The COMRADITY Journal

Why isn't interactive technology stimulating the economy?

This week Ben Bernanke warned that without new business creation, the US debt levels are unsustainable. 

Supposedly we have a vibrant new business creation driver, interactive media (internet & mobile). 

What I've read this week sounds like it is written in the context of a vibrant economic boom driven by innovation via interactive media. My comments all relate to what I think it will take for interactive technology to stimulate the eoncomy.

Here are the articles I've read and commented on:

Paid Content: by Ben Huh  A Guide To The Cultural Battle That Is Reshaping The Media Business : Makes the point that Internet Culture is in a battle for dominance vs. Popular Culture and suggests that Internet Culture will win.  

A VC: Ad Spend Trends:  Fred Wilson points out the good news that Internet share of ad$ is up from 0 to 5% in just over 10 years.

Find an airplance to jump out of: Dave Winer tells the NYT  that there's still time to take a risk.

Software Product Granularity: building depth-first vs. breadth-first Bradford Cross tells us about the advantages of scaling up software development based on user scenario (breadth first) instead of technology function (depth first).  

Why Mark Zuckerberg should have a Carol Bartz Moment Robert Scoble suggests that even if he thinks Mark Zuckerberg has made mistakes, he deserves credit for growing a business, maybe even more than Carol Bartz has done for Yahoo!.   

Here are the comments I've made on these articles.  In sum, in my opinion, here's what it will take for interactive technology to stimulate the economy:

1. Don't rely on a the crumbs of a shrinking pie of advertising spending, instead, create value people will pay for.
2. Guarantee to NOT use personal data in ways that violate the sensibilities of the consumers to differentiate paid alternatives from free, ad-based options.
3. Interactive and traditional media should use the traditional licensing relationship to collaborate to experiment with and find new value worth paying for by the consumer.
4. When developing technology, consider both marketing scalability and user experience in addition to engineering efficiencies.
5. Instead of emulating/competing with Google and Facebook, emulate or compete with Steve Jobs and Apple. After all that's what Google and Google's former advertising strategist, Tim Armstrong at AOL, are doing. 

HOW MANY FACEBOOK ACTIVE USERS ARE THERE?

UPDATED:  Facebook revenues are driven by scale and data mining.  Some say the May 31, 2010 "quitfacebookday" was a bust because Unique Visitor numbers continue to climb.  But there is evidence that the traffic may be inflated by people changing their Facebook status, and/or tools like Facebook Connect and the Like button.  However, the data mining value is protected - even the information of those who have deactivated, deleted accounts, or just removed Facebook content from their pages.

Unique Monthly Visitor numbers are used by Facebook to define "active" users in the press.   The "500 Million and growing" reports we hear so often from Facebook and the press are global numbers:   http://www.businessinsider.com/facebook-reaches-500-million-users-2010-5 and http://techcrunch.com/2010/04/21/facebook-500-million-visitors-comscore/. 

The US numbers are about a fifth,  at just over 100 Million.  Comscore data that says that monthly unique visitors were 111.9 million  Download ComScore 2009 US Digital Year in Review: Page 7 in December 2009.  Corroborating the latter, Nielsen reports 116.3 Million unique visitors in the month of January 2010.  http://blog.nielsen.com/nielsenwire/online_mobile/facebook-users-average-7-hrs-a-month-in-january-as-digital-universe-expands/

On May 17th (2 weeks before the May 31st, "QuitFacebookDay"), Fortune questioned the backlash and reported that Facebook added a net gain of 10 million after announcing the controversial privacy changes.  http://tech.fortune.cnn.com/2010/05/17/what-backlash-facebook-is-growing-like-mad/

A Comscore chart confirms that US monthly unique visitors increased at a much faster pace after a plateau from December 2009 - March 2010.  The increase coincides with the Facebook policy change to shift of the default "share" from private to public and the launch of the "Like" button in April 2010.  Makes you wonder what the change in momentum means.   

Are these unique visitors "active" or "deactivating"?  According to an ABC News investigation,  Facebook does track deletions and deactivations but does not publically report them.   In the ABC report, search marketing expert Danny Sullivan suggests interest in deleting Facebook accounts was significant since it did impact Google search trends:

To see how recent the Facebook trend was, Sullivan used Google Trends, which shows the popularity of certain searches over certain periods of time.

Although there was not enough search volume for "how do I delete my facebook account," he said he found something interesting when he entered "delete facebook account."

"Yes, there is definitely a rising trend," he wrote. "Over time, more and more searches at Google have involved it, it appears."  Quitting Facebook: What Happens When You Deactivate?

Likewise, according to Joseph Dee, who started the movement,  "quitfacebookday" was a trending topic on Twitter. 

