Monday, 16 May 2011 09:40

The fundamental problem with Facebook's business model

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Facebook's ongoing reluctance to tighten the privacy and security of its users reveals the fundamental problem with its business model.  In order to maintain business relationships with the 'corporates' (who pay the bills), the users must be delivered on a platter.

In the eyes of Facebook, a 'user' is simply the unit of currency used to trade with the companies who provide the income stream.  The more 'users' delivered to the client, the more Facebook received.  Not a single user contributes a single cent to Facebook's huge data centre start-up and running costs.

Of course this is a simplistic summary of the state of affairs, but it usefully serves to identify the major players and what their motivations are.

If I were so kind as to want to invest in Facebook as part of some commercial arrangement, I would clearly want something in return.  Just about the only thing Facebook has to give in return is access to its users.  And the more users are able to hide themselves and their 'attributes,' the less value they have in the transaction.

Let's counter this with an observation of the very separate discussion between Facebook and the users.  Quite successfully, Facebook has told everyone to detail their lives in amazing detail.  More, to link with the people close to themselves - whether these links are personal, professional or social connections. 

What is kept (somewhat) out of sight is that the most attractive part of this mesh of interactions is the mesh itself - generally referred to as a "social graph."  Just ask Google.

In order to create a social graph, it is imperative that users are both encouraged to and freely able to link to each other.  No pesky privacy or security here!

And here's the issue, as Sophos' Paul Ducklin notes when observing each incremental change in privacy. 


Mostly we find that in conjunction with a tightening of security or privacy, Facebook manages to find two or three ways to open things up elsewhere.

For instance, there is the current dispute involving the use of the names and images of under-aged children in advertising.  Facebook would argue that it was in keeping with its (rapidly evolving / changing) terms-of-service, but it would seem state lawmakers would prefer to believe their own laws take precedence.

Also, as Ducklin observes, ""We want Facebook and its hundreds of millions of users to remember that we're not against the world's biggest social network.  When Facebook takes positive steps towards better security we're happy to say so, as we're doing now. But there's much more they could be doing, so we all need to maintain pressure on Facebook to keep on improving."

Unfortunately, the steps being taken in this instance are unrelated to Facebook's income stream.  Admirable of course, but not really addressing the core dichotomy.

I guess this boils down to the expectation that the Internet is free.  As a user, I pay my ISP for access, why should I have to pay again?  Crashing up against this whole problem is the fact that those who provide content also need to be paid.  But by whom?

And of course, we must in closing return to the title of this piece.  The business model requires that Facebook continue to exploit the users in order to encourage those who would actually give money to Facebook.  There's the problem.

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David Heath

David Heath has had a long and varied career in the IT industry having worked as a Pre-sales Network Engineer (remember Novell NetWare?), General Manager of IT&T for the TV Shopping Network, as a Technical manager in the Biometrics industry, and as a Technical Trainer and Instructional Designer in the industrial control sector. In all aspects, security has been a driving focus. Throughout his career, David has sought to inform and educate people and has done that through his writings and in more formal educational environments.

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