To justify its sky-high valuation, Facebook will have to increase its profit per user at rates that seem unlikely, even by the most generous predictions. Last year, we looked at just how unlikely this is.

The issue that concerns many Facebook users is this. The company is set to profit from selling user data but the users whose data is being traded do not get paid at all. That seems unfair.

Today, Bernardo Huberman and Christina Aperjis at HP Labs in Palo Alto, say there is an alternative. Why not  pay individuals for their data? (…)

If buyers choose only the cheapest data, the sample will be biased in favour of those who price their data cheaply. And if buyers pay everyone the highest price, they will be overpaying.

{ The Physics arXiv Blog | Continue reading }

drawing { Tracey Emin, Sad Shower in New York, 1995 }

The buy, driven entirely by Zuckerberg, was made because Facebook’s CEO was petrified of Instagram becoming a Twitter-owned property.

Zuckerberg, we’re told, lives in perpetual anxiety, preoccupied by the fear of Facebook losing its place, terrified that youngsters will get their social networking fix from other services. That fear served as the catalyst behind his decision to buy Instagram and keep it out of the hands of a cross-town competitor.

This type of paranoia is relatively normal at Silicon Valley’s largest technology companies.

{ VentureBeat | Continue reading }

Nobody seems to love Facebook any more. People seem mostly tolerate it, because it’s convenient. And that’s why Facebook remains vulnerable.

Consumer-oriented social networking sites are like television networks: People will switch when there’s something better on another channel.

With its awkward design, 1990s-style layouts, weird privacy policies, and intrusive advertising, Facebook is vulnerable to the next best thing. Frankly, I think it’s just one online conversion program away from losing its customer base and becoming the next MySpace.

That’s not true of LinkedIn, though.  LinkedIn is all about business and people’s resumes.  Because its scope is limited to fundamentally dull information, LinkedIn is simply not vulnerable to something “cooler.”

{ Inc | Continue reading }

One research group inside Facebook, known as the Data Team, is tasked with the challenge of mathematically sifting through that data to look for patterns that explain the how and why of human social interactions. The people who do that, mostly PhDs with research experience in computer and social sciences, look for insights that will help Facebook tune its products, but have also begun to publish their findings in the scientific community.

{ Technology Review | Continue reading }

artwork { Jean-Michel Basquiat, Untitled (Mary Boone), 1984-1985 }

{ When the authorities send a subpoena to Facebook for your account information, what do they receive? }

related:

This paper reports a study which investigated adult social activity on Facebook. The data was drawn from an online survey (N = 758) and 18 in-depth research sessions (semistructured interviews and verbal protocols). The research explored the function of Facebook in making contact, maintaining contact and facilitating extended contact with online friends and the concept of ‘facestalking’. It also examined how the specific tools of Facebook (wall postings, status updates, events and photos) are used to communicate and socialise. The research concludes that Facebook strengthens existing friendships by supplementing traditional forms of communication (face to face, telephone). Also, participation in the Facebook community enables efficient and convenient contact to be maintained with a larger and more diverse group of acquaintances, thus extending potential social capital.

{ IJETS | Continue reading }

A Wall Street Journal examination of 100 of the most popular Facebook apps found that some seek the email addresses, current location and sexual preference, among other details, not only of app users but also of their Facebook friends. One Yahoo service powered by Facebook requests access to a person’s religious and political leanings as a condition for using it. The popular Skype service for making online phone calls seeks the Facebook photos and birthdays of its users and their friends. (…)

Facebook requires apps to ask permission before accessing a user’s personal details. However, a user’s friends aren’t notified if information about them is used by a friend’s app. An examination of the apps’ activities also suggests that Facebook occasionally isn’t enforcing its own rules on data privacy.

{ WSJ | Continue reading }

Facebook has trademarks on its name and many variations of it—including the letter “F.” The company is expanding its claim over the word “book.”

{ Ars Technica | Continue reading }

also { Facebook says it may sue employers who demand job applicants’ passwords }

Researchers have established a direct link between the number of friends you have on Facebook and the degree to which you are a “socially disruptive” narcissist, confirming the conclusions of many social media skeptics.

People who score highly on the Narcissistic Personality Inventory questionnaire had more friends on Facebook, tagged themselves more often and updated their newsfeeds more regularly.

The research comes amid increasing evidence that young people are becoming increasingly narcissistic, and obsessed with self-image and shallow friendships.

A number of previous studies have linked narcissism with Facebook use, but this is some of the first evidence of a direct relationship between Facebook friends and the most “toxic” elements of narcissistic personality disorder.

