Facebook and the Value of Free Data


The information technology market is undergoing a major shift towards cloud computing.  While cloud computing only represents 2.8% of the $3.6 trillion information technology market today, analysts expect it to more than double over the next two years (Cantu, 2011).   Moreover, the economics of the cloud are so compelling this author thinks that all compute services will be delivered via the cloud in the decades to come.  Given the clear shift to the cloud, it is worthwhile to explore what cloud computing is, how it works, and potential implications of the cloud for Internet consumers and producers of content.  However, an overarching analysis of the cloud is overly ambitious given the size and scope of the market, therefore, this author will analyze the cloud using the narrow confines of a case study on Facebook, the largest social Internet application in the world.  Therefore, this author compared Facebook to the cloud market in general, and specifically explored the implications of content usage, labor, and privacy in a cloud application, like Facebook.   This author found that Facebook has remarkably similar issues with cloud vendors, and profits from user-generated data while providing only limited privacy protections, in exchange for the use value of the application.

What is Cloud Computing?

            Cloud computing is the result of advances in information technology over the last forty years, and specifically is the result of the Internet architecture.  Whereas, in the era before the network, computing power was largely in the hands of government and large corporations, the coincident revolutions of personal computers and private networks, led to a client server architecture, where application processing occurred on a client computer, and data was stored on a network server.  With the development of the Internet, a global computing network, came the possibility of a new architecture, where every layer of the architecture is centralized, including the application logic, and the network end-points are simply dumb terminals in essence.  While this description is necessarily an oversimplification, it is generally correct.

            As the Internet architecture has matured, increasingly corporations are seeking ways to improve efficiency and reduce the costs of doing business over the network.  Indeed, cost and efficiency gains have led to the advancements necessary to make cloud computing possible.  Important advancements in the shift to cloud computing include autonomic computing, service-oriented architecture, web services, virtualization, and grid computing (Cantu, 2011).  These technologies allow technology professionals to deliver each compute layer as a service, including storage, database, middleware, and applications.  Moreover, as the cloud market has matured, so has the definition.  The National Institute of Standards and Technology (2011) recently released the final draft of the cloud computing definition, conceived of as:

A model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. (p. 1)

In the strictest sense, an application like Facebook cannot be conceived of as cloud computing, because the application is not provisioned for different entities, rather it is simply an application that is available for end users.  While admittedly, the distinction is minor, it remains important.  However, Facebook is similar enough to a cloud application to warrant further analysis.  Specifically, the application logic, the infrastructure, user credentials, user information, user-generated content, and user relationship data are centralized behind Facebook’s corporate firewall.  This architecture gives rise to a number of important questions for both cloud applications and Internet applications.  For instance, what are the implications for user generated content?  Whose data is it?  Who profits from the data?  Who is both responsible and liable for data protection and privacy?  It is these questions that this author will attempt to address in the rest of the paper.

Whose Data Is It?

            When a user registers for a Facebook account, the user is required to load their name, email address, birthday, and gender (Facebook, 2012a).  No other information is required.  However, the application is of limited value without providing additional data.  Typically, users will add personally identifiable information, relationship data, preference data, status updates, location data, photos, and videos to make the application valuable.  Legally, each user is the owner of their data in the application, however the matter is complicated by the social nature of the application (Facebook, 2012b).  For example, if one user posts a photo of another user, the data is owned by the user that posted the photo, an important implication for those concerned about privacy (Facebook, 2012a).   Moreover, through the terms of agreement between Facebook and a user, users assign Facebook a “non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content [posted] on or in connection with Facebook” (Facebook, 2012b, p. 1).  Therefore, while users own the data, Facebook has the right to profit from it.

Of course, the problem with storing user data in Facebook is that like most cloud applications, the application is analogous to a roach motel, it is easy to check data in, but much tougher to check it out.  While Facebook provides a number of application programming interfaces to retrieve data (Facebook, 2012c), it requires technical expertise to access the data through anything but the native Facebook application interface.  Therefore, outside the confines of Facebook, the data is of limited use.  Moreover, the limitations of the application interface make it difficult for non-technical users to substantially transform the data to produce new works. In effect, the structure serves to constrain people from profiting from their data.

Who Profits from User Data on Facebook?

