By now Facebook users seem to finally get that they may not get charged anything for using the social networking service but it sure isn’t free, not after being subjected to ad after spookily tailored ad.
Yet users still seem to have a long way to go to fully understand what Facebook and the other big tech companies are really doing. And, of course, Facebook seems just as far away from delivering what consumers clearly seem to want.
That’s my pessimistic conclusion from a new research note by the venture capital firm Loup Ventures of Minneapolis, in which managing partner Doug Clinton answered the question of what the online data of a single U.S. user are really worth.
Clinton and his Loup partners are technology optimists, with Clinton saying this week that people should expect at least a few problems with pretty much all innovations that make their lives better.
He started looking into the topic of what he called social data not because of Facebook’s still-unfolding privacy scandal but by puzzling over technical solutions for locking up and then selling one’s own personal data. One problem Loup found here — which is that a user’s not worth nearly as much to Facebook as consumers seem to think — seems to also suggest that Facebook has a lot of work ahead to regain consumer trust.
As almost everyone must know by now, Google doesn’t charge for using Google Maps, and Facebook doesn’t charge for its popular Facebook and Instagram applications. These applications are almost too easy to use, as even novices can get online and be liking and friending like mad within minutes.
Facebook’s business model of “free” is shared by other big technology firms, a peculiar outcome of popular Silicon Valley ideas that seem to be impossible to hold in your head at the same time.
One was how the technology community had to celebrate the entrepreneurs of this age, builders of thriving businesses such as Sergey Brin and Larry Page of Google or Mark Zuckerberg of Facebook. The other is that the internet must remain a free and wide-open place, without government interference and available at no cost to anybody with the interest and means to get online.
The problem with free, of course, is that the entrepreneurs had to get their money from someone in order to have a business. That meant selling advertising.
The Silicon Valley firms offered advertisers a different deal, though, not the mass-market approach of 30-second radio spots or a quarter of a newspaper page. Facebook promised ads in front of the eyeballs of just the right person, having learned who that was by closely paying attention to what its users did online.
Meanwhile, Clinton and his colleagues at Loup Ventures had recently been noodling a potential business opportunity for the emerging blockchain technology, best known now for being the foundation of virtual currencies. Maybe consumers could use something like that to lock up their personal-use histories on technologies like Facebook’s and Google’s. Instead of giving their data away to these companies, they could sell it.
So what’s that worth?
Last year Facebook generated about $19.5 billion in U.S. and Canada ad revenue from its average monthly active users of more than 235 million, working out to about $82 each. Pare that amount back, applying things like expenses and taxes, and the value of their data per user is about $20.72.