Facebook is one of the world’s largest social media platforms. With around 2.45 billion monthly active users and more growing daily, for many, it serves as the primary medium for users to communicate with their friends, family and acquaintances.
This essay will explore the historical developments behind Facebook, its business model and provide an analysis of its internet ecology. In the last part, a discussion around its transformative effects on the Internet will take place. Ultimately, Facebook is a revolutionary social media platform but its business model strategy has also lead to concerns about user data and privacy.
The Historical Developments behind Facebook
Facebook was first developed in 2004 by Mark Zuckerberg, Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes at Harvard University. It was created as a way for Harvard students to socially interact with each other (Brügger, 2015). The platform soon became popular and outgrew to other Ivy League Universities and then finally being open to the public in 2006.
At the time, MySpace was the most popular social networking platform. With the advent of Facebook, users migrated over from MySpace as they were attracted to the user-friendly design of Facebook (McWilliams, 2009). One of the other reasons it become so popular was because of its successful branding tactic. The MySpace slogan was ‘A place for friends’, while Facebook’s promise was that is ‘helps you connect and share with the people in your life’ (McWilliams, 2009). The focal point is that MySpace was essentially a hangout place while Facebook facilitated and mediated the user’s ability to connect and communicate with others.
According to boyd and Ellison, social media platforms are web-based services which allow users to:
- Construct a profile within a closed networking system.
- Communicate with other users that they share a connection with.
- View and go through their list of connections and activities by others in the system.
It was unique in the fact that it allowed individuals to meet strangers and make visible their social networks. Consequently, Facebook transformed the way that people interact and communicate with others. Using the affordances of the Internet, they were able to provide a user-friendly service for all.
Social media also provides an unmediated and free service for individuals to create their own content and connect with other people. Although a lot of this content relates to their personal lives, it also allows them to document their opinions and reactions about public affairs and events (Fink, Kopecky, Bos, 2012: 294).
Facebook’s Revolutionary Business Model
Facebook, as a social media platform, is free to sign up and use for individuals. Its economic profit lies elsewhere. In 2013, 88.7% of Facebook’s revenues stemmed from advertising, generating almost $US7 billion in advertising revenue (Fuchs, 2016: 428). This has quickly grown to $US55 billion in 2018.
As such, media scholar, Christian Fuchs, has argued that “Facebook is not a communication company but one of the world’s largest advertising agencies” (2016: 428). The access to the platform is not the commodity, rather “the commodity that is sold is rather users’ registration data, profile data, browsing behaviour on Facebook and other parts of the World Wide Web, communication content, and social relation data” (Fuchs, 2016: 428).
This advertising business model relies on two major aspects:
- people using their real-life identity
- protection of its revenue streams
In order for Facebook to continue to sell its user data to third parties, the accuracy and correctness of its information are important for its business model. User data collected from fake identities is useless for advertising companies because they cannot send them effective, targeted advertisements. On the other hand, media reports have shown that a lot of the click-throughs on these ads are from bots. Facebook has no incentive to prevent this fraud as it benefits from the high number of click-throughs. However, this may not be sustainable in the long-term as advertisers could move away if the targeted ads do not deliver correctly (Krombholz et al., 2012: 176).
Another part of its business model is its acquisition strategy. It buys “other online technology providers that could either compete with Facebook directly or that allow the company to enhance its own platform and services in other technological realms” (Fuchs, 2016: 429). For example, it has acquired its competitors Instagram and WhatsApp. It has also ventured in other tech realms, buying out virtual reality company Occulus and online advertising company LiveRail. This enables it to fortify its dominant position within the social media sector and venture into other forms of capital as well.
Facebook’s Internet Ecology
In 2012, Facebook became a publicly-traded company, allowing individuals to invest, buy and sell its shares on the stock market. Its founder, Chairman and Chief Executive Officer, Mark Zuckerberg, still possesses a majority of its shares, holding around 60% of its voting shares.
Its competitors include in the tech industry include Google, Amazon and Apple. In terms of competitors for its social media platform, these include Youtube, Twitter and Snapchat. Its previous competitors where Instagram and WhatsApp but Facebook acquired those companies in 2012 and 2014 respectively. Facebook has also acquired other tech companies, which further cements its dominant position within the tech sector.
