Why Facebook is broken, and how to fix it

And why it shouldn't be free

Facebook is broken. It’s not the only Big Tech company that’s broken, but for the purpose of this post, I’m going to focus on Facebook. My fellow Racketeer David Thornton was recently put in “Facebook jail.” He wrote about it, and I tweeted I’m glad he did, though Facebook’s “rules” are arbitrary to the point of non-existence. In response, David challenged me to find a better solution.

This is my acceptance of the challenge.

Let me start with the obvious, but frequently the obvious is lost as we tend not to see what’s right in front of our own nose. Facebook is a business, a for-profit business. It was started by Mark Zuckerberg as a way to leverage the fast-maturing Internet, web and mobile technology by creating a global literal “face book” of people who can share their online lives with others, and then monetize the hell out of it.

As a business, Facebook has always been aware that in the dog-eat-dog world of Internet products, it must innovate one step ahead of its competitors. The Internet is like the NFL, which is commonly known among players as “not for long.” Imagine a job where 500 qualified people want your position, are extremely motivated to take it from you, and are waiting with relish for you to mess up so they can do exactly that.

Take the NFL analogy into the business world, where software can be developed, launched and deployed in days, where the “next thing” is typically the thing you haven’t foreseen, and where a couple of Stanford grads can pitch the same money people you pitched, and then destroy you. When Facebook made its first acquisition, the domain name “facebook.com” in August, 2005, the tiny social media space was dominated by MySpace.

LOL, MySpace. In 2006, it was briefly reported as the most visited site on the Internet, even more popular than Google. Yahoo challenged the claim, and corrected the record, as the count only considered mail.yahoo.com, not the company’s complete product offering on the domain. LOL, Yahoo (at least Yahoo still exists). Remember AOL?

Why did MySpace fizzle, along with Friendster and a whole raft of ne’er-do-well startups, while Facebook dominated? It has a lot to do with business and capital deployment, even more than clever programming. Facebook never married itself to a tech platform, like many companies do. It never adopted a “not invented here” attitude, and instead sought to execute the classic “S-curve” maturity model used by many acquisition companies.

Starting in 2007, fueled by (edit: Sequoia), Y-Combinator Silicon Valley connections, and investor cash, Facebook began acquiring companies. And acquiring, and acquiring. One of the purchases, ConnectU, was the result of a federal lawsuit by the Winklevoss twins, which was dramatized (fictionalized) in the movie “The Social Network.” The rest were a Harvard MBA class in capital deployment, growth, and adjacent market development.

Facebook has acquired about 8-10 companies per year since 2010. The company’s two large purchases in 2007 and 2009 established Facebook Mobile, just in time for the iPhone’s rollout. Its latest acquisition, in November 2020, is a CRM firm called “Kustomer” that leverages social media to improve customer service.

Facebook’s tentacles stretch well beyond the average user’s newsfeed, and its big corporate customers see a much different interest in the product than grandma looking at grandkid pictures, or small-time bloggers posting memes. Eyeballs are the means to Facebook’s product, and its product is our lives. Or rather, providing access for big corporations flush with cash access to our lives, our “likes,” our shares, our friends, and our purchases.

Thousands of websites use Facebook trackers which tie your web browsing to complex ad algorithms, to “customize” your experience in the app, so advertisers can target you properly. It’s business, but it’s more than just business.

We take the Internet for granted in the same way we take flicking a light switch and having a lamp illuminate a room. Electricity is deemed an essential utility, and Americans don’t tolerate not having it with complete reliability. The Internet is really in the same category for more and more citizens around the world. As we “cut the cord” on traditional media like cable and over-the-air television, we depend on the Internet to get our news, educate our kids, and do our jobs.

The last year of COVID-19 has made the Internet of supreme importance more than ever. Many could not even get groceries or eat meals without using it. The Internet, and the World Wide Web, is vital infrastructure, and control of it is tantamount to control of gas lines, electric service, and water utilities.

Facebook, along with other tech giants like Google and Amazon, operate what amounts to an Internet infrastructure that is incredibly difficult to escape. In fact, journalist Kashmir Hill tried to do it, and concluded, writing in the New York Times that it’s “impossible.”

There were two very different types of reaction to the story. Some people said that it proved just how essential these companies are to the American economy and how useful they are to consumers, meaning regulators shouldn’t interfere with them. Others, like Representative Jerrold Nadler, Democrat of New York and ex officio member of the House’s antitrust committee, said at the time that the experiment was proof of their monopolistic power.

