March 29, 2018 / 4:16 PM / 4 months ago

Breakingviews - Facebook’s size is its other looming problem

NEW YORK (Reuters Breakingviews) - Facebook’s social contract is coming unstuck. Its users provide massive amounts of data, which the company uses to sell advertising. In return, it provides a free service. The same is true of search engine Google. But while more data makes Google’s service better and more accurate, it has tended to make Facebook less entertaining. With questions about how Facebook data was used in political campaigns, that could make users more wary of the trade-off.

Mark Zuckerberg, Facebook's co-founder and chief executive introduces 'Home' a Facebook app suite that integrates with Android during a Facebook press event in Menlo Park, California, April 4, 2013. REUTERS/Robert Galbraith

Scale helps a social network on the way up. Facebook is only useful if friends are on it. But there are diminishing returns. After, say, 100 friends, it’s impossible to keep up with all the updates, videos and interactions. And the longer a user stays on a social network, the more tangential friends they can acquire. Facebook’s answer is an algorithm to sort the wheat from the chaff.

Yet recommendations based on behavior like what a user read, liked or what similar people enjoyed is an imperfect guide to changing tastes, especially when algorithms can privilege activity. The user sees their neighbors bickering about politics, but doesn’t see that their favorite band is playing next week. Moreover, targeting users based on interest can be gamed by bad actors, ranging from sellers of useless products to foreign states seeking to spread discord.

Now compare this to Google’s searches. Data breeds accuracy: translations get better; road traffic data gets more helpful. True, Google also faces problems where subjectivity creeps in. European regulators fined the company 2.4 billion euros for putting its own services high up in search results, for example. Video service YouTube relies on divining users’ tastes algorithmically to serve up content they didn’t request. The core search product, though, ought to get more useful over time.

Usefulness and entertainment value are hard to measure. User engagement isn’t, though. Time spent on Facebook declined by 50 million hours a day after changes to its news feed, and its number of daily users in the United States and Canada fell in the last three months of 2017. This matters because Facebook users are effectively weighing how much information they will give up in return for free service. Unfortunately for the firm, the cost to consumer is becoming apparent just as the perceived benefit may be falling.

Breakingviews

Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.


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