Facebook relies heavily on its users to keep its social media platform running. Its high number of users highlights Facebook’s popularity as a social networking site and also supplies it with numerous user data and information, which it can then sell to third-party companies and advertisers. The funds raised from this transaction form a large part of its yearly revenue, with over 7 million active advertisers using Facebook to promote their services and products.
Due to the global nature of Facebook’s platform, it is incredibly difficult to establish a uniform, regulatory body to govern Facebook’s actions. Instead, national governments and their individual regulatory bodies monitor Facebook’s activities within each country. For example, in the US, its governing and regulatory body, the Federal Trade Commission (FTC), has been investigating Facebook for its recent Cambridge Analytica scandal.
Below is a diagram of Facebook’s internet ecology:
What is Facebook’s Transformative Effect on the Internet?
Facebook’s conception as one of the largest social media platforms in the world has had irrevocable effects on how individuals interact and use the Internet. It relies on two main elements, which the technological affordances of the Internet have brought about; the ability for user-generated content and user-distributed content (Herman, 2013: 39). An individual can use the tools on Facebook to create their own post or story, to share and express their personal thoughts and feelings about a variety of topics to whomever they wish to include. These posts can then be repeatedly shared, liked and commented on by others. The emergence of Facebook has thus allowed individuals to move from a one-to-many mass media distribution model to a many-to-many circulation dynamic.
Facebook has now been around for fifteen years. The longevity of the company and its high number of users mean that Facebook now serves as an archive for individuals to reflect on how their life narratives are constructed, shared and documented (Lincoln, Robards, 2017: 518). This is facilitated by its social tools, such as the introduction of the Timeline feature in 2011. Users can go through their profiles and neatly see all of their posts and interactions in chronological order. Facebook has created a ‘Year in Review’ tool in 2012, which allows people to create a summary of that year’s highlights.
These features mean that individuals can go back to their profiles and engage in reflexive identity work (Lincoln, Robards, 2017: 530). Users will look back on their past posts and decide whether that online representation of themselves still fits their current offline identity. For example, a college graduate might look back on their high school posts and accordingly edit out the ‘unsavoury’ or ‘inappropriate’ posts in order to avail themselves to future employers.
The opportunity for users to reflect on their online identity is especially important since an estimated 70% of employers use social media to screen their job applicants. The rise of social media being used for job screenings is a result of social convergence, where disparate online and offline social contexts are collapsed into one (boyd, 2008: 18). This fusion of different social audiences has lead to users’ concerns about privacy in the contemporary career market.
Accordingly, users on Facebook have had to engage in selective self-presentation, whereby they carefully choose what elements of themselves they would like to emphasise in their online identity (Gonzales, Hancock, 2011: 80). The public nature of Facebook has also contributed to the way in which individuals participate in objective self-awareness. Before posting anything that will be published onto their social media page, users will decide whether it contributes to their presentation of their optimal self. Ultimately, this outlook, a product of the environment on social media platforms, provide “new access to the self as an object” (Gonzales, Hancock, 2011: 82).
All of the above actions provides Facebook with a behemoth amount of data on their users. Facebook can see what their users have written, what they did not, the posts they liked and shared, and so forth. It is on this information which Facebook has based its business model off. The previous sections of this essay have demonstrated that Facebook receives a majority of its revenue from advertising streams. Millions of advertisers pay Facebook to access its user data and send targeted ads.
Facebook’s business model is not only revolutionary but also demonstrates the datafication and commodification of user interactions on social media. Datafication “refers to the ability of networked platforms to render into data may aspects of the world that have never been quantified before”, including friends and relationship dynamics (van Dijck, Poell, 2013: 9). Its business model is rooted in the ability to harvest and repurpose their users’ data using predicative and real-time analytics.
The layout of Facebook is designed to get its users to share more information. They exploit the fact that users will share more information if they know their friends have already shared. This is why users will get notifications about their friends’ activities and why their posts and activity are privileged in Facebook’s Newsfeed algorithms (Waldman, 2016: 233). Consequently, as users share more information, Facebook acquires more and more data which it can sell to third-party advertisers.
Facebook provides free platform access and in return commodifies users’ personal data. According to Fuchs, this strategy is based on the exploitation of users’ digital labour (2016: 431). “Digital labour is a specific form of cultural labour that has to do with the production and productive consumption of digital media” (Fuchs, Sandoval, 2014: 492). This includes any activities that users perform on social media, such as posts, likes and shares. As such, every piece of user-generated content becomes a part of the “analytics of big data that serve to turn your social life into potential target market” (Herman, 2013: 41).
