You Pay for Facebook with your Pocketbook
Facebook has become one of the biggest companies in the world on the backs of a series of products that it gives away entirely for free. Or at least, it likes to present the story that all of its products are free.
In truth, Facebook is exploiting a massive arbitrage in understanding between itself and consumers. Society largely has decided that Facebook makes money because “data is valuable”. And while that’s a correct statement, it’s also an incomplete statement, designed to turn something nefarious into something innocuous.
Data is valuable because it can be used to manipulate people. Facebook is worth nearly a trillion dollars not because it has some mountain of nebulous data, but rather because companies all over the world pay Facebook to manipulate its users on their behalf — typically called “advertising”.
The ultimate goal of advertising is to convince humans to spend their money on the goods and services being offered by the advertiser. The rosiest and most naive interpretation of advertising is that it presents consumers with options that they may not have been aware of previously. Advertisers like to act as though the consumer still has control over what they are buying, and that the consumer isn’t going to buy anything that isn’t going to improve their lives.
The reality though is that the relationship between the consumer and the advertiser is adversarial: the advertiser doesn’t care about the consumer or their well being, the advertiser cares that the consumer spends their money, and that the advertiser is willing to exploit features of human psychology to achieve a desired result. Data driven advertising is especially aggressive, because the algorithms don’t care about things like ethics, but rather are entirely primed around metrics like conversion rates.
An enormous amount of research by some of the world’s smartest people has gone into understanding human psychology and learning how to exploit it for the sake of making a sale. The simplest techniques are just exposure based — we know that humans are more likely to buy a product the more they’ve seen that product, irrespective of how that product was presented. More advanced techniques will juxtapose a product against a trusted celebrity or personality, exploiting a feature of human psychology that will cause the consumer to translate their trust of the celebrity into trust of the advertised product.
Facebook steps this up dramatically. Facebook knows which celebrities you trust the most, which celebrities your friends trust the most, what you and your friends have bought most recently, and what sorts of products you are most susceptible to buying. And Facebook leverages all of this information to make itself more effective at manipulating people to buy the goods and services of the highest bidder.
The result of this manipulation is consumers spending more money on goods and services that they don’t need, consumers choosing overpriced and inferior products instead of high quality ones, and consumers experiencing a general reduced satisfaction with their lives. Advertising isn’t free, and it doesn’t just cost “attention”. The result of advertising is that consumers have less money and less happiness. Advertising costs the viewer money. It just does it in a way that is difficult to measure, and difficult to associate with the root cause of the spending. Often times, a consumer does not even realize that their purchasing habits have been influenced.
There’s also a scientifically established relationship between advertisements and poor health [1]. “Several studies have found strong associations between increases in advertising for nonnutritious foods and rates of childhood obesity.” Beyond obesity, there are similar studies regarding other eating disorders, anxiety disorders, and other form of psychological stress. We pay for advertising not just with our money, but also with our health.
We need to reject the idea that Facebook is free. You don’t pay for Facebook with just your data or your attention. You pay for Facebook with your money and with your well being.
