Facebook: Betting $100 billion on human nature

My, how far Facebook has come, said Michael Wolff in the London Guardian. A company that founder Mark Zuckerberg started in his dorm room just eight short years ago has transformed business, culture, and even interpersonal relations on a “world historical” scale. And “now comes the payoff”: Facebook is about to go public, announcing an initial public offering of stock last week that valued the company at an eye-popping $100 billion. When the stock sale is held, the company will have enough cash “to buy whatever it needs,” and extend its reach into our lives even further. Soon, a billion users could be logging on to Facebook to watch movies, hear music, play games, make phone calls, buy new shoes, or do virtually anything inside its private universe. It’s you, the Facebook users, who provide the company with its value, said Somini Sengupta in The New York Times, not its relatively tiny staff of 3,000. Facebook’s content consists mostly of the vast trove of personal data that its users “freely share about themselves and their desires.” Every time users share a link, click a “like” button, visit a website, or change their relationship status, it becomes part of Facebook’s file on them, which enables businesses to target individuals with specific advertising. But is this data really as valuable as the business world thinks? Will users keep surrendering it indefinitely? No one knows.

Don’t believe the hype, said David Weidner in The Wall Street Journal. Facebook already claims 845 million users, from whom it extracts only $1 billion in profit every year. There simply aren’t enough people on the planet for that user base to grow significantly in the coming years, particularly since Facebook is banned in China. So how does a $1 billion business that traffics mainly in time-wasting “diversions” justify a valuation of $100 billion? There’s also the issue of Zuckerberg himself, said Charles Rotblut in Forbes.com, and his “lack of experience” in the business world. The quirky, reticent 27-year-old has retained an unheard-of level of control over Facebook, and may soon find out that “running a privately held start-up is very different from managing a closely watched public company that has to report results.”

Facebook’s spectacular, world-changing success is hardly hype, said Larry Magid in the San Jose Mercury News. “Just ask former Egyptian President Hosni Mubarak,” or any of the Arab autocrats toppled from power by citizens sharing ideas and organizing themselves over Facebook, Twitter, and the other social media. The Internet has become “a potent sociopolitical force in its own right,” said Sam Gustin in Time.com, and “social networks like Facebook and Twitter are the glue that holds this force together.”

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But what if there’s a revolution against Facebook? said Lori Andrews in The New York Times. So far, users have been cheerfully surrendering their privacy and their personal data, figuring that a few targeted ads are a small price to pay for staying in touch with a vastly expanded circle of friends. Only just now are people waking up to the fact that “the bits and bytes about your life can easily be used against you.” The IRS searches Facebook “for evidence of tax evaders’ income and whereabouts,” and material mined from the site is frequently used in divorce and child-custody cases and criminal prosecutions. Horror stories are already starting to circulate of people being turned down for jobs or housing or even dates because of “red flags” in their online personas. The most ominous single fact for Facebook and its investors, said The Economist, is that “most users don’t realize how much Facebook knows about them.” Should they ever decide that Facebook “is abusing their trust, they will clam up and log out” in droves.

But it’s more likely users will stay, said anthropologist Lionel Tiger in The Wall Street Journal. Human beings, like all primates, are insatiably curious about what’s happening to other members of our species; we also have a profound need to have our own lives, and faces, recognized and acknowledged by the wider pack. With 21st-century technology, Zuckerberg has given hundreds of millions of people “the chance to be their old ape selves.” True enough, said Farhad Manjoo in Slate.com. But we humans are also hardwired “to be a restive, fickle, crazy, unpredictable bunch,” who get bored very quickly—and then move on to the Next Big Thing. Given that Facebook’s value depends entirely on capricious human nature, “is it really so wise to invest in us?”