Facebook valuation: $100 billion for what?

Yes, if FB were a country it would be the third largest. It would also be the most unproductive country ever.

Below is my take on Facebook’s IPO published on spiked-online.com

When Facebook filed its initial public offering, the world’s media, led by the Wall Street Journal, speculated the social network could be valued between $75 billion and $100 billion, putting the company on track for one of the biggest US stock market debuts of all time. While some suggested this would make it the largest technology initial public offering (IPO) ever, others have questioned the valuation, saying that $50-$75 billion is more realistic. Yet amid all this monetary speculation, no one has raised the obvious question: why has a social network with no productive capacity whatsoever attracted such media attention and an investment frenzy?

It is really important to ask what Facebook actually does in order to grasp the significance of all this interest in its IPO. Google, Amazon or, indeed, Apple, all provide services, or facilitate access to a service or product. Facebook does none of that. As an interesting article on Slate put it, ‘What’s different about Facebook is its product: Facebook is us. You go to Google for web pages, you go to Apple for computers, and you go to Amazon for stuff. What does Facebook give you? Me and you and everyone we know.’ But this is only the start of the conundrum. Connecting ‘us’ and providing a platform for collaboration could be the foundation for remarkable progress and productivity. But Facebook does the opposite. It is both a product of, and now has become a major contributor to, the contemporary culture of self-absorption and consumptive indulgence.

Digital children and social media

Facebook and its predecessors, particularly MySpace, rose to prominence not because they were the product of lone entrepreneurial geniuses or compelling technologies. They emerged, rather, because they fulfilled a social need that they barely understood. This need belonged to ‘digital children’, the generation whose childhood had been transformed by risk culture and who embraced digital media as a means of gaining some autonomy from the pervasive gaze of their parents. Because this generation could not escape the physical presence of adults, digital media became attractive because it provided them with the space in which to experiment, entertain and express themselves free from supervision. The need for self-expression, acknowledgement and the accumulation of ‘friends’ as a marker of social status drove the demand for technologies like Instant Messaging, blogging and eventually social networking. These tools gave the ‘digital children’ control, and freedom to do what all younger generations need to do: namely, create the spaces within which to indulge their self-absorbed nature, to experiment with identity and to attain peer-driven support and discovery. This is what gave rise to a host of social-networking sites of which Facebook emerged as the pre-eminent one.

The fact that social networks like Facebook are now intergenerational should not be confused with the impulse behind their emergence. ‘Digital children’ were a product of their time. Like previous generations, they used, adapted and shaped the technologies they found around them. The culture they spawned, which was driven by introspection and self-expression, was a natural outcome. The fact that today this same cultural impulse affects all generations, particularly adults, should not be blamed on the digital kids. Rather, it expresses how contemporary society has become infantilised. Facebook is now a cultural institution, which is driven by, and nurtures, a culture of self-reflective, self-absorbed individuated entertainment and therapeutic communications. The sad truth is that the frenzy and excitement generated by Facebook’s pending IPO reflects little more than its cultural significance. And this is a million miles away from where investment ought to be focused.

Consumption versus productivity

The importance of this cannot be underestimated. The problem is not simply a short-term one, where investors see the possibility of making a quick killing on the stock market. There is every possibility that Facebook’s IPO will generate a valuation of $100billion. What’s at stake here is more than the staggeringly large figures of money. If Facebook were to realise this investment, it would become even more of a material force, increasingly able to shape this very unproductive egosphere of individuated consumption. If you think this is an exaggeration then examine Facebook’s S1 – the document the company filed to kick off its initial public offering – which lists several risks to its future success. Keep in mind this is a document it has to produce by law to be transparent to potential investors. Facebook argues, for example, that if it fails to retain existing users or add new users, or if its users decrease their level of engagement, then its revenues, financial results and business may be significantly harmed. In other words, what Facebook understands, and what it wants its prospective investors to understand as well, is that its future success relies upon more of the same: more people playing games, sharing photos and sending each other messages upon which Facebook can generate revenues through targeted advertising.

The largest technology IPO in history, in other words, is not about a technology that can transform nature, provide new sources of energy, or new cures for illnesses or cancer, for example; it is about a platform that encourages ever more of the same unproductive, self-absorbed communications between users.

And if you imagine this to be an exaggeration, be mindful of the fact that there are now serious studies showing that social media networks are becoming more addictive than nicotine and other drugs. In this view, we appear to be powerless against the power of Facebook, which suggests that Facebook’s valuation of $100billion might indeed be an underestimation.