“By virtue of controlling essential infrastructure, these companies appear to have the ability to control access to markets,” Mr. Nadler said. “In some basic ways, the problem is not unlike what we faced 130 years ago, when railroads transformed American life — both enabling farmers and producers to access new markets, but also creating a key chokehold that the railroad monopolies could exploit.”

In its collection of 89 acquisitions over the last 14 years, Facebook has grown well beyond its initial vision of creating a social media space for the world. Its data centers operate around the planet. There’s one over in Walton County, Georgia, about 50 miles east of Atlanta, that I believe stores video content. And this giant company made thousands of decisions every hour regarding who is a real user, who is a “bot”—an AI operated by some computer algorithm—trying to plant content into the company’s data streams, who is posting funny pictures for the use of friends and like-minded people, and who is trying to spread dangerous and divisive misinformation on behalf of foreign governments.

Facebook in essence operates like a government of its own, a mini-country. The company’s 2020 revenue was 21.47 billion dollars. That’s a far cry from the top revenue earner Walmart, with 524 billion, or the bevy of oil companies with revenues well over a quarter of a trillion, or Amazon, with $280 billion. But Facebook punches well above its dollar weight, because these other companies actually sell physical product. Facebook sells data, and few outside of China can escape its enormous fishing net.

Note that of the top 11 most popular platforms in 2018, Facebook controls two, three are Chinese companies, and Google controls two (though Google+ has been officially shut down). What the chart doesn’t show is the sheer number of commercial sites, news articles, and political engagements through Facebook and its child companies.

Many, including my friend David, have noted that Facebook isn’t so biased against conservatives, because the top engaged/shared posts and political pages have mostly tended to be conservatives or Fox News. But that’s not really the right measurement. Top sites by reach range from funny memes, inspirational content, to hard news, and ABC News is well ahead of Fox in this category.

From the casual user’s point of view, engagement is important. But from the advertiser’s and news organization’s point of view, reach is far more important, because reach means eyeballs, and eyeballs means money. The difference between Russian disinformation operations and MyPillow or gfycat.com is that the Russians don’t care so much if their content has enormous reach, as long as a lot of people are talking about it and arguing online. BoredPanda.com and NBC News care far more about reach because that’s how it makes money.

It’s this basic conflict of interest (lawyers will be familiar with the concept dealing with contingency cases where the lawyer’s pecuniary interest may conflict with the client’s best legal course of action) where Facebook cares about getting money from high reach clients, while keeping regulators off its back in crafting rules for the eyeballs that pay its bills.

The rules, known as “community standards,” leave a whole lot of wiggle room for personal judgment of faceless, nameless employees, partner “fact checkers,” and contractor content censors who sit and look at awful content all day long, swiping left and right like Malcolm McDowell in a Stanley Kubrick movie being forced to use Tinder with eyes pinned open. Read Facebook’s definition of “hate speech” in the section on objectionable content.

We define hate speech as a direct attack against people on the basis of what we call protected characteristics: race, ethnicity, national origin, disability, religious affiliation, caste, sexual orientation, sex, gender identity and serious disease. We define attacks as violent or dehumanizing speech, harmful stereotypes, statements of inferiority, expressions of contempt, disgust or dismissal, cursing, and calls for exclusion or segregation. We consider age a protected characteristic when referenced along with another protected characteristic. We also protect refugees, migrants, immigrants and asylum seekers from the most severe attacks, though we do allow commentary and criticism of immigration policies. Similarly, we provide some protections for characteristics like occupation, when they’re referenced along with a protected characteristic.

We recognize that people sometimes share content that includes someone else’s hate speech to condemn it or raise awareness. In other cases, speech that might otherwise violate our standards can be used self-referentially or in an empowering way. Our policies are designed to allow room for these types of speech, but we require people to clearly indicate their intent. If intention is unclear, we may remove content.

David shared some content about Martin Luther King, Jr., along with a few other satirical memes, and was suspended over it. His 30,000 follower group was deplatformed. Others have had their Instagram accounts shut down without warning, losing years of photos, including of friends and family. This wasn’t about money for David, or for others. But for Facebook, that’s the prime motivator.

And Facebook runs a not-inconsequential chunk of the Internet’s infrastructure, and is responsible for global reach of over 2 billion users. It functions in this regard as censor, policeman, judge and jury. It must function this way, because its business model requires it to constantly grow, innovate, and deploy capital to stave off less mature businesses which could threaten it. One of its greatest external threats is government regulation, or even anti-trust action.

