Facebook, the Media and Democracy

Big Tech, Small State?

Leighton Andrews

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429881558
• Edition: 1
• Topic: Informatik
• Subtopic: Informatik Allgemein

Facebook, the Media and Democracy examines Facebook Inc. and the impact that it has had and continues to have on media and democracy around the world.

Drawing on interviews with Facebook users of different kinds and dialogue with politicians, regulators, civil society and media commentators, as well as detailed documentary scrutiny of legislative and regulatory proposals and Facebook's corporate statements, the book presents a comprehensive but clear overview of the current debate around Facebook and the global debate on the regulation of social media in the era of 'surveillance capitalism.' Chapters examine the business and growing institutional power of Facebook as it has unfolded over the fifteen years since its creation, the benefits and meanings that it has provided for its users, its disruptive challenge to the contemporary media environment, its shaping of conversations, and the emerging calls for its further regulation. The book considers Facebook's alleged role in the rise of democratic movements around the world as well as its suggested role in the election of Donald Trump and the UK vote to leave the European Union.

This book argues that Facebook, in some shape or form, is likely to be with us into the foreseeable future and that how we address the societal challenges that it provokes, and the economic system that underpins it, will define how human societies demonstrate their capacity to protect and enhance democracy and ensure that no corporation can set itself above democratic institutions. This is an important research volume for academics and researchers in the areas of media studies, communications, social media and political science.

1 The mounting monopoly

I started Facebook, I run it, and I’m responsible for what happens here.

– Mark Zuckerberg, April 2018¹

Facebook’s origin story is well-known. Mark Zuckerberg, who had already successfully developed music suggestion software while at school, arrives at Harvard in the autumn of 2003 and develops software called Course Match, which enabled Harvard students to pick courses based on whoever else might be taking them, and then Facemash, which allowed students to rank others by their objectified attractiveness, involving the collection of photographs from the student yearbooks (facebooks) of Harvard student houses – popular but quickly challenged on grounds of sexism and racism by campus women’s organisations.²

Thefacebook.com opened for subscribers on 4 February 2004 as a platform for people to post their own content to their own personal profile. People could then ‘friend’ others to find out what they were doing. Zuckerberg told the Harvard student newspaper, ‘there are pretty intensive privacy controls’. Only those with a Harvard.edu email address could join, and students could restrict who could look them up. After a month, it had 10,000 active users, and demand started coming in from universities across the United States to be allowed to join. Zuckerberg and Facebook later had to settle lawsuits relating to Facebook’s creation.³

Thefacebook.com received its first purchase offer within four months of opening.⁴ That summer, Zuckerberg and key Harvard friends rented a house in Palo Alto in California’s Silicon Valley, linking up with former Napster entrepreneur Sean Parker, whom Zuckerberg had already met. The social web was getting into gear, with companies focusing less on webpages or interests than on people and the connections between them. Parker became company president, ensuring it was incorporated in Delaware and ownership of the IP was transferred to it. Zuckerberg had 51% ownership. By summer’s end, the site had 200,000 users in colleges across the United States, and Zuckerberg and others decided not to return to Harvard. According to early employees, ‘Domination’ was Zuckerberg’s favourite toast at company parties.⁵

In the autumn of 2004, Zuckerberg was introduced to former PayPal co-founder Peter Thiel by LinkedIn chief Reid Hoffman (also a former PayPal founder). Thiel loaned the company $500,000 in return for 10.2% of its shares and joined the company board. Hoffman also became an investor. Along with Mark Pincus, owner of Zynga, a gaming company which became an early partner of Facebook, he owned the software patent for sixdegrees.com, important to Facebook’s growth.⁶

The Facebook ‘Wall’ was launched in September 2004, meaning every user now had his or her own ‘bulletin board’, as well as Facebook Groups, allowing people to organise a group with its own Facebook page. That autumn, a photos feature was added, allowing people to upload pictures from cellphones. Thefacebook.com reached one million users by the end of November 2004.

The company bought the web address Facebook.com, officially became Facebook on 20 September 2005, with a re-designed logo and streamlined typeface, and had 5 million users a month later. It agreed to investment from the venture capital company Accel for 10% of shares and in due course was the subject of purchase offers, which it resisted. There was an early secondary market in Facebook shares. Marc Andreessen, co-founder of the Internet browser Netscape, became an adviser to Zuckerberg and a few years later joined the board.⁷

The News Feed is what today most people think of as Facebook. This algorithmically sorts the material posted by Facebook users’ friends into an orderly reverse chronological trail of information, using algorithms to identify the material likely to be of most interest to them. This means each user has a different homepage. News Feed was accompanied by what was initially called Mini-Feed, which showed what had recently changed in a user’s own profile, such as status updates, relationship changes and so on, and what content they had added, such as photographs.⁸

News Feed came into operation on 5 September 2006. Data showed that people were spending more time on Facebook than before. But soon, 10 percent of Facebook’s users were protesting about it. Some felt that it was creepy, turning them and their friends into stalkers. Although nothing would be visible to people who couldn’t have seen it before News Feed was created, the protests continued and Zuckerberg agreed to changes in privacy controls which allowed users to restrict what could be seen. Zuckerberg admitted, ‘We really messed this one up’, and apologised. His approach – denial of a problem, reluctant acceptance, change of position, and then apology – would be repeated on other issues subsequently over the years.⁹

