Have you ever wondered how Facebook earns $27 billion a year, even though you’ve never paid them a cent? Most of that revenue doesn’t come from users; it actually comes from advertisers. Advertisers love Facebook.
To understand why, let’s quickly talk about advertising technology from twenty years ago. Back then, if you wanted to advertise a new kitchen mixer, you might place an ad in a cooking magazine. Many different types of people buy cooking magazines: parents, hobbyists, someone bored at the airport. Not all of them are in the market for kitchen tools, but some of them will see your ad and be interested. Maybe your mixer is really for kitchen professionals, so instead of placing the ad in Good Housekeeping, you put it in a trade publication that you know is reliably distributed to chefs and kitchen staff.
All that stuff is pretty cute compared to what advertising technology can accomplish today, thanks to Facebook. Facebook can outperform the cooking magazine. They can even outperform the trade publication. Facebook can guarantee that only people who are currently working in kitchens see the ad, because Facebook knows where you work. It also knows a lot about where you work, because your employer created a Facebook Page to drum up business. Maybe the advertiser leases mixers to new businesses, so they ask Facebook to only show their ad to people currently working in kitchens who work for businesses less than 2 years old.
This advertising process, whether you do it with magazines or social media, is called targeting. Facebook has world-class targeting, and it’s what drives their revenue. Since targeting is what makes all the money, Facebook employees spend their work hours figuring out how to sign up more users, keep those users visiting the site, and learn as much information as possible about each one. The more they know about you, the better targeting they can sell to advertisers. It might be surprising to hear that Facebook does not prioritize features based on what is best for its users. But then we remember that from a financial standpoint we aren’t the users, we’re the product and the advertisers are the users.
Of course, being the product still has its benefits; Facebook does care about keeping us around, and that means making a website that we find valuable. I just want to introduce you to the idea that Facebook has dual motivations, and then I want to make the case that one of these motivations is working against our well-being. The ideal Facebook feature does two things: it improves the bottom line by making advertising more lucrative, and it provides value to the average end user so they don’t stop using Facebook.
There’s a problem though. We never know what’s being collected when we use Facebook features, so it’s hard to say if the privacy we’re trading away is a fair trade. For example, when Facebook acquired Instagram for $1 billion, it wasn’t just to give us better photo features on their website. It was because end users had stopped using Facebook’s own photo features in favor of Instagram’s, and this made Facebook blind. A picture is worth a thousand words, and a photo shared to Facebook (or a company they own) is worth a thousand pieces of marketable information about you.
This starts to give us a sense of what pays for Facebook’s development. In return, it’s “free” to you. But granddad would say there’s no such thing as a free lunch, and in today’s lingo there’s no such thing as a free website. So what is the hidden cost of using Facebook?
Have you ever shared a link to a song you like? Facebook wrote down who it was. Now Facebook knows you like Michael Bublé, and your dollar value went up because advertisers can use that information to target you. But you weren’t thinking about that when you shared Michael’s angelic voice with your friends, were you? It feels like you were having a personal conversation with your friends and this guy you don’t know was standing there writing down everything you said. That guy is Facebook.
That’s kinda creepy, but a lot of people are doing that to you. Your supermarket and your pharmacy got you to sign up for a savings club or reward program so that they could keep track of what you’re purchasing and then use it to target you. If we’ve already crossed your creepy line, prepare to get straight up sweaty gross creeped out, because we’re just getting started.
Remember when pharmacies used to take rolls of film and print photos for you? In a way, Facebook does that too. You upload photos from your camera and Facebook “publishes” them so you can show your friends. You paid the pharmacy to do that though; how are you paying Facebook? Well, they trained hundreds of algorithms to look at your photos and find information about you. You can see some of that information. It’s right in the source code of your news feed. My friend posted a selfie with his girlfriend at a music festival. I took a look at the source code to see what Facebook sees. It said: Image may contain: 2 people, people smiling, outdoor and closeup. Spot on, Facebook algorithm. A few engineers at Facebook got a pat on the back for training such a great algorithm. The rest of us, we just get our photos snooped on.
Facebook knows what you look like in photos. You made that really easy because you and your friends keep tagging you. But they can do it without tags. Their algorithms see that you keep sharing photos of a person they don’t recognize. Maybe it’s someone who never signed up for Facebook. But it’s probably your child. Facebook knows what your kid looks like. More importantly they know you’re a parent. That’s really good information, advertisers love knowing you’re a parent; so your dollar value goes up. They also love that you keep posting what your kid is into so that they can use it to target you. “We had fun today at Frozen On Ice!”, you wrote. “Interested in: Frozen, Live Shows,” Facebook wrote; and your dollar value went up.
We passed a bunch of laws so that you can’t collect information from people under the age of 13. But we never passed laws that say you can’t collect information about people under the age of 13. Anyway, that’s why you keep seeing all those accurate ads for characters your kids love. It’s also why you see a sudden rush of summer programs advertising to you when school’s nearly out.
Facebook’s true power is in the combinatorial effects of the targeting information it gathered about you: show my ad to parents of preschoolers (03-05 years) who have an interest in autism awareness. Facebook knows your kid’s age because you told them when you posted your hospital photos and marked it as a life event. Remember? Remember telling a website you use to look at your friends’ dogs how old your child is? That’s okay, Facebook remembers. Oh, and Facebook knows you’re curious about autism because you read an article on an autism awareness website and tapped the ‘like’ button embedded on the page.
A typical targeting panel in Facebook’s Advertising Platform
Okay, okay, you’re probably ready for a shower. Or at least some advice on what to do. You could visit Facebook’s Ad Preferences Page and try to control what Facebook tracks about you. You’re only given so much control from there, and the page is designed to obscure what little control you do have. Or there’s always the nuclear option, which is stop using Facebook. Maybe you aren’t ready to do that. But at least now when you use the site you’ll know what the true cost is and can decide if the action you’re about to take is worth the price. Funny that I had to be the one to tell you and not Facebook, isn’t it?