            As made clear in the previous section, while users own their data, Facebook has both the right and the architecture to assure that they are in a position to profit from user data.  In fact, the data only has value when considered in the aggregate.  For example, few would care to pay this author for knowing of a recent ski vacation.  However, a skiing manufacturer might pay a considerable sum to target active adult skiers across the country with targeted advertising for a new line of high performance skis.  Thus, Facebook profits from the free labor of 800 million users.  Indeed, with Facebook’s recent initial public offering, their finances came under intense scrutiny from the investment community.  In 2011, Facebook generated more than $3.7 billion in revenue, 82% of which came from advertising (Boorstin, 2012).  With more than 500 million monthly active users, and 125 billion friend connections, Facebook provides advertisers a platform with reach, relevance, and most importantly, a social context for product recommendations (Boorstin, 2012).  For example, if this author creates a post highlighting the purchase of a set of high-performance skis, the ski manufacturer might send targeted advertising to other skiers in the author’s network.

Croteau, Hoynes, and Milan (2012) point out that firms like Facebook “harvest and harness the free labor of others to generate profits for themselves” (p. 314).  However, that perspective includes only one side of the transaction.  Facebook simply enables a transaction to occur, where users providing content receive a use value, while Facebook creates exchange value from the commodification of users.  In this sense, Facebook is simply following the business model of traditional mass media who provided television content for consumers, in exchange for commodification of consumers into an audience to bring in advertising revenue; new media indeed.  Therefore, in the case of Facebook, is there really exploitation of free labor?  Or are Facebook users receiving value from the use of the application?  This author thinks it is the latter.  In what other way can people stay connected and share their lives with friends and family as efficiently as on Facebook?  Therein lies Facebook’s use value for users.  While the exchange relationship between Facebook users, the company, and advertisers captures the essence of the business model, the business model itself raises significant concerns over the security and privacy of the data that fuels Facebook’s revenue.

Debates over data security and privacy have raged over the last two decades as society has attempted to come to terms with the implications of the growing amount of data.  Facebook in particular, has come under intense public scrutiny for a series of data privacy policy changes over the last six years that erode data privacy for users (Electronic Privacy Information Center, 2012).  Moreover, Facebook recently stands accused of matching Facebook data with data from Datalogix to improve ad targeting, in potential violation of a recent privacy settlement with the FTC (Electronic Privacy Information Center, 2012).  In fact, Facebook no longer has a privacy policy, rather they express their point of view in a data use policy (Facebook, 2012a).  While Facebook has taken steps to improve data security by adopting HTTPS as an optional user setting, the company increasingly is altering their data use policy to introduce new capabilities that grow revenue at the expense of user privacy (Electronic Privacy Information Center, 2012).  In short, until users decide that costs, in the form of privacy loss, outweigh the use value, it is unlikely Facebook will change their data use policy in a way that favors improved privacy protection.


 

Conclusion

            Technology companies like Facebook have an amazing business model.  The company has figured out how to generate immense revenues from the data that people provide about themselves, their friends, and their family, in exchange for a more efficient way to keep in touch.  By locking the user data into the Facebook application, Facebook assures that the data is only useful to Facebook.  Moreover, given the legal terms associated with use of the application, users readily grant Facebook the license to profit from the invasion of their privacy.  Future research should explore whether the development of open standards for social relationship data portability could spur the company to provide greater privacy protection based on the threat of customer churn, in much the same way that cell phone number portability enabled greater choice and competition in the wireless industry.

References

Boorstin, J. (2012). Inside Facebook’s money machine. Techbiz.  Retrieved from http://money.msn.com/technology-investment/post.aspx?post=869a1b6c-0bb7-47b3-ac0a-25d10f6a5404

Cantu, A. (2011). The History and Future of Cloud Computing. Retrieved from http://www.forbes.com/sites/dell/2011/12/20/the-history-and-future-of-cloud-computing/2/

Croteau, D., Hoynes, W., & Milan, S. (2012). Media/society : Industries, images, and audiences (4th ed.). Thousand Oaks, CA: SAGE.

Electronic Privacy Information Center. (2012). Facebook Privacy. Retreived from http://epic.org/privacy/facebook/

Facebook. (2012a). Data Use Policy. Retrieved from http://www.facebook.com/about/privacy/your-info

Facebook. (2012b). Facebook Terms. Retrieved from http://www.facebook.com/legal/terms

Facebook. (2012c). Graph API – Facebook Developers. Retrieved from http://developers.facebook.com/docs/reference/api/

National Institute of Standards and Technology. (2011). Final Version of NIST Cloud Computing Definition Published. Retrieved from http://www.nist.gov/itl/csd/cloud-102511.cfm


Why This Republican Voted For Obama (Again)


Following Obama’s re-election, it is clear that the GOP is doing some soul-searching, trying to figure out what went wrong.  There are several dominant narratives in the mainstream press, including a) Republicans failed to recognize the changing ethnic makeup of the country, b) Governor Romney was out of touch with the working class, or c) President Obama’s campaign had a better ground game, doing a better job of mobilizing Democratic voters.  It appears likely that all three narratives played some part in the election results.