It is a sad reflection on our society that so much excitement can be generated over what is nothing more than a means for self-absorbed consumption. It reveals just how far our expectations about what technology can do have been lowered. It is rather tragic. On the one hand, connecting 845million people together has so much potential it is staggering. The role Facebook has played in the Arab Spring, although greatly exaggerated, at least points to the potential power of this connectivity. But as Facebook’s S1 reveals, this is not going to be part of Facebook’s focus in the future. Instead we will see more gossip, self-absorption, targeted advertising aimed at and driving more consumption. The productive potential is incredible. Yet what is being celebrated are connections as ends in themselves, spawning a culture of self-obsession where we can all let the world know we merely exist.

There is a statistic that social media gurus and others uncritically roll out when they evangelise about social networks and how they are changing our society: ‘If Facebook were a country it would be the third largest in the world.’ What they fail to add, however, is that it would be the most unproductive country in the history of mankind.

The Facebook IPO does show how unambitious contemporary society’s expectations are about technology. That Facebook could become the largest technology IPO in history is an alarming prospect. It is simply not possible to compare the IPOs of past technology giants like IBM, Microsoft or even Apple, which has itself made a great success out of the creation of devices and applications that elevate the self above all else. $100 billion could fund the further quest of space, or research into nanotechnology and new drugs. There is nothing inevitable about the fact that updating your status on a beautifully designed device or social network website is now regarded as important, if not more important than updating our understanding of how the world works. It is more necessary than ever for those who still believe in society’s capacity to create productive investments that can solve the problems facing humanity to come together, raising a collective voice of opposition to this narrow self-indulgence. Anyone like to create a Productive Investment Group on Facebook?

4 thoughts on “Facebook valuation: $100 billion for what?

  1. Norman, Thank you for having the courage to raise the issues around what I fear is rapidly becoming that “unaskable” truth. The hype around Everything Social is creating a large sucking sound that is the warning call for a significant drain on a world that needs some all-too-real answers to “what’s next” in a Post-Industrial World. It would be to easy for others to look at your post and assume it comes from the mind of a neo-Luddite. In reading through your About section, it’s clear that the work that you and Professor Furedi are doing is anything but anti-technology. That being said, there are not enough of us who truly believe in technology’s transformational potential that are asking the tough questions about to what end all this “Social” behavior should be leading. None of us has the answer for most of the tough, intractable, system-wide challenges that confront our world, but collectively we do. As Peter Drucker, A.G. Lafley, John Hagel and John Seely Brown, and many others have pointed out, bringing the outside in is a key element of innovation and productivity in the emerging Creative Economy. One of the biggest problems with Social is that senior management of most of the world’s largest corporations is made up of people who came of age in the Me Decade. They are the ones who are least likely to engage in the meaningful interactions with “outsiders”. Those outsiders are the ones with the unique new perspectives needed to reveal the dots to be connected for those desperately needed new insights. For those who might think this all sounds pretty negative and pessimistic, think again. What many of us see is the potential for digital systems and human cultures to combine synergistically and produce meaningful engagements that can catalyzes our collective wisdom to create the innovation needed for a better planet. Thanks again for a well-written post. Nicely done, sir!

  2. Jim, I appreciate your comments and agree with your very legitimate concerns. The cultural moment we are in is depressing. We have so lowered our expectations it has become a self-fulfilling prophecy – low expectations, risk aversion, lowered ambitions, and an unwillingness to experiment. At the same time paradoxes abound. There are examples that show some potential. The bifurcation between what is possible and the expectation that nothing will change or is worth trying means the gaps will produce changes that will eventually allow potential to become reality. To your point about the small number of people who are swimming against the stream, it is precisely because these points are being made and the existing culture is being challenged, where small but significant examples are emerging that things change will gather pace. Its contradictory and depressingly slow, but it is and will continue to gather pace. Thanks for your comments.

  3. Hi Norman

    This is an excellent analysis.
    The technology, like Google is a mash up of open source
    tools which is then characterized by a search -that is a search for identity and relevance – or a search for stuff!

    The linked people or organizations are subtlety – in fact
    not so subtlety – entrapped in a ” cloud ” of information
    gathering, purely for marketing / profit, often without the connected peoples understanding of present or future consequences.

    Facebook could be replaced in a moment – or 2 !

    Regards

    Ken Grogan

    Virtual local

    1. Thanks for the comments, Ken. You are so right about the replicability of Facebook in terms of technology. Surely there is something more productive we could do capitalising on the self-expression motivation underpinning so much of Facebook’s growth?

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