Spotlight

6 IT Pro November/December 2012 P u b l i s h e d b y t h e I E E E C o m p u t e r S o c i e t y 1520-9202/12/$31.00 © 2012 IEEE

Web 2.0 Social Media: A Commercialization Conundrum

Facebook, with over a billion registered users, actively engages over 1/7th of all the people on the

planet. Given other social media, such as Twitter, Linked-In, Zynga, Google+, Foursquare, and You-Tube, you can’t deny the pro-found grasp the social media phenomenon has on humankind. Many claim social media ush-ers in an era of unprecedented sharing, collaboration, coopera-tion, and openness. Indeed, it has connected people globally in ways unimaginable just a few decades ago. Widely accepted, social me-dia appears to have developed real staying power. In so doing, it has created a new class of t-shirted tycoons, riding a valuation wave almost solely based on the per-ceived value of “big data.”

The Facebook genre, however, is in jeopardy. Facebook stil l hovers around a 50 percent loss in stock valuation since reaching that level by late August of 2012. After its highly overrated 18 May 2012 initial product offering,1 Facebook has clearly fallen well short of free-market expectations. Could the Facebook and other third-quarter 2012, tech-firm performance numbers become

harbingers of another impending “dot.bomb” event? It all hinges on the yet to be proven ability of the social media genre to generate sig-nificant revenue, commensurate with user counts. Moreover, in addition to growing users, Face-book is also attracting a growing cadre of outspoken critics.

The Two-Sided Derivative BetThe revenue aspect of social me-dia appears as stable as any deriv-ative bet can be. The basic value proposition is that vast amounts of personal data can be success-fully mined to permit effective, targeted marketing. Advertisers are willing to pay top dollar for the ability to reach “ready” markets. This helps define Facebook’s val-uation, because Facebook owns the personal information, photos, links, and statements that its us-ers enter.

The turmoil over General Mo-tors’ withdrawal from Facebook advertising just before the social site launched its IPO, however, has certainly clouded the sure bet. General Motors claimed that the Facebook exposure didn’t boost its sagging sales num-bers and ceased supporting paid

advertising in Facebook.2 In simi-lar moves, GameStop, Nordstrom, and J.C. Penny closed their on-line Facebook shops.3 Will oth-ers follow and bet the flip side of this tricky derivative? The answer appears to boil down, in part, to user acceptance, as adaptation to emerging technology (particularly mobile apps) continues apace.

Facebook has been criticized for its failure to adopt mobile media. Indeed, the company appears to be grasping for ways to better har-ness this technologically domi-nant force. Despite rumors of a dedicated Facebook phone, the firm appears to steadfastly cling to its Web preeminence in the near term. Introduction of the timeline and open graph have reinforced a Web-centric approach and drawn the wrath of skeptical observers.

The gaming giant Zynga is also wrestling with how to make its games mobile, and the challenge goes beyond merely interfacing with a smaller platform. Social media outlets, such as Zynga and Facebook, hope to develop and sustain a network of intercon-nected users, exclusive to the mo-bile medium. This is proving to be a daunting task, because the limited mobile real estate requires

George F. Hurlburt, Change Index

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paid advertising to compete with content delivery.

Vacant AdvertisingMore fundamentally, however, stock valuation will clearly de-pend on how much exploitation consumers will accept before they rebel and move on to less invasive experiences. Thus a key com-ponent of the positive corporate wager is consumers who favor sharing their interests over main-taining their privacy.

Research from a digital shopping-cart vendor suggests that small and medium businesses (SMB) are more adroit in reaching lo-cal constituents and generating sales on Facebook than the behe-moths.4 The SMB markets tend to be local and trustworthy, which might be why big businesses have had trouble reaching a criti-cal mass on Facebook. Nonethe-less, the Wall Street bottom line depends on social media’s abil-ity to deliver nonstop penetrable markets to hungry advertisers. These markets are best served hot, in near real time, while so-cial media consumer demand is at peak.