Consequently, Facebook has received a lot of backlash surrounding the privacy concerns of its users. One of these includes the Cambridge Analytica scandal. Over 87 million US voters’ data from Facebook was harvested and exploited in the lead-up to the 2016 Presidential Election. According to Christopher Wylie, the whistleblower who revealed the incident, Cambridge Analytica took that Facebook data and sent targeted messages to voters to influence their opinion for the election.
In 2019, Facebook was ordered to pay a $US5 billion fine for the data breach and for deceiving its users about its ability to keep their personal information private. However, there are concerns that this fine will do little to change the company’s future behaviour. There is limited information available on how and what Facebook specifically does with user data. Thus, its business model and how it operates has lead to calls for new privacy regulations and laws to be put in place. More research and analysis will have to be done before any satisfactory protections can be put in place. This will also be prohibited by the limitations of the geographical nature of national laws.
In conclusion, the success of Facebook can be attributed to its ability to connect users with others. It allows for individuals to communicate with their peer users and keep track of their online representations. Facebook’s business model, which is based on advertising revenue, has also contributed to its financial success, cementing the company as one of the world’s largest social media platforms. However, this model has also lead to concerns about user data and privacy. Currently, there are insufficient measures in place to prevent those data breaches and more should research should be done to protect the privacy of its Facebook’s users.
boyd, d. (2008). Facebook’s Privacy Trainwreck: Exposure, Invasion, and Social Convergence. Convergence: The International Journal of Research into New Media Technologies, 14(1): 13-20, doi: 10.1177/1354856507084416.
boyd, d., Ellison, N. (2007) Social Network Sites: Definition, History, and Scholarship. Journal of Computer-Mediated Communication, 13(1), pp. 210–230, https://doi.org/10.1111/j.1083-6101.2007.00393.x
Brügger, N. (2015). A brief history of Facebook as a media text: The development of an empty structure. First Monday, 20(5). doi:https://doi.org/10.5210/fm.v20i5.5423
Company Info. (n.d.) Retrieved November 7, 2019, from https://newsroom.fb.com/company-info/
Davies, R., Rushe, D. (2019, July 24). Facebook to pay $5bn fine as regulator settles Cambridge Analytica complaint. The Guardian. Retrieved from https://www.theguardian.com/technology/2019/jul/24/facebook-to-pay-5bn-fine-as-regulator-files-cambridge-analytica-complaint
Facebook’s advertising revenue worldwide from 2009 to 2018. (2019). Statista. Retrieved from https://www.statista.com/statistics/271258/facebooks-advertising-revenue-worldwide/
Facebook Year in Review 2012. (2012). Retrieved November 7, 2019, from https://newsroom.fb.com/news/2012/12/facebook-year-in-review-2012/
Fink, C., Kopecky, J., & Bos, N. (2012). Inferring demographic attributes and extracting political discourse from nigerian social media. In Advances in Design for Cross-Cultural Activities Part II (pp. 293–306). CRC Press. Retrieved from https://ebookcentral-proquest-com.ezproxy1.library.usyd.edu.au/lib/usyd/detail.action?docID=981562
Fuchs, C. (2016). Facebook. In Birkinbine, B. Gomez, R. Wasko, J. (Eds.). (2016). Global media giants. (pp.428-444). https://doi.org/10.4324/9781315682334
Fuchs, C., & Sandoval, M. (2014). Digital Workers of the World Unite! A Framework for Critically Theorising and Analysing Digital Labour. tripleC: Communication, Capitalism & Critique. Open Access Journal for a Global Sustainable Information Society, 12(2), pp.486-563. https://doi.org/10.31269/triplec.v12i2.549
Gayomali, C. (2011, September 22). Facebook Introduces ‘Timeline’: The ‘Story’ of Your Life. Time. Retrieved from http://techland.time.com/2011/09/22/facebook-introduces-timeline-the-story-of-your-life/