Directionally, polls suggest the Facebook backlash was real:

"60% consider quitting facebook" http://news.yahoo.com/s/ytech_gadg/20100521/tc_ytech_gadg/ytech_gadg_tc2184 

"40%+ of Mashable readers say no" http://mashable.com/2010/05/31/quit-facebook-day/

"78% of CBS poll takers say Facebook privacy control changes did not go far enough" http://www.cbsnews.com/8301-501465_162-20006164-501465.html

In addition to considering deactivating or deleting accounts, Facebook members also reacted to privacy policy changes by removing content:

"only 2% say they would quit, but 81% say they are using Facebook more carefully" http://www.sfgate.com/cgi-bin/blogs/techchron/detail?&entry_id=64627

The other question raised by the change in Unique Visitor momentum in April 2010 is how Facebook user participation in Facebook "partners" is reflected in the Unique Visitor numbers.     Fortune reports "partners" have grown to 100,000  http://tech.fortune.cnn.com/2010/05/17/what-backlash-facebook-is-growing-like-mad. 

One way Facebook has developed partners is Facebook Connect (launched in Spring, 2008) in which Facebook member activity on other sites is dynamically published on their Facebook page, without ever going to www.facebook.com.  Does this count as a Unique Montly Visitor for Facebook?

Another way Facebook has developed "partners" is the Facebook "Like" button.  The launch coincides with the sudden increase in Unique Monthly Visitor momentum in April 2010.  Wonder how Facebook "Like" button use factors into the Unique Visitor numbers, even if you never visit www.facebook.com? 

Another Facebook partner are 3rd part y data miners.  You'd think that removing content, deactivating or deleting your account would devalue Facebook to 3rd parties.  But it appears 3rd parties still have access to information.  According to the ABC investigation (above): 

If a user decides to deactivate an account, the profile information is no longer available on Facebook, but the site still saves all of the information in case the user returns.

"We preserve the account in its entirety. People often deactivate for temporary reasons and expect their content and information to be there for them when they return," a Facebook spokesman said in a statement.

and Facebook is vague about what happens when the account is "deleted" rather than just "deactivated": 

After the 14 days, Facebook said it purges the user's information from the site. The policy says copies of some materials may remain for "technical reasons," but Facebook did not immediately explain this further.

 Those "technical reasons"  include obligations to 3rd parties or partners.   When you deactivate or delete your account they still have access to some materials.    The ABC investigation confirms:

Still, Facebook said third-party applications or sites might be able to hold on to that information "to the extent permitted by our policies."

Why isn't Mashable publishing this post?

Mashable reports "How Facebook's New Privacy Controls Work" but won't post this reply to @NeilAdam:

Thanks for the link. So nothing has changed: Facebook's policy is that once you OR YOUR FRIENDS opt-in, they can share your personally identified info with affiliates without further opting-in. This parenthetical comment in the above link is the point: (applications and websites you and your friends use *already have access to your name, profile picture, gender, networks, friend list, user ID, and any other information you share with everyone*). This standard is way below what is required for commercial emailing which requires a double *opt-in*.

I guess I shouldn't be surprised by the neutral to positive coverage of the Facebook changes by ad based media since they plan to take advantage of the same policies Facebook uses.

They want Rep. Rick Boucher's proposed Internet Privacy Policy, which sanctions Facebook's policy to share personally identified info with "affiliates" unless you opt-out, to go through.

Unless of course you opt-out.

Comradity would like to know how you think your information should or shouldn't be shared. We will share the results with Rep. Rick Boucher and our clients only. We want our clients to do what you want not just follow Facebook's example.

Here's your chance to opt-in or opt-out to Facebook's policy being the standard for Internet Privacy Policy law by Rick Boucher: http://www.comradity.com/comradity/how-do-you-f...

 

Why isn't the New York Times publishing this comment?

UPDATE: NYTIMES finally posted this 5/25 comment on 6/1:

The NY Times started a discussion called: Should the Government Take On Facebook , but my comment is not accepted. . . Here it is:

Should the government take on Facebook?

*More importantly*, should the government sanction Facebook's "opt-out" standard for sharing personally identified information with any "affiliate" a website makes a deal with? Which is sanctioned by the Internet Privacy Policy bill which Rep. Rick Boucher has drafted http://www.boucher.house.gov...

I guess we should not be surprised that any media which relies on ad $ for revenue does not want people to know that Facebook's opt-out policy may become the standard for ALL media by law.

Comradity does want to know if people want to opt-in or opt-out. We will only share aggregated, anonymous results with Rep. Rick Boucher and with our clients who also want to know: http://www.comradity.com...