By the end of September 2006, anyone could join Facebook – ‘open registration’ – and within weeks, Facebook had 10 million users. With open registration also came a facility to allow users to import their email contacts into Facebook. From its earliest days, Zuckerberg conceived of Facebook as a platform, meaning that it would essentially be an operating system on which other applications could build. The notion of ‘platform’ also allows the positioning of Facebook as separate from the media sector. For Zuckerberg, the strength of Facebook was ‘the social graph’, the interconnections and relationships between Facebook users. Facebook was building a network composed of nodes with data flowing between them.¹⁰

Facebook launched as a platform on which developers could build from August 2006, and in May 2007, at Facebook’s first ever developers’ conference, known as f8, Zuckerberg announced he was opening Facebook’s Application Programme Interface (API) to app developers. Their apps would operate within Facebook, ensuring users’ attention was enclosed within Facebook’s walled garden. The new Facebook Platform development tool allowed significant growth for developers, as every time their app was downloaded by a user, this would be announced on the News Feed, and they would not be charged rental for their space. Developers could charge for their apps or collect advertising revenue from them. How app developers applied Facebook user data was a risk however – and arguably led to the Cambridge Analytica scandal in 2018, which exposed Facebook’s loose data practices to the world.¹¹

From the beginning, Facebook’s founder has kept a close eye on competitors. MySpace was the largest social network in the world until Facebook overtook it in 2009. The launch of Google Plus in 2011, integrated with Gmail and YouTube, looked like a clear attempt to copy Facebook. Zuckerberg declared a Facebook ‘Lockdown’, calling all staff to a meeting where he spoke passionately about the competition with Google.¹²

Sponsored company pages started in November 2007. Users could become fans of these pages, and announcements to that effect would show up in the News Feed. Alongside that development, Facebook also introduced a new service called Beacon, which allowed forty-four companies initially to announce in Facebook users’ News Feed products which users had bought on these companies’ websites, even if the user was logged out of Facebook. Facebook faced another crisis of trust from its users, which this time resulted in lawsuits and complaints to the Federal Trade Commission (FTC) over the misuse of user data.

Zuckerberg’s reaction again followed the cycle of denial, acceptance, change and apology. He took three weeks to react to the protests, before posting a statement on his Facebook Wall, ‘Thoughts on Beacon’:

We’ve made a lot of mistakes building this feature, but we’ve made even more with how we’ve handled them. We simply did a bad job with this release, and I apologize for it.

Beacon was changed to opt-in. In 2008, Facebook launched a product similar to Beacon called Facebook Connect, which avoided the problems of Beacon, allowing users more control. This subsequently became Facebook Log-in. In 2009, Facebook closed Beacon following a class action suit. The Beacon fiasco led directly to the hiring of Sheryl Sandberg, introduced to Zuckerberg by long-term Silicon Valley investor Roger McNamee,¹³ as chief operating officer. Sandberg, a former head of Google’s advertisement business, transformed Facebook’s approach to advertising revenues.

In 2012, Facebook went public. In the run-up to its IPO (initial public offering), Facebook bought the photo-sharing company Instagram for $1 billion. It has recently been valued at $100 billion. Facebook saw a growth curve for Instagram not unlike that of its own in its early days. The decision to allow Instagram to stay as a standalone app and keep its own branding was also significant: previously, Facebook had preferred to maintain a single brand.¹⁴

At the time of its IPO, Facebook had 850 million users. In the prospectus filed with its original IPO form on 1 February 2012, there was a letter to potential investors from Mark Zuckerberg. The letter began ‘Facebook was not originally created to be a company. It was built to accomplish a social mission – to make the world more open and connected’.

Unusually, when Facebook went public on 18 May, the ringing of the NASDAQ bell by Zuckerberg took place in Facebook’s headquarters, rather than in New York, an indication of the company’s power. The outcome of the IPO was controversial. Facebook had lost advertising from General Motors, raising questions about the advertising model. Facebook amended its prospectus just over a week before the IPO, to say that mobile numbers were growing more rapidly than the rate of advertising revenues. Smaller investors were to feel that they had not been adequately informed of concerns over future growth, leading to legal action eventually settled in 2018 for $35 million.¹⁵

Then most users were accessing Facebook on desktop or laptop computers. Today, the bulk of access and 93% of its revenues come from mobile devices. Its mobile advertising revenue has increased from $470 million in 2012 to $50 billion in 2018. Along with Google, Facebook dominates global digital advertising revenue. Facebook’s acquisition of Instagram deepened its engagement with mobile, as did its partnership with the games company Zynga, its purchase of WhatsApp and its development of Messenger as a standalone app.¹⁶

Facebook acquired WhatsApp for $19 billion on 6 October 2014. WhatsApp is a cross-platform communication medium allowing its billion-plus users to exchange unlimited text and multimedia without paying for SMS services.

At the end of 2018, 2.7 billion people were using Instagram, WhatsApp, Facebook or Messenger every month, and more than 2 billion were using them every day. Average revenue per user (ARPU) varied by territory: US and Canada users averaged $34.86, European users $10.98, Asia-Pacific $2.96 and the ‘Rest of the World’ $2.11. Facebook headcount at the end of 2018 was 35,587 compared to around 3,000 at the time of the IPO in 2012.¹⁷

Economists explain Facebook’s rapid growth as being due to network effects: the more people who are part of the network, the more valuable it becomes. They argue that there is a tendency for the leading applications in particular areas, such as search and social media, to attain dominant positions which are hard to overcome: the market becomes inflexible, and lock-in occurs.¹⁸

Legal scholar Timothy Wu has written that ‘when a dominant firm buys its nascent challenger, alarm bells are supposed to ring’. He points out that the analysis of Facebook’s purchase of Instagram by the US regulator, the FTC, remains secret, but the analysis undertaken by the UK’s then competition authority, the Office of Fair Trading (OFT), is...