Gonzales, A., & Hancock, J. (2011). Mirror, Mirror on my Facebook Wall: Effects of Exposure to Facebook on Self-Esteem. Cyberpsychology, Behavior, and Social Networking, 14(1-2), 79–83. https://doi.org/10.1089/cyber.2009.0411
Herman, A. (2013). Production, Consumption, and Labor in the Social Media Mode of Communication and Production. In Hunsinger, J., & Senft, T. M. (Eds.). (2013). The social media handbook. (pp.30-44). Retrieved from https://doi-org.ezproxy1.library.usyd.edu.au/10.4324/9780203407615
Krombholz, K., Merkl, D., Weippl, E. “Fake identities in social media: A case study on the sustainability of the Facebook business model” in Journal of Service Science Research 4, no. 2 (2012): 175-212. https://doi.org/10.1007/s12927-012-0008-z
Lincoln, S., Robards, B. (2017) Editing the project of the self: sustained Facebook use and growing up online. Journal of Youth Studies, 20(4), (pp.518-531) https://doi.org/10.1080/13676261.2016.1241869
McWilliams, J. (2009, June 24). How Facebook beats MySpace. The Guardian. Retrieved from https://www.theguardian.com/commentisfree/cifamerica/2009/jun/23/facebook-myspace-social-networks
Newton, C. (2019, July 30). It’s time to regulate tech platforms with laws, not fines. The Verge. Retrieved from https://www.theverge.com/interface/2019/7/30/20746427/facebook-ftc-settlement-congress-privacy-law
Number of active advertisers on Facebook from 1st quarter 2016 to 1st quarter 2019. (2019). Statista. Retrieved from https://www.statista.com/statistics/778191/active-facebook-advertisers/
Olson, P. (2014, October 6). Facebook Closes $19 Billion WhatsApp Deal. Forbes. Retrieved from https://www.forbes.com/sites/parmyolson/2014/10/06/facebook-closes-19-billion-whatsapp-deal/#574c0b235c66
Pepitone, J. (2012, May 18). Facebook trading sets record IPO volume. CNN Money. Retrieved from https://money.cnn.com/2012/05/18/technology/facebook-ipo-trading/index.htm
Rushe, D. (2012, April 10). $1b deal: Facebook buys Instagram mobile photo sharing app. The Sydney Morning Herald. Retrieved from https://www.smh.com.au/technology/1b-deal-facebook-buys-instagram-mobile-photo-sharing-app-20120410-1wllb.html
Salm, L. (2017, June 15). 70% of employers are snooping candidates’ social media profiles. CareerBuilder. Retrieved from https://www.careerbuilder.com/advice/social-media-survey-2017
Solon, O. (2018, April 5). Facebook says Cambridge Analytica may have gained 37m more users’ data. The Guardian. Retrieved from https://www.theguardian.com/technology/2018/apr/04/facebook-cambridge-analytica-user-data-latest-more-than-thought
Stewart, E. (2018, December 19). Mark Zuckerberg is essentially untouchable at Facebook. Vox. Retrieved from https://www.vox.com/technology/2018/11/19/18099011/mark-zuckerberg-facebook-stock-nyt-wsj
Taylor, C. (2012, July 31). Startup Claims 80% Of Its Facebook Ad Clicks Are Coming From Bots. TechCrunch. Retrieved from https://techcrunch.com/2012/07/30/startup-claims-80-of-its-facebook-ad-clicks-are-coming-from-bots/
The Guardian. (2018, March 20). What is the Cambridge Analytica scandal? [Video file]. Retrieved from https://www.youtube.com/watch?v=Q91nvbJSmS4
van Dijck, J., & Poell, T. (2013). Understanding Social Media Logic. Media and Communication, 1(1), 2–14. https://doi.org/10.12924/mac2013.01010002
Waldman, A. E. (2016, Fall). Privacy, sharing, and trust: the Facebook study. Case Western Reserve Law Review, 67(1), 193+. Retrieved from https://link-gale-com.ezproxy1.library.usyd.edu.au/apps/doc/A485808649/AONE?u=usyd&sid=AONE&xid=b4f949c2
Welcome to Facebook, everyone. (2006). Retrieved November 7, 2019, from https://www.facebook.com/notes/facebook/welcome-to-facebook-everyone/2210227130
Williams, P. (2017, October 10). Employer asks interviewee for Facebook page, but many see it as an invasion of privacy. ABC News. Retrieved from https://www.abc.net.au/news/2017-10-10/facebook-employers-ask-to-see-profile-page-for-interview/9033722