Indeed, this long-time Republican voted for Obama again, continuing a trend that started with a vote for Vice-President Gore.  If you believe the political rhetoric coming from disappointed conservatives on Twitter or Facebook, my vote, along with the votes of more than 61 million other Americans, is going to result into a descent into economic depression, communism, or civil war.  Of course, I didn’t vote for economic failure, communism, civil war, or any other such thing.  Rather, I voted for the Democratic candidate for a variety of reasons I felt were important for America.

  1. The Economy
  2. Tax Policy
  3. Freedom and Liberty
  4. The Environment
  5. Foreign Policy
  6. Character and Leadership

The Economy and Jobs

Of course, the economy dominated the election discourse.  The key differences between the candidates centered on the size of government debt.  Romney appeared to favor decreasing government deficit spending, arguing that economic growth in the private sector is the result of decreased regulation.  In addition, in an either-or argument, Romney suggested that the private sector created jobs rather than government.  On the other hand, President Obama favored deficit spending to spur the economy and create jobs.  As a voter, I rejected the either-or proposition as an overly simplistic argument.  Indeed, I was offended that both parties underestimated the intelligence of the American people.  Of course, the budget deficit and the size of U.S. debt needs to be reduced, because too much government debt crowds out private investment.  However, it is largely a question of timing.  As a proponent of Keynesian economics, I understand how short-run government spending can stabilize the amplitude of economic cycles.  The $700B stimulus package was the right thing to do for the economy.  To argue that the deficit we now must reconcile with was somehow the fault of President Obama when it was the only way to prevent the economy from going into depression is not only divisive, it is stupid.  Had Governor Romney been in a similar position, he would have had to use the same tools of fiscal and monetary policy to prevent the collapse of our economic system.  Moving backwards at this stage in the game is simply an ill-conceived idea.  Moreover, it suggested to this voter that Governor Romney either a) didn’t understand the economy, or b) was simply pandering to the views of the Republican base, knowing his policy response would have had to be the same in a similar situation.

Tax Policy

As noted earlier, government debt crowds out private investment.  We simply must reduce our deficits while growing the economy.  There are two ways to reduce our debt, increase revenue and cut spend.  President Obama focused on raising revenue through higher taxes.  Governor Romney favored cutting taxes and reducing spend on entitlements.  In an ideal scenario, the government will do both, finding opportunities to raise tax revenue and cut spending.  Again, the candidate’s positions forced an either-or mentality when the answer is likely both.  For my part, I believe that U.S. tax policy harms the economy by overwhelmingly favoring those with wealth over income-earners.

Indeed, according to the U.S. Census Bureau, household median income in 2011 is roughly $50K annually, the same as it was in 1989 when adjusted for inflation.  Of course, in the same period, the U.S. GDP has grown 60%, from $7.8 trillion to more than $13 trillion in constant dollars.  So where did the money go?  The money overwhelming is going to those with wealth.  In 1989, the bottom 60% of households shared roughly 30% of U.S. income, whereas the top 40% shared 70%.  Today, the ratio is 25% for the bottom 60% and 75% for the top 40%.  Moreover, the top 5%’s share increased from 18% to 22%.  It is clear that our tax policy favors wealth.

Of course, we don’t need economic analysis to tell us what is happening.  We are all feeling the pinch as energy, healthcare, and education costs rise, while median income remains the same.  The question is what to do about it.  There are two schools of thought coming from our political parties.  The Republican plan is to lower tax rates on wealth and businesses, while the Democratic plan is to raise taxes on wealth and businesses.  Concurrently, the Republicans favor cutting government spending, while the Democrats favor continued spending to spur the economy.  This leaves voters with an imperfect choice.  It comes down to this: do we believe in trickle-down economics, where greater wealth results in greater investment, or income equality, where greater income for the middle-class results in higher consumption and the resulting investment from those with wealth?

For my own part, I believe that more income in the hands of the middle class will increase consumption and thus grow the economy.  Let’s face it, our economy is geared towards consumption.  Our mortgage interest deduction favors the purchase of houses.  We use tax credits to spur consumption for everything from energy efficient appliances to new cars.  Indeed, just how many cars will a billionaire buy compared to healthy middle class?  If you’re Jay Leno, perhaps you’ll buy a hundred or so, but otherwise, it is unlikely you will buy much more than you need, whereas the same amount of money in the hands of the middle class would create far more demand. I should note that I do not believe in the redistribution of wealth.  However, that is exactly what is happening when a tax policy favors wealth.  It assures that income earners have difficulty accumulating wealth, while those who make their money from wealth grow wealthier.  Rather, our tax policy should reverse the current trend to create a more level playing field between the wealthy and income-earners.

