By any measure of financial success, Facebook’s Second Quarter 2016 report was stunning. The company reported over $6.4 billion in revenues and operating income exceeding $2.7 billion. There isn’t an industrial giant in the world that doesn’t salivate over those 43% pre-tax profit margins. Annualized, Facebook makes almost $10 in pre-tax profits for each daily active user.
How does Facebook achieve such extraordinary results? It’s really quite simple. The most vital raw material for the company’s amazing marketing engine—information they collect about you and me— is free. They don’t pay a dime for it.
We, the 1.13 billion daily active Facebook users, naively treat the private information we disclose while spending hours on the social media network as having no value. We innocently assume our “likes,” shares, comments, and network of friends have no monetary value. But Facebook executives know better. The company’s data scientists and software engineers can mine our billions of seemingly trivial bits of data. The result is a rich profile of each and every one of us, which they then peddle to advertisers.
Facebook reasonably argues that there is a quid pro quo in this relationship. They provide a free social networking service, and in exchange we users give up little pieces of personal information. What Facebook doesn’t openly disclose is the imbalance in this relationship. The monopoly profits they reap speak to a lack of consumer understanding about just how unfair the relationship between Facebook and its users has become.
So, in the interest of fairness, I offer a simple proposal that would make this relationship much more balanced. Facebook should pay its active users—all 1.13 billion of us—for the information we provide that fuels the company’s advertising engine. That’s right, like every other business, Facebook should pay for the resources it uses to generate revenue.
As Mark Zuckerberg and his team know, paying us for our services is not a major technical challenge. It would not be difficult to analyze the relative value to Facebook of any given user. The processing cost to Facebook for making quarterly payments is probably just pennies per user. Facebook could probably get away with giving some of us credit in our user accounts that we could spend on Facebook for such valuable things as animals on Farmville or tokens on a “play for amusement only” slot machine game. For those of us who are serious about getting paid, we could demand that Facebook makes electronic transfers to our bank accounts.
After all, Facebook can do anything that Mark Zuckerberg puts his mind to. Facebook captures a user’s every mouse and keyboard click and knows each second we are connected to the social network. Algorithms can easily apportion a user’s benefit to Facebook, and the cost of making an ACH transfer to a bank account is trivial. Operationally and technically, this would be a low-impact project at a minimal cost to Facebook. With a cash hoard in excess of $23 billion, Facebook can easily afford this modest engineering project.
Here’s the deal, Mark. Let’s make this a real partnership. I will gladly return to more active use of Facebook if you agree to share (“share” seems to be your favorite marketing word) your monopolistic profits with those of us who make these profits possible.
I think I deserve 50% of the pre-tax profits you reap from me. Sure, it’s only a few bucks a year. But let’s face it, I’m working for you every time I login to my Facebook account. I should get paid for it, right?
Even better, maybe the profit-sharing system your engineers develop could give me the option to donate my share to the nonprofit of my choice. Just send me a link to the profit-sharing page and I’ll sign up now.
So will a whole bunch of my friends.
Gary Ebersole is co-founder of Xumi Group, provider of SafeCloudNow.com and 1776Email.com secure and private email accounts.