The trouble with Zuckism
If no one ever complained about lies, damn lies, and anecdotal evidence, it's because no one ever had to. Our reliance on numbers, math, and the order they impose on the messier parts of the business world make stats necessary, if sometimes also the subject of skepticism. Whenever we feel especially skeptical, we lean on anecdotal evidence as a kind of correction. A pretty much imperfect correction.
With that in mind, I want to revisit Facebook's excellent quarter. Like many journalists, I combed through the data and the conference call discussing the numbers and saw much for bulls to celebrate. Is Facebook still growing? Yes, and daily users faster than monthly users. On mobile? Yes, mobile-only users more than doubled on year. Above all, is Facebook monetizing mobile? Yes, ad revenue per user grew 27 percent worldwide and 41 percent in its “mature” market of North America.
It's a performance few expected from Facebook so early. And it explains why Facebook's stock has surged 42 percent over the past week, closing at $37.63 Wednesday, or just a little below its offering price of $38 a share. It remains to be seen whether the stock can hang onto these gains. Investors who bought the stock in the IPO or in the private offerings that preceded it may be ready to unload shares. Then there's the Prisoner's Dilemma among insiders who control more than a billion shares of the stock.
Forget, for a moment, the stock market and factors like the supply and demand of shares. Consider instead good-old anecdotal evidence about Facebook. Does anyone love it? Evidently. Does everyone love it? Clearly not. But what about those who don't love it and yet still use it -- use it every day, as Facebook's daily active user data reminds us?
How do we square Facebook's data with the complaints we hear about the company -- complaints that go far beyond the usual ones about the Internet and ascend to a new level of discontent about personal privacy, interface complexity and constant spamming of ads into our intimate lives? Are these anecdotal complaints just lies?
Facebook might dismiss these complaints as something you'd expect from a service with 1.1 billion members and growing: When a service get big, whining gets loud. That might be convincing, except that there is one thing bigger than Facebook: the Internet. And I wonder whether you, or anyone you know -- or anyone who works at Facebook, for that matter -- hear as many complaints about the open Internet as they do about the walled garden that is the World According to Facebook.
That leaves us with a paradox about Facebook, one that its impressive financials only underscore. The more people complain about the company and the way it treats them, the more money this company makes from its users. What Facebook's earnings tell us is that the disconnect between the fabulous Facebook numbers and the less-than-ideal Facebook experience will only get more and more pronounced.
This paradox is the very foundation of a cynically practical idea we can call Zuckism. Zuckism says that if you can tap a deep enough need at a big enough scale you can strip-mine a billion intimate lives for profit. The need Facebook tapped was the desire of people to stay in contact in a chaotic, globalized world. The company's stated mission (“to make the world more open and connected,” according to Mark Zuckerberg's letter to shareholders) romanticizes the assembly line it's built to monetize our daily conversations. And the gap between Facebook's image and its profits shows how well Zuckism is working right now.
I'm not sure where the term “Zuckism” originated. After a minute of amateur research on this search engine called Google, I saw it's been around for a few years at least. The people who forged the term early on all did so with a gimlet eye: Zuckism means the economic exploitation of knowledge. And the commercial manipulation of identity. And the drive to do what it takes to grow. Words are coined wherever they can carry value.
Welcome to the age of Zuckism, where your deepest secrets are coaxed from your heart by computer code and employed as a serving dish to proffer overcooked ads to your loved ones. Friendship, in the philosophy of Zuckism, is the fungus that yields the penicillin of Facebook profits. To get the profits, it helps to be one of the people creating that code. Or to have bought the stock at nearly any point for much of the past year.
And as I noted above, I wrote what I think of Facebook's earnings as a financial journalist. Those are numbers any tech company would kill to claim. What I write here is my thoughts as a Facebook user. My anecdotal experience is that growth always comes at a cost. And Facebook's growth, impressive as it is, is coming from... well... us.
From an investment standpoint, Zuckism works. In the conference call to discuss earnings, Facebook touted Custom Audiences, which helps advertisers in “marrying their data with ours.” The merger of of Publicis and Omnicom announced this weekend underscores how serious the broader ad industry has gotten about managing data. The number of marketers who use Custom Audiences doubled last quarter from the previous quarter. It's a nice illustration of Zuckism in action.
But the more Facebook forges its new business models, the more the company starts to resemble the glory days of another tech giant, Microsoft. Facebook is the new Windows, a platform that churned out years of hefty profit margins because of its broad adoptions by users, and yet a platform that -- in the pursuit of those profits -- became more and more constraining, buggy and ultimately infuriating for the users corralled inside it. In a way, the scene involving Bill Gates in the Social Network has proven weirdly prescient.
You can say what you will about the historical accuracy of "The Social Network" -- and there is little to be said that would defend it. The film remains a good one in spite of its inaccuracies, if only because it hews to a central theme of David Fincher: obsession and its costs. In "Se7en," "Panic Room," "House of Cards" and the upcoming "Gone Girl," the unifying idea is all that obsession can accomplish, and all the destruction it can unleash in the pursuit.
I never saw "The Social Network" as a comment on Silicon Valley. I always thought it was the B-side to "Zodiac," Fincher's anti-climatic tale about well-intentioned obsessions that lead nowhere. In "The Social Network," a less virtuous obsession bears an obscene harvest of fruit. Zuckerberg picked away at the historical details of Fincher's film with justice, but there's nothing in the Q213 earnings of Facebook that can prove the spirit of Fincher's movie wrong: Zuckerberg may be a good-enough guy underneath it all, but Facebook is, in its DNA, a cold-blooded parasite, subsisting on ad dollars extracted from necessary human relationships. Zuck is likeable. Zuckism is not.
Like most technology companies, Facebook has to answer to two constituents -- its users and its investors. Over time, things inevitably break down so that it comes down to a choice: making a difference in people's lives or making a profit. Few companies can manage both for long. Yet few in the history of Silicon Valley have caved in as quickly as Facebook.
[Illustration by Niv Bavarsky for Pandodaily]