{ Guardian | Continue reading }

photo { Leo Berne }

quote { Hamilton Nolan/Gawker }

Mr. Zuckerberg’s control is based on the structure of Facebook’s shares. Facebook is proposing to go public with a dual-class share structure. Public shareholders will purchase Class A shares that have one vote apiece. Mr. Zuckerberg, Facebook employees and current Facebook investors will hold Class B shares, which have 10 votes apiece. This is a deviation from the one share one vote norm followed by most publicly traded companies.

Eight years after the company’s founding, Mr. Zuckerberg has retained a remarkable percentage of Facebook’s ownership — he currently owns 28.4 percent of the Class B shares.

This alone does not give Mr. Zuckerberg total control over Facebook.

He has also entered into voting agreements with other Class B shareholders, including shares held by the Facebook co-founder Dustin Moskovitz and Facebook’s first president, Sean Parker. These agreements give Mr. Zuckerberg voting control over an additional 30.6 percent of the Class B shares. Mr. Zuckerberg even retains control over about half of these shares if he decides to leave Facebook. Post-I.P.O., he will control at least 57.1 percent of the Class B shares, potentially more if some investors sell their B shares in the offering. This will give him complete voting control over the company.

Mr. Zuckerberg’s consent will be required if the company is sold. Unlike most public companies, Facebook will not have a nominating committee for its directors comprising the independent directors on Facebook’s board. Instead, all of the directors will be selected by the board itself, a group that will be appointed by Mr. Zuckerberg. He can also remove and replace any director at any time.

Nor is this going to change any time soon.

Facebook’s organizing documents dictate that when Class B shares are transferred, they typically will convert into the low-vote Class A shares. It is likely that, over time, Mr. Zuckerberg will hold onto the bulk of his Class B shares as other holders of Class B shares sell off their stakes.
This is the rub of the dual-class shares.

Mr. Zuckerberg can also sell down his shares. But until the Class B shares comprise less than 9.1 percent of the outstanding Facebook shares, the holders of the Class B shares control Facebook.

Given this low threshold, Mr. Zuckerberg, 27, is likely to have enough Class B shares to give him control of the company for a long, long time, despite the fact that he will have a much smaller economic stake. In fact, other shareholders are more likely to sell their Class B shares more quickly than Mr. Zuckerberg, who appears to want to manage Facebook for the long-term.

As a result, his control over Facebook could increase over time.

{ DealBook/NY Times | Continue reading }

Consider the 843 million monthly users and the 450 million daily users. Those sound like enormous numbers — but what do they really mean? (…) If you click on a Like button any given day, you are counted by Facebook as an active user that day.

From the S-1:

Daily Active Users (DAUs). We define a daily active user as a registered Facebook user who logged in and visited Facebook through our website or a mobile device, or took an action to share content or activity with his or her Facebook friends or connections via a third-party website that is integrated with Facebook, on a given day.

All of those people clicking all of those “Like” buttons are counted as active that day, EVEN IF THEY NEVER GO TO FACEBOOK.COM.

Think of what this means in terms of monetizing their “daily users.” If they click a like button but do not go to Facebook that day, they cannot be marketed to, they do not see any advertising, they cannot be sold any goods or services. All they did was take advantage of FB’s extensive infrastructure to tell their FB friends (who may or may not see what they did) that they liked something online. (…)

It helps to explain why Facebook’s valuation may be so greatly exaggerated.

{ Barry Ritholtz | Continue reading }

Facebook users can spread emotions to their online connections just by posting a written message, or status update, that’s positive or negative, says a psychologist who works for the wildly successful social network.

This finding challenges the idea that emotions get passed from one person to another via vocal cues, such as rising or falling tone, or by a listener unconsciously imitating a talker’s body language, said Adam Kramer on January 27 at the annual meeting of the Society for Personality and Social Psychology. Kramer works at Facebook’s headquarters in Palo Alto, Calif.

“It’s time to rethink how emotional contagion works, since vocal cues and mimicry aren’t needed,” Kramer said. “Facebook users’ emotion leaks into the emotional worlds of their friends.”

{ ScienceNews | Continue reading }

I was far from the most active Facebook user I know, but my decision to quit came from a long cold look at just how many hours I’ve devoted to it in the last couple of years, and a strong accompanying feeling that, were I to devote the same amount over the next couple, I would want to put on some spiked gloves and repeatedly punch myself in the nose really hard. No matter how positive you feel about Facebook or Twitter and the ways in which they’ve enhanced your life, it is unlikely that anyone will ever lie on their deathbed and say, “You know what? I’m really glad I spent all that time social networking!” Additionally, I’m starting to write a new book, and attempting to feel more focussed.

{ Tom Cox/Guardian | Continue reading }

bonus [more]:

Facebook is planning to sue Mark Zuckerberg. No, not that Mark Zuckerberg, [the founder of Facebook], but an Israeli businessman, formerly named Rotem Guez, who legally changed his name to Mark Zuckerberg in order to support a business that can only make sense in today’s ephemeral market: selling “likes” to companies who, you know, want to feel more “liked” in their online presence.