Facebook’s incentives and motives toward users are not weighted to the user’s protection. They are weighted toward compliance with government (globally, especially the E.U.) privacy laws, and keeping a hedge around its revenue generators. Again, we are the product. We are the sheep to be shorn, and the sheep get no say in who does the shearing.

This is broken because users invest more than just money in Facebook stock. Users invest our lives in a website, mobile platform, photo and video store, chat messenger, charity platform, individual marketplace, and yes, political engine. This investment has far more value than simply the bits, bytes, intellectual property rights, and meta data that is packaged, aggregated, distilled and sold to companies around the world. Facebook has little incentive to vouchsafe this property, other than to make us sheep stay in the pen.

But as long as Facebook keeps buying adjacent sheep pens, enlarging its own pens, and constantly feeding the sheep better content than its competitors, the hurdles for the sheep to leave for greener pastures get higher and higher.

This is why the solution, to me as a tech guy and a tech entrepreneur, is to break up Facebook, like the Bell System was broken up. The company should logically dis-integrate. The social media side should continue to develop features, but the whole “it’s free and always will be” by necessity should go away.

Yes, I’m in favor of people having to pay for Facebook, at least in theory. Don’t hate me yet.

Suppose that your mobile phone provider included Facebook in its plan, like Verizon does with Netflix. Suppose that your ISP includes Facebook as part of its basic plan. Suppose that computer and operating system manufacturers like Apple, Dell, and Microsoft include Facebook as part of their initial package offered with computers and OS’s. Yes, you’d have a license to use Facebook, and that license agreement, with cash consideration, would give you massive rights you don’t have now, and most people wouldn’t pay a penny for it.

Facebook’s social media company should have a duty, a primary duty, to its users. The users should be the customers, not just consumers of content a.k.a. eyeballs for sale. This basic change in business structure would change many of the relationships the company has with its users. It could open up a new transparency while forcing users to register in a more tangible way with real identities. That in turn would make it easier for Facebook to monitor itself for bots, foreign disruptors, and other nefarious elements. It would mean that users like David would not need to be put in “Facebook jail” because it’s more like real life, where if you get “triggered” you don’t have to read his stuff.

The advertising and data tracking parts of the company should be a completely different, separately managed and separately owned, enterprise. The links between the social media and the advertising companies should be knowable and severable. Right now, they’re not, as everything is integrated to the atomic level. Let Facebook Advertising generate billions of dollars in profits and good returns to investors. But don’t let that same company operate the social media site. To me, it’s that simple.

It’s bad enough that Comcast owns NBC, but what if Comcast could cut your cable or Internet fiber because you badmouthed NBC online? We all know that we pay Comcast, so they really can’t do that. But if Comcast gave Internet away simply so you’d watch NBC, they’d have plenty of incentive for you not to kill the goose laying golden eggs for them. This is where Facebook is right now.

Facebook has become a very mature company, and is unlikely to be knocked out by an upstart competitor. It deployed capital more efficiently than AOL and most other social network competitors, and therefore it thrives while other companies over-reached, miscalculated, or fell behind. Facebook is so successful that it must evolve its business model. It can no longer function as a vertically and horizontally integrated web giant. There is too much at stake.

I don’t trust the government to regulate Facebook or any other social media company. The government has no idea what it’s doing, and “customer service” is not in its DNA. I guarantee that a government-regulated Facebook would either be a license for the company to operate in an unrestricted manner like Walt Disney World runs the Reedy Creek Improvement District in Orange County, Florida, or it would be a feces-show of the highest order, like the FAA regulating SpaceX Starship test launches in Boca Chica, Texas. The government should not regulate Facebook, but it should compel the company to break up.

If Facebook does not evolve into two separate and distinct entities, we will find it engaging in more seemingly-neurotic behavior in the future. Some people will be harmed in ways we can’t easily quantify, losing years of work, memories, and connections to others. But these actions will serve the interests of Facebook’s customers, by managing the flock of sheep we all are in its eyes. A shepherd should love the sheep, and in many ways, Facebook does love us, its precious eyeballs. But we need more than love. We need transparency, reliability and fair treatment.

In short, we need to be customers, not product.

Facebook is broken because of its own success. The best way to cure that is to break the company, and to end the free ride.

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