So Facebook represents the ultimate test of two ideas. The first is that traffic once attracted, can successfully be monetized. Facebook is presently earning only $4 per user per year. Its investors are gambling that it can increase annual revenue per user before its users get bored and begin to fade away. The second is that there is real value created in passing personal information back and forth between people.
Tax, environmental, workplace and other policies have driven commercial activities like natural resource extraction and manufacturing offshore. The Information Economy and its armies of Knowledge Workers have been touted as the substitute means by which we finance our public and private deficits. Mark Zuckerberg is touted as the latest Boy Wonder, following in the undeniably value-adding footsteps of Bill Gates and Steve Jobs. But one wonders, as does Vox, whether Silicon Valley is in dynastic decline.
What Facebook represents is the present pinnacle of the 30-year trend of the Information Age. From start to finish, there is nothing there. There is no real work, there is no real product, there is only the electronic version of paper chasing paper, from the transfer of a picture from one person to another to the transfer of dollars from one bank account to another. Only the copious reliance upon debt and the way in which the money constantly flows from one person to another obscures the fact that no economically productive activity is taking place.
What, precisely, is the significant difference between an economy built on Facebook and a tribe of naked pagans exchanging leaves with one another? At least in the case of the latter, someone is picking up the leaves off the ground. The idea that the more efficient exchange of information would make us more productive refuted itself with the release of Windows 3.0 and the inclusion of Solitaire and today is no more credible than the now-laughable idea that financial innovations and complex financial instruments would benefit the economy as a whole.
I don’t begrudge the Facebook investors their billions nor do I know where this is all leading. And yet, I can’t escape the thought that if Facebook is the crown jewel in our economic empire, the emperor is not wearing any clothes.
There's actually been a good deal of commentary on the ultimate demise of Facebook. A post of mine from January 2011 has some good links, including Richard Spencer's wry observation that being featured on the cover of Time Magazine is a good sign of impending doom. Remember AOL? Remember Time Warner-AOL?
Ultimately, the more efficient exchange of information just means ever lower margins. Facebook is another consumption medium no different than a TV or radio station. They collect revenue from advertising expense in an increasingly fragmented and crowded market. I don't think those little fractions of pennies per page view will add up to much in the long run.
UPDATE: Facebook has already dropped a little over $4 from its initial offering price of $38/share.