{ persuasive litigator | Time }

Facebook is steamrolling forward. It now boasts 800 million active users. The company is reportedly preparting for an initial public offering. It’s laying plans to sell a Facebook phone, strengthening its presence on the mobile web. But Facebook’s plans may be hampered by a new backlash against the company’s efforts to get its users to share more of their lives online.

In September, Facebook announced at its annual f8 developers conference that it was upgrading its Open Graph technology. Facebook CEO Mark Zuckerberg introduced Open Graph in 2010 to let web sites and apps share information about users with Facebook. The revamped Open Graph takes sharing to a new level, allowing apps to automatically share what articles users are reading or what music they’re listening to.

Zuckerberg said the new feature would allow “frictionless experiences” and “real-time serendipity.” At the time, only a few observers found them to be scary. “They are seeking out information to report about you,” wrote developer and blogger Dave Winer. But suddenly, a critical mass of critics are speaking up about the changes, how they affect users and publishers alike.

{ Kevin Kelleher/Teuters | Continue reading }

Adding a new chapter to the research that cemented the phrase “six degrees of separation” into the language, scientists at Facebook and the University of Milan reported on Monday that the average number of acquaintances separating any two people in the world was not six but 4.74.

The original “six degrees” finding, published in 1967 by the psychologist Stanley Milgram, was drawn from 296 volunteers who were asked to send a message by postcard, through friends and then friends of friends, to a specific person in a Boston suburb.

The new research used a slightly bigger cohort: 721 million Facebook users, more than one-tenth of the world’s population.

{ NY Times | Continue reading }

painting { Wilhelm Gallhof, The Coral Chain, circa 1910 }

By comparing the brains of monkeys living in large groups to those living in smaller groups, scientists have found that the brain can change shape to accommodate social network size.

The finding, published in Science today, reveals that there are still opportunities for the brain to change, even during adulthood. It also suggests that a complex social environment puts pressure on improving brain plasticity - our brain’s ability to efficiently adapt to changes.

The researchers found that areas of the brain known to process social information such as facial expressions were larger in monkeys who lived in larger groups, and vice versa. There was also more activity between neurons in the monkeys who had larger social networks.

{ Cosmos | Continue reading | Scientific American }

Placing a value on a company is always a tricky business. History is filled with examples of disastrous valuations that are hard to credit in retrospect. The dotcom bubble of the late 90s is one of the best known examples.

And yet crazy valuations continue apace. One current bubble involves social media companies such as LinkedIn, Twitter, Groupon and, of course, Facebook. In July, the latter announced that it had 750 million users, an astronomical number that is dwarfed only by the company’s valuation which stands at anything from $65 billion to north of $100 billion.

By that measure, the company’s current and future users will each have to generate a remarkable amount of income for the company, numbers that reek of the boom and bust economics of the dotcom era.

So how much is Facebook really worth? Today, Peter Cauwels and Didier Sornette, econophysicists at the Swiss Federal Institute of Technology in Zurich, inject a little sanity into the debate. They argue that it is actually easier to value social media companies than other firmS because their revenue is so obviously based on a singe simple metric: the number of users.

All that is required is a reasonable model of user growth and a good understanding of the profit each user can generate.

For Facebook, user growth is pretty straightforward. Cauwels and Sornette argue that although Facebook’s growth has been exponential in the past, this cannot continue if only because of the finite number of people on the planet. Instead, Facebook user numbers will eventually level off, following a classic s-shaped curve.

Indeed, they say Facebook’s growth has already changed. In 2010, they say it switched from exponential to s-shaped.

The only question now is how high it will reach. Cauwels and Sornette offer three scenarios in which Facebook eventually plateaus at a base case of 840 million, a high growth case of 1.1 billion or a case of extreme growth reaching 1.8 billion users within a few years.

Cauwels and Sornette then calculate a value for the company based on the prospect of each user generating $1 profit per year, the approximate average over the last five years. This gives a value in the base case of $15 billion, in the high growth case of $20 billion and in the extreme growth case of $33 billion.

{ The Physics arXiv Blog | Continue reading }

An Australian technology expert has discovered Facebook tracks the websites its users visit after they leave the social networking site. Nik Cubrilovic said his tests showed Facebook did not delete its tracking cookies when you logged out but modified them, maintaining account information and other unique tokens that could identify you.

So whenever you visited a web page containing a Facebook button or widget, your browser was still sending the details back to Facebook, said Mr Cubrilovic. “Even if you are logged out, Facebook still knows and can track every page you visit,” he wrote in a blog post. “The only solution is to delete every Facebook cookie in your browser, or to use a separate browser for Facebook interactions.”

