private companies. They are truly riveting and only limited by the imagination. That can be valued at $90 billion. And rising.
What would be a better model for users? One based on common sense. Content uploaded on a website would only be licensed for use on that website. I, the user, truly own it, he/she should be able to remove it from circulation in a straightforward manner. More elaborate licensing terms could be negotiated case by case, and include compensation for the user. No small print, no invisible tentacles, no hidden, planetary potential uses. No excessive hoarding of value.
“Facebook was not originally created to be a company,” co-founder and chief executive Mark Zuckerberg said in a letter that accompanied the IPO filing. “It was built … to make the world more open and connected.” This statement would be best read in association with media theorist Douglas Rushkoff’s recent analysis of the Facebook IPO in which he stated that the more money a company takes on in financing, “the more obligated it becomes to function in accordance with the properties and rules of money.” Social mission and missionary utopianism notwithstanding, Facebook’s increasing valuation is no accident.
Which means that we should fully expect Facebook to continue intensifying its content grab on its best, cheapest, and ultimately, most valuable asset. You.