Where did all the money go?

Facebook’s all time high Market Capitalization was $627 billion on July 25, 2018.  

On July 26, 2018 Facebook released their Q2 financial report indicating a dramatic slowing in the growth of new users due to the Cambridge Analytica scandal. Facebook market capitalization dropped to $509 billion by the end of July 26 losing shareholders $118 billion or 19% of the total market capitalization of the company.

Since July, 2018 Facebook has lost another $93 billion, another 18%, reducing the market value of Facebook to $416 billion on December 13. The last time Facebook’s total value was this low was April 18 , 2017 when it closed at $408 billion.  That’s a total of $211 billion in shareholder value lost in just 19 months.

Companies with stable, sustainable business models do not lose 20% of their total market capitalization in one day.  $211 billion is really hard to make, it should be even harder to lose. We are talking about real money invested in pension funds and private retirement plans that no longer exists.

How much money is $211 billion anyways?

When you talk about today’s Internet giants, the FANG companies (Facebook, Amazon, Netflix and Google), the numbers are really big. Billion or even trillion dollar valuations are so routine with  that you get de-sensitized to the value of money.

I’ll try to make it more real for all of you. $211 billion represents:

  • Losing $105.50 per Facebook user
  • The annual Gross Domestic Product (GDP) of Qatar, the 50th largest economy on the planet according to the United Nations
  • The value of 573 brand new Boeing 747-800 commercial aircraft
  • All 5 of most valuable sports teams on the planet; the New York Yankees, Dallas Cowboys, Manchester United, Real Madrid and Barcelona Football clubs 10 times
  • The entire cost of raising 2,740,000 children from birth to age 21 years in India including food, education and health care

This is a crazy amount of money and it is all generated by free-of-charge software. For a moment, imagine the pressure Facebook’s management team is under to prove how they can make this kind of money from a free app. The scale of the exploitation of Facebook’s users is just beginning to be revealed and may end up in the regulation or even break up of the FANGs.

CEO Mark Zuckerberg makes all the key business decisions for Facebook, and he personally controls 53.3% of the voting shares. Even at the low end valuation of Facebook on December 13, 2018, that means Mark Zuckerberg personally controls $221 billion worth of Facebook value.

It’s therefore hard to see how Mark Zuckerberg avoids a conflict of interest when he personally makes 53 cents for every dollar Facebook gains in shareholder value.  

Let’s get personal

If you are the average Facebook user, just what is your personal data worth to Mark Zuckerberg and Facebook’s shareholders? Some facts:

  • Number of Facebook Users: 2.27 billion
  • Market Capitalization of Facebook on December 13, 2018: $416 billion
  • Value of your data: $183 per user
  • Annual Revenue of Facebook in 2017: $40.7 billion
  • Value of your data: $18 per user

If it is free you are the product

Most people I talk to say something like “I’m okay if Facebook sells my data because I get it for free”.  This is clearly not correct because you are, in effect paying $18 per year to Facebook for the privilege of using their free app.  Each user is also creating $183 worth of value for Facebook shareholders.

As the recent scandals as well as their drastic and immediate effect on the market value of Facebook have proven, investors and the markets see almost zero value in Facebook beyond the value derived from exploiting user data.  It is your data, but how much money do you get from Facebook in return for it? Zero.

If users leave Facebook, revenue drops immediately. Investors, and CEO Mark Zuckerberg personally, lose almost inconceivable amounts of money.  To make up such immense losses as quickly as possible, Zuckerberg and his management team (including Sheryl Sandberg) have proven that they will resort to pretty much anything.

Tim Cook, CEO of Apple, recently reminded us that “If the product is free, you are the product.”  He was referring to social media when he said this and now the social media industry itself has confirmed it. You definitely are the product that Facebook is selling.

How does that make you feel?

Be careful what you agree to you just might get it!

Facebook’s top bosses have clearly created a culture of exploitation at the company.  User data is referred to as a “signal” and permission is only asked when absolutely necessary, and even then sometimes not.  When Facebook users (Zuckerberg calls them suckers) have clicked “I agree” once — sometime faraway in the past — little do they know they’re giving Facebook carte blanche to do whatever they want to meet shareholders growth targets and in doing so, increase Facebook executives’ personal wealth immensely.

Coincidence?  I think not.

But here’s the real question. All the debate surrounding algorithms, advertising and exploitation by the FANG companies overshadows the real question everyone should be asking. Why should Facebook, Amazon, Netflix and Google make money from my data?

Shouldn’t you be the one to volunteer that you like a particular gym shoe in return for a payment or a discount of some kind?  Doesn’t this seem much more reasonable?

If you think you should earn money from the sale of your data, keep your eye on and help us change social media for all of us. #peersocialispuresocial


Michael Cholod

Peer Social will change the world!

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