Sincerely,
Katherine Warman Kern
@comradity

 

The "Bait and Switch" Business Model

Facebook is taking a lot of flack for executing the standard "Bait and Switch" business model for the internet.   Google may have succeeded (so far) in the context of Search.  But the ethics issues are really magnified in the context of a Social Network Service, like Facebook.  

There are other business models.  But it takes a lot of confidence to buck the trend. 

If you would like business and your government representatives to know how you feel about your information being used to pay for their "free" services, please take a few minutes to complete the Comradity survey here.

We will share the results with Rep. Rick Boucher's office and our clients to encourage them that there is a market for more straightforward, transparent business models.

How ironic is this?

Serendipitously, I read two articles consecutively which tell a very ironic tale about Mr. Zuckerberg, founder of Facebook.

The first article, by Nick Carr, focused on this Zuckerberg 2009 quote¹: “You have one identity… The days of you having a different image for your work friends or co-workers and for the other people you know are probably coming to an end pretty quickly… Having two identities for yourself is an example of a lack of integrity”

The second article, by Nicholas Carlson, focused on this IM² from Zuckerberg's days at Harvard:

Zuck: Yeah so if you ever need info about anyone at Harvard

Zuck: Just ask.

Zuck: I have over 4,000 emails

, pictures, addresses, SNS

[Redacted Friend's Name]: What? How'd you manage that one?

Zuck: People just submitted it.

Zuck: I don't know why.

Zuck: They "trust me"

Zuck: Dumb fucks.

1. Danah Boyd shared the quote here.  She cites it is from the soon to be released book,  The Facebook Effect  by David Kirkpatrick.

2. SAI sources, according to Nicholas Carlson

The "get it while you can" era results in low expectations.

Read Write Web reports a study by British firm, YouGov Brand Indexindicates that attitudes towards Facebook terms of use are remarkably different among those over 35 versus those under 35.

The article points out there could be several reasons for this, pointing to a NYT article that suggests that “digital natives” believe they are responsible for controlling the use of their data and can control it by deleting it or simply not sharing. (However the article also indicates that 88% of young people think that websites should be required to delete all content after a certain period of time, according a study by the Berkeley Center for Law & Technology for the FTC privacy roundtable

The Read Write Web writer, Mike Melanson (@rwwmike), considers :“Or maybe it's entirely the other way around and it's not that the 35+ demographic is incapable of controlling their online identity, but they're more fully equipped to understand the implications of recent changes by Facebook and are making their opinions known.”

Here’s another consideration. Maybe people under 35 don't have very high expectations. There are no significant events during their lifetime to establish the perception that anyone makes money "doing the right thing".  In fact, their life's lesson is "get it while you can"

There is a theory used by experts, across the psychology, marketing, sociology, and management fields, that our perceptions are “set” when we are 10-13 years old. So 18-34 year olds were 10-13 between 1986 and 2005.

1986: The beginning of the end of advertising: As cable television Household penetration reached 50%, top management at storied, very profitable, privately held ad agencies cashed out to line their pockets, despite creating client conflicts and reversing agency organizational evolution towards integrated segmentation marketing, by selling to holding companies. ( AdAge provides the cable household penetration and years of holding company deals, the editorial comments are mine based on what I personally witnessed)

The first financial industry bust: De-regulation of the Savings and Loan industry to expand investment diversification and, later, to offset runaway risk by attracting more deposits, led to losses of $20 Billion at over 1,000 Savings and Loans (with millions of depositors?) and the collapse of the Federal Savings and Loan Insurance Corporation because it had only $4.5 Billion to cover the $20 Billion in losses. (Figures and timeline from Reuters)

The first Gulf War: US and its allies agree to a “no ground troops”, short term mission to air bomb Iraq to drive back Saddam Hussein’s invasion of Kuwait, driving oil prices up , re-doubling the economic downturn started by the mass marketing/media bust and the Savings and Loan collapse.

The internet boom: Wall Street led an investment boom in internet start-ups with the intent to cash out by Initial Public Offering. Since the primary use of these investments were to fund mass marketing campaigns, Wall Street improved the value of their agency holding company investments and pocketed record IPO fees (although I haven’t been able to find out what those dollars were, the spike probably reflected this depiction of the Nasdaq market cap from the Wikipedia Dot Com entry)


The internet bust: I’m looking for the dollars lost and the number of people negatively impacted, but haven’t found it yet. Importantly, the people who lost ranged from the individuals who worked at the IPO’ed dotcoms who were restricted from selling stock for 2 years to the individuals who bought the stocks and held them.