The notion of timely, targeted advertising ultimately depends on the ability to exploit big data. In this context, the Facebook num-bers get interesting. US Facebook users, perhaps because of their assumed disposable income or excessive compulsiveness, are val-ued higher than other nationali-ties.5 US users create a relatively high volume of Facebook con-tent, so the already large amount of data grows daily. Regrettably, however, the proper advertising insights are hard to draw—for the most part, they must be derived inferentially. Google, because of its powerful search methodol-ogy, comes close to identifying advertising opportunities. How-ever, given Facebook’s server

configurations and its insufficient search abilities, some question its ability to effectively exploit such volumes of data.6

The Technical ChallengeMoreover, scalability in big data analysis remains a significant is-sue. For example, the National Security Agency plans to store a yottabyte (1024 bytes) of data in the Nevada desert, awaiting the ability to effectively exploit it for national security purposes. The algorithms for effectively reducing big data are still emerging from the laboratories, and those that do work require phenomenal cycles and speed.7

This is a technological question of the highest order, eventually requiring ever-closer tolerances to overcome speed and distance limitations in supercomputing. They literally beg for quantum computing.

The CriticsSherry Turkle of MIT, while still a cheerleader for social technol-ogy, sees an evolving dark side in her book Alone Together: Why We Expect More from Technology and Less from Each Other (Basic Books, 2011). Taking 15 years of obser-vation to develop her thesis, she notes that intimacy and democ-racy are challenged by a loss of privacy via social media. She feels that privacy must be reinforced as a national value based on firmly applied social norms. In fact, she calls for an Internet culture that overtly reinforces privacy as a valid social norm. She acknowledges Facebook as a shallow provider of connection services, but she stops short of supporting overt mar-keting on social media, because that practice undermines privacy. Turkle also notes the subtle shift from the long form of argument to the short email or tweet, utterly devoid of argumentative depth.

She laments the resulting lack of a deeper appreciation of substantive issues when important thoughts are regularly reduced to 140 or fewer characters.

Iconoclast Andrew Keen, a columnist and video commenta-tor for TechCrunch, draws upon severely dark metaphors to il-lustrate the fallacies of Facebook and Twitter in his book Digital Vertigo: How Today’s Online Social Revolution Is Dividing, Diminishing, and Disorienting Us (St. Martin’s Press, 2012). He likens the social media experience to the classic Hitchcock movie Vertigo, where the object of Jimmy Stewart’s af-fection becomes an enigma. He senses danger in “hypervisibil-ity” in the new data-dominated world . T hose who ow n the data promote the notion that it’s good to be constantly observed— constantly performing and indi-vidually becoming “the informa-tion,” as James Gleick notes in The Information: A History, a Theory, a Flood (Pantheon, 2011).

More directly, Keen invokes John Stewart Mills’ principle of “individual liberty.” He sees the Mills philosophy as a viable alter-native to sheepish submission to the monolithic but highly visible Facebook profile. He attacks the simplistic view of the individual portrayed in Facebook as a pro-found denial of the basic com-plexity of individuals and their ever-morphing lives. Keen illus-trates how ill-informed mob men-tality can breach basic human rights, often with devastating out-comes. He also references studies that show increased isolation and depression, not exhilaration and growth, as a function of growing reliance on social media.

In the article, “Is the Web Driv-ing Us Mad?”, which appeared in Newsweek’s 9 July 2012 “iCRAZY” issue, Tony Dokoupil discusses is-sues dealing with digital depression.

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8 IT Pro November/December 2012

Spotlight

At one point, he explores how ex-pectations are wired to cause fre-quent dopamine releases, which tend to reinforce our desire for in-stant gratification and decrease our ability to concentrate over time. Similarly, the term “Internet use disorder” is being added to the Diagnostic and Statistical Manual of Mental Disorders.8 As both Turkle and Gleick note, compression of time and urgency leads to a faster paced society, where thought-ful ref lection is discouraged— if not made impossible—by the temporal nature of the demand-ing social network. As Dokoupil discusses in his article, film-maker Jason Russell—whose rave YouTube piece on African despot Joseph Kony received fast-paced praise and ridicule—experienced temporary psychosis fueled by his extreme reaction to the feedback.