{ Sydney Morning Herald | Continue reading }

Facebook filed paperwork today to start FB PAC, a political action committee that will support candidates dedicated to protecting the online privacy of ordinary Americans at any cost. Kidding! The PAC will fund candidates who support “giving people the power to share,” i.e. stripping them of what few government privacy protections remain.

{ Gawker | Continue reading }

With the growing permeation of online social networks in our everyday life, scholars have become interested in the study of novel forms of identity construction, performance, spectatorship and self-presentation onto the networked medium. This body of research builds upon a rich theoretical tradition on identity constructivism, performance and (re)presentation of self. With this article we attempt to integrate the work of Italian playwright Luigi Pirandello into this tradition.

Pirandello’s classic 1925 novel Uno, Nessuno, Centomila (“One, No One and One Hundred Thousand”) recounts the tragedy of a man who struggles to reclaim a coherent identity for himself in the face of an inherently social and multi-faceted world. Via an innocuous observation of his wife, the protagonist of the novel, Vitangelo Moscarda, discovers that his friends’ perceptions of his character are not at all what he imagined and stand in glaring contrast to his private self-understanding. In order to upset their assumptions, and to salvage some sort of stable identity, he embarks upon a series of carefully crafted social experiments.

Though the novel’s story transpires in a pre-digital age, the volatile play of identity that ultimately destabilizes Moscarda has only increased since the advent of online social networks. The constant flux of communication in the online world frustrates almost any effort at constructing and defending unitary identity projections. Popular social networking sites, such as Facebook and MySpace, offer freely accessible and often jarring forums in which widely heterogeneous aspects of one’s life—that in Moscarda’s era could have been scrupu- lously kept apart—precariously intermingle. Disturbances to our sense of a unified identity have become a matter of everyday life.

Pirandello’s prescient novel offered readers in its day the contours of an identity melee that would unfurl on the online arena some 80 years later.

{ Alberto Pepe, Spencer Wolff & Karen Van Godtsenhoven, Re-imagining the Pirandellian Identity Dilemma in the Era of Online Social Networks | PDF }

This article looks at how previous practice of portraiture prepared the way for self-presentation on social networking sites. A portrait is not simply an exercise in the skillful or “realistic” depiction of a subject. Rather, it is a rhetorical exercise in visual description and persuasion and a site of intricate communicative processes. A long evolution of visual culture, intimately intertwined with evolving notions of identity and society, was necessary to create the conditions for the particular forms of self-representation we encounter on Facebook. Many of these premodern strategies prefigure ones we encounter on Facebook. By delineating the ways current practices reflect earlier ones, we can set a baseline from which we can isolate the precise novelty of current practice in social networking sites. (…)

Although a Velasquez portrait does not look much like a Facebook page, it fulfills many of the same functions. A portrait by Velasquez, hanging in the grand palace of Madrid, articulates an image of royal power and privilege to those permitted to view it, and thus reinforces the sitter’s right to certain prerogatives and respects.

{ SAGE | Continue reading }

There are numerous comparisons between Google’s new Google+ social offering and Facebook, but most of them miss the mark. Google knows the social train has left the station and there is a very slim chance of catching up with Facebook’s 750 million active users. However, Twitter’s position as a broadcast platform for 21 million active publishers is a much more achievable goal for Google to reach. (…)

While Facebook is not sweating about Google+, the threat to Twitter is significant. Google has the opportunity to displace Twitter if it gets publishers and celebrities to encourage Google+ follows on their websites as well as pushing posts to the legions of Google users while they are in Search, Gmail and YouTube. Google was turned down when it tried to buy Twitter for $10 billion, and now it is going to try to replicate it.

{ Social Beat | Continue reading }

photo { Jay Van Dam }

related { Invite your entire Facebook graph into Google Plus | Searching through other people’s photographs as soon as they’ve taken them is now possible thanks to a new search service. }

As Zadie Smith argued in a recent New York Review of Books article, Facebook’s private-in-public mode of operation traps us:

It feels important to remind ourselves, at this point, that Facebook, our new beloved interface with reality, was designed by a Harvard sophomore with a Harvard sophomore’s preoccupations. What is your relationship status? (Choose one. There can be only one answer. People need to know.) Do you have a “life”? (Prove it. Post pictures.)

The juvenile mentality built in the medium pushes us to broadcast our private lives and expect that the details we share will be obsessively dissected. We sense, more or less consciously, that with the capability to broadcast our lives comes an obligation to be entertaining. (…)

Thanks to social media, we are no longer obliged to disguise our voyeuristic impulses. Voyeurism has been culturally legitimized. We can turn to the real events of our lives as we have retold them and to the reactions they have prompted. On the internet, our personal lives have become our television shows.

{ The New Inquiry | Continue reading }

related { Facebook Lost Nearly 6 Million Users in U.S. in May }