9/11: A perfect storm peaked on September 11, 2001. During the 1980's & 90’s, as Islamic cultures' resentment of Western culture and modernity rose, the global communication system Wall Street built enabled global networking, and Western Allies’ “in and out” First Gulf War strategy created tensions in the Middle East, all came together with a well-organized, secret attack on the United States.

The second Gulf War: President George Bush declaration of victory in 2003 turned out to be wishful thinking.

The sub-prime mortgage boom (which peaked in 2005): Learning nothing from the consequences of reducing regulations on the Savings and Loan industry and federal insurance agencies taking on too much risk, Wall Street convinces the US government to pass the Gramm, Leach, Bliley Act, altering the Glass Steagall act, passed after The Depression in 1933 to prevent financial institutions from taking too much risk, and pushed Freddie Mac and Fanny Mae to take on more risk.

While "under 35 year olds" have understandably low expectations, 35+ers whose childhood is more influenced by the stories of the "Greatest Generation", are appalled that the integrity they thought this Open Internet promised is actually being used as a bait and switch.

Giving Facebook the "benefit of the doubt".

Jeff Jarvis is giving Zuckerman the benefit of the doubt.  Robert Scoble comments on the post that "Most people don’t care, or have learned that Facebook is not about being private and don’t worry too much."  But I suspect most are giving Facebook the benefit of the doubt. 

After all, FB users have an archive of content that would be a pain to download and upload somewhere else and have spent an enormous amount of time convincing their friends to join their circle.

Facebook was propelled to success because they allowed you to "create your own public", as Jeff says above.  As evidenced by the buzz about being  surprised that we do not control who sees our stuff, Facebook borders on a false advertising claim.  But since their "advertising" has been "word of mouth", their defense will be that they never said that.  After all, read their original terms of service/privacy policy - they always claimed to have the right in perpetuity to use/monetize your content even though they reassuringly tell you that you "own it".  (Yes, and I still own the watch that someone stole 5 years ago, right?)

I really hope that the Internet Privacy Policy Act drafted by Rick Boucher considers the tendancy to believe there is a corporate conscience - especially when that corporation is relying on these customers to make their advertising claims. 

is it really so complicated? (Boucher privacy bill)

Continuing the theme, we are making it more complicated than it is . . . . The Internet Privacy Bill proposed by Representative Boucher is more complicated than it has to be.

A website should only be required to have a privacy policy if it does something beyond the acceptable.  Specifically, acceptable use of data is commercializing anonymous data, or, using personal data only for its transparent intended use (i.e. to complete a transaction or to help a commercial entity improve its own operations, products, or services):

But this bill requires all websites to have a privacy policy.  If the government made a policy that rewards websites that intend to keep their relationship with the consumer clean and simple, more would be motivated to do so. 

If Facebook affiliates, ad networks, or other 3rd parties offer value to consumers by sharing their personally identifiable data, then why wouldn’t they disclose the benefits to the consumer and ask for their consent!  The very fact they want to avoid asking for consent implies that there is no benefit to the consumer.  Why would the government encourage this or grant this freedom?  Furthermore, there is no downside to the ad networks.  If the individual does not want to consent, the ad network still has the anonymous data with which they can target ads to  be relevant to the interests of the general audience on a website or its webpage.   What is the difference between this ad and an ad targeted to an individual?  And what advertiser can afford to pay to personalize each ad?  I highly doubt there is data to prove the additional investment and impact on the intended target delivers  ROI. In fact, I think most consumers consider it creepy at this stage in the communication process that a website knows enough about them to push a personalized message when they have never shared information with that site.   In other words, requiring an ad network to ask for consent will not hamper their freedom of commerce one bit and may even improve their performance!

But this bill allows websites to share personalized data with affiliate 3^rd parties unless or until consumers “opt-out”. 

How do you feel about sharing your information?

Zuckerberg is telling advertisers and our representatives in government that we don't care about sharing our data with advertisers and others to make money in exchange for getting services for free.

For example, Rep. Rick Boucher has drafted an Internet Privacy Bill that sanctions Facebook policies.  Specifically, the bill allows companies to share personally identifiable data with "affiliates".

Thanks to the folks who completed our survey.  We will share anonymous, aggregated results with Rep. Rick Boucher's office and our clients who are interested in knowing how you think your information should be shared (not just taking Mr. Zuckerberg's word for it).  If you completed the survey and asked for results, we will be sending them on June 2.

As for the rest of you, all I can say is that the respondents were pretty definitive that they do not agree with the idea of a website sharing personally identifiable information with other sites on an opt-out basis.

Hopefully, we will convince Rep. Boucher to not make the Facebook policy the standard through legislation and the market will have a chance to decide if they want to use sites which employ the Facebook policy.