Sunday 9 January 2011

Personal pricing

This week, Facebook was valued at approximately £32,000,000,000. Initially, this may seem a phenomenal sum of money for a website that people merely use to keep in touch with friends, make witty remarks on status updates and peer voyeuristically into others’ lives.

When we remember we pay nothing to use Facebook, the question of what makes the company worth anything surfaces. Is it the hardware infrastructure running the site? Is it the programmers who make it all work? While these might form the tiniest part of the valuation, the £32 billion is what the information about its users is worth.

Think about it. In signing up for Facebook you entered, inter alia, your age, gender, location, schools and universities attended, courses taken, employers, personal beliefs and the interests you have. You then made virtual friends with people who you have encountered because they – usually – have something in common with you. Therefore, when one of your friends finds something new they enjoy or they are interested in, Facebook can recommend it to you as there is a good chance of you being interested in it too. In short, having shared your life with it, Facebook knows what will interest you before you do. Think about that from the marketing point of view.

Before you dismiss this as unrealistic, consider the last purchase you made on Amazon. Did you notice the list of recommended books or DVDs ‘that you may like’ which had been bought by other people who also bought the item you have just paid for? All you told Amazon was that you liked a certain book or DVD by purchasing it. The information you have chosen to give to Facebook covers far more of your life.

We would all like to believe that you cannot put a price on human life but this is what Facebook’s valuation has done. According to its own statistics, Facebook has more than 500,000,000 active users. This means that each of its users’ lives is worth around £64. For less than the price of a tank of petrol, you have been sold to the marketing executives of any forward thinking company which looks to Facebook for access to their target market. Unlike a traditional survey which might identify consumers at a single point in time, your profile on Facebook changes as your interests change and with this the forward thinking company either knows it is no longer worth chasing you or that they need to double their efforts in appealing to you.

Does this mean that I am going to delete my Facebook profile and stop posting online? No. I, like so many others, find the free service that Facebook provides both useful and fun. I am willing to tolerate the advertisements dotted throughout the site, but I would like think that I understand some of the implications – both for now and the future – of the privacy agreement saying what our data can be used for which we are obliged to accept when joining.

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