Freedom and Liberty

I have to be honest.  The Republican agenda against gay marriage is a problem for me.  The Declaration of Independence is quite clear, “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”.  How then, should we legislate less than equal rights to some of our population, simply because they are different?  Moreover, how much has the party of President Lincoln changed, that they have departed from the basics of our democracy?  The Republicans are simply on the wrong side of history in the argument against gay marriage.

Furthermore, the argument against gay marriage appears to be a moral argument with origins in Christian thought and influence.  Because of the 1st amendment to the Constitution, which protects the rights of the people by preventing Congress from abridging freedom of religious worship, equally so, it prevents Congress of forcing the values of any one religion on the people.  Indeed, as Jefferson wrote, “I contemplate with sovereign reverence that act of the whole American people which declared that their legislature should ‘make no law respecting an establishment of religion, or prohibiting the free exercise thereof”, thus building a wall of separation between Church & State”.  As such, freedom of religion is also freedom from religion.  Accordingly, and consistent with our founders, the idea that Christians should implement their moral agenda on the free people of these United States is abhorrent to me, despite my personal faith.

The Environment

While climate change was not a topic during the Presidential debates, the candidate’s policy positions were relatively clear.  Governor Romney had no policy position on climate change, while President Obama favors investment in clean energy.  Indeed, the general position of Republicans on climate change seems to be evolving from denial, to an argument questioning the relationship between cause and effect.  Is climate change happening?  There is no longer any question, it is simply physics.  Carbon dioxide stores the sun’s energy radiated from the earth’s surface.  Burning fossil fuels increases the amount of carbon dioxide in the atmosphere.  More carbon dioxide in the atmosphere increases the amount of heat stored in the atmosphere.  More heat in the atmosphere increases the melting of the ice caps and glaciers, decreasing the amount of the sun’s energy reflected out to space.  Ipso facto, burning fossil fuels increases the temperature of the atmosphere causing changes to our climate.  How long can we continue to ignore this issue?

Moreover, as Hurricane Sandy showed, the economic impact of climate change is staggering.  Should we continue to protect the energy and automotive industry given such high social costs?  Or should we invest to spur innovation and reverse the current warming trend?  Like President Obama, I believe we have to innovate now.  Of course, there will be failures.  Failure is a part of innovation.  However, the risks of doing nothing far outweigh the risks of doing something.

Foreign Policy

After entitlement spending, the defense budget is the largest line item in the federal budget.  We need to have a strong defense, but when it comes to killing people, it should be defensive, not offensive.  I do not believe President Obama will get us into a frivolous war, like Iraq.  Moreover, Bin Laden is dead and you cannot fight a war against a concept like terrorism.  You can destroy terrorist organizations.  However, that does not require spending more than $1 trillion dollars.  Intelligence, international cooperation, police action, and limited military action are far more efficient means to prevent terrorism and destroy the capabilities of terrorist organizations, than is war.

Character and Leadership

Leader’s share their vision and inspire people to achieve great things.  While some can argue President Obama’s leadership, the President was remarkably consistent in his beliefs and policy positions.  I struggled with Governor Romney’s character.  He appeared to change his policy positions quite often, particularly between the Republican primaries and the Presidential debates.  The Governor initially pandered to the extreme elements in the Republican party in order to get nominated and then attempted to appear as a centrist to be more electable.  If he so willingly abandoned his positions, how do you know what he stands for?  Was Governor Romney a conservative extremist or simply an opportunist?  Moreover, what would happen when he got into office?  I simply had a very difficult time understanding how our country would be governed under Governor Romney.  In addition, President Obama, with all of his faults, appears to behave as an honest man.  Character mattered to me.

After reading this, some might argue that I am not a Republican.  However, I would argue that I am a Republican, but my party left me behind long ago.  By pandering to social conservatives and growing government during the Bush years, the Republicans left a sizable number of fiscal conservatives, like me, behind.  I remain committed to the power of free markets (with some caveats), strong defense, and freedom for all of us.  However, the party has changed.  The free market philosophy appears to be irrevocably attached to policies that deride smart regulation, and favor income inequality and special interests.  Moreover, strong defense has become strong offense.  Finally, liberty and freedom for all have reverted to liberty and freedom only for those that look and act the same as the majority.  When the Republican party comes back, I’ll still be here.  Perhaps I can even vote for one again.

 

 


Emotional intelligence: Value and limitations in leadership communication


Presentation on the use of Emotional Intelligence instruments for leadership development.

ORG423 Week 7 Critical Thinking Richard Rock