19.2. Meta’s Capitalist Strategy#

Now that we’ve looked at what capitalism is, let’s pick a particular example of a social media company (Meta, which owns Facebook, Instagram, WhatsApp, etc.), and look at its decisions through a capitalism lens.

19.2.1. Surveillance Capitalism#

Meta’s way of making profits fits in a category called Surveillance Capitalism.

Surveillance capitalism began when internet companies started tracking user behavior data to make their sites more personally tailored to users. These companies realized that this data was something that they could profit from, so they began to collect more data than strictly necessary (“behavioral surplus”) and see what more they could predict about users. Companies could then sell this data about users directly, or (more commonly), they could keep their data hidden, but use it to sell targeted advertisements. So, for example, Meta might let an advertiser say they want an ad to only go to people likely to be pregnant. Or they might let advertizes make ads go only to “Jew Haters” (which is ethically very bad, and something Meta allowed).

19.2.2. Meta’s Business Model#

So, what Meta does to make money (that is, how shareholders get profits), is that they collect data on their users to make predictions about them (e.g., demographics, interests, etc.). Then they sell advertisements, giving advertisers a large list of categories that they can target for their ads.

The way that Meta can fulfill their fiduciary duty in maximizing profits is to try to get:

  • More users: If Meta has more users, it can offer advertisers more people to advertise to.

  • More user time: If Meta’s users spend more time on Meta, then it has more opportunities to show ads to each user, so it can sell more ads.

  • More personal data: The more personal data Meta collects, the more predictions about users it can make. It can get more data by getting more users, and more user time, as well as finding more things to track about users.

  • Reduce competition: If Meta can become the only social media company that people use, then they will have cornered the market on access to those users. This means advertisers won’t have any alternative to reach those users, and Meta can increase the prices of their ads.

19.2.3. How Meta Tries to Corner the Market of Social Media#

To increase profits, Meta wants to corner the market on social media. This means they want to get the most users possible to use Meta (and only Meta) for social media. Before we discuss their strategy, we need a couple background concepts:

  • Network effect: Something is more useful the more people use it (e.g., telephones, the metric system). For example, when the Google+ social media network started, not many people used it, which meant that if you visited it there wasn’t much content, so people stopped using it, which meant there was even less content, and it was eventually shut down.

  • Network power: When more people start using something, it becomes harder to use alternatives. For example, Twitter’s large user base makes it difficult for people to move to a new social media network, even if they are worried the new owner is going to ruin it, since the people they want to connect with aren’t all on some other platform. This means Twitter can get much worse and people still won’t benefit from leaving it.

Let’s look at a scene from the movie The Social Network (about the origins of Facebook), where Sean Parker (who created the music-sharing app Napster) talks to Facebook founders Mark Zuckerberg and Eduardo Saverin about their strategy to grow Facebook:

In that clip, you will notice strategies for trying to use the network effect (though they don’t call it that) by targeting specific users to try to make Facebook more desirable than competitors. They also discuss how they could start running ads now (making them a million dollars). But instead, if they don’t sell ads now (running the company at a loss) then they can maximize their growth. Then, when they have grown much larger and have enough network power, users won’t quit when they start selling ads later (and they’ll make a billion dollars).

So, looking back at Meta’s goal (getting the most users possible to use Meta, and only Meta for social media), let’s look at some obstacles and how Meta tries to overcome these obstacles:

  • Obstacle: Users don’t want ads on Facebook

    • Solution: No ads until Facebook has attracted enough users (network power) so that users won’t leave when ads are introduced (Facebook introduced ads in 2007)

  • Obstacle: People speak different languages

    • Solution: Increase language support of Facebook so more people can use the site

  • Obstacle: Not everyone has the internet

  • Obstacle: A competing company social media company has a user base (e.g., Instagram, Snapchat)

    • Solution: Try to purchase the company, or copy their features