It’s indeed difficult to place a valuation on an abstraction such as trust, especially given that, de-spite Facebook’s insistence that all accounts must be “genuine,” 83 million accounts are alleged spammers.9 It’s hard enough to evaluate the relative trustworthi-ness of “friends” whose social me-dia commentary becomes tainted by app-placed advertisements and endorsements, much less those who pose as friends. This makes it even harder for users to maintain credibility—let alone privacy.

The Future Social OutlookGiven these substantive critiques, yet faced with nearly a billion us-ers on Facebook alone, where does social media really stand?

It’s often loosely defined as Web 2.0, and Tim Berners-Lee foresees a Web 3.0. This rendi-tion of the Web, also known as the semantic Web, boldly envi-sions a simultaneous human- and machine-readable Web, where in-formation, when synthesized se-mantically, becomes knowledge.

This lofty goal suggests that meta-data reigns supreme and trust is implicit at all levels. Although some doubt that th is can be achieved, the goal is worthwhile. It begins to create the necessary course correction for Web 2.0 to mature into something more pro-ductive than merely an agitated engine of advertisers.

Others foresee a day when so-cial discovery links with search capabilities such that results can be endorsed by friends. This brings the notion of trust to the forefront. Although endorse-ments from respected friends help form critical judgments, such en-dorsements must be genuine and not supplanted or exaggerated through yet another biased app.

Network science and complex-ity theory show great promise for better understanding behaviors at multiple levels in any culture. The practice of social network analy-sis through the exploitation of big data is growing. In this context, social media’s immense moun-tains of internal data are treasure chests of psychological and so-ciological, if not anthropological, wealth. Like all wealth, we can use it wisely to improve culture, or we can grossly abuse it through reck-less intervention to the detriment of civil rights. Noted sociologist, Manuel Castells, has been a leader in placing the necessary caution signs.10

In the analytical process, it’s important to note that social me-dia thrives not because it’s gigan-tic but because it’s intrinsically “hyperlocal.” Although users have access to hundreds of millions of other people, most tend to link to folks they know and presumably trust. This means that most users have control over the microcosm of those with whom they choose to associate. Most users keep their circle of friends and acquaintances relatively manageable, averaging

around 150 or so “friends.” It’s this personalized network that reinforces opinions and drives usage. This is why SMBs have a greater opportunity to flourish than impersonal corporate enti-ties. In the long run, social media is popular because of individual choice. Attempts to commoditize the resulting special relationships will likely fail.

References 1. S. Sengupta, “Facebook Shares Hit

New Low as a Lockup Period Ends,” New York Times, 16 Aug. 2012.

2. S. Terlep, S. Vranica, and S. Raice, “GM Says Facebook Ads Don’t Pay Off,” Wall Street J., 16 May 2012.

3. A. Lutz, “Gamestop to J.C. Penney Shut Facebook Stores,” Bloomberg, 22 Feb. 2012.

4. R. Fazlyev, “Data Shows Facebook Commerce Does Work—Just Not for Big Brands,” Venture Beat, blog, 3 Aug. 2012.

5. J. Koetsier, “Facebook: U.S. Users in the Smallest Regional Group (Not Good for Profits),” Venture Beat, 26 July 2012.

6. A. Fontevecchia, “Facebook vs. Google: The Battle for Internet Dominance,” Forbes, 30 Dec. 2011.

7. J. Bamford, “The NSA Is Building the Country’s Biggest Spy Center (Watch What You Say),” Wired, 15 March 2012.

8. K.S. Young, “Internet Addiction: The Emergence of a New Clinical Disorder,” CyberPsychology & Behav-ior, vol. 1, no. 3, 1998, pp. 237–244; doi:10.1089/cpb.1998.1.237.

9. R. Cellan-Jones, “Facebook Has More Than 83 Million Illegitimate Accounts,” British Broadcasting Corp., 2 Aug. 2012.

10. M. Castells, The Rise of the Network Society, The Information Age: Economy, Society and Culture, vol. I. 2nd ed., Blackwell, 2000.

George F. Hurlburt is CEO of Change Index. Contac t him at ghurlbur t@change-index.com.

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