Law in the Internet Society


-- By DavidKorvin - 15 Oct 2012


I am currently taking a class at Columbia Law School titled “Investment Banking.” For our first major group assignment we had the task of attempting to value what Facebook would be worth in an initial public offering (IPO). While researching the company we learned that Facebook generates revenue from two sources: [1] advertisements, and [2] payments (fees associated with the purchase of virtual goods on a developer’s application).

One of my primary obligations during this assignment was to describe Facebook’s business model in detail, which required me to spend a lot of time reading Facebook’s prospectus and registration statement (S-1), while also closely examining its financial statements. Furthermore, Facebook constantly claims that its mission statement is “to make the world a more open and connected.”

While writing this report, neither I nor any of my group members ever mentioned Facebook’s relation with the United States government; however, in “Law in the Internet Society” we have spent a lot of time discussing how Facebook acts a surveillance mechanism for the American government. My question is the following: if Facebook plays a surveillance role for the government, how come this revenue stream is not accounted for or acknowledged for in any of Facebook’s public registration statements or financial exhibits? Additionally, if Facebook is not receiving money from the government, what is Facebook’s incentive in establishing and maintaining this relationship?

Relationship with the Government

After looking at Facebook’s public registration statements, I have been unable to find a source or document that states that the government directly pays Facebook. Further, in all the IPO research we did for Investment Banking project, the research analyst reports never mentioned this relationship between Facebook and the government. Thus, Facebook must be getting some other kind of tangible benefit from the government in order for it to continue providing the government with this type of surveillance information. More specifically, we have discussed how the United States has become the center of the global data mining industry, which has the goal of “knowing everything about everybody everywhere.” However, in order for this type of data mining to be successful, Mark Zuckerberg and Facebook need to be properly incentivized.

Facebook could decide to do surveillance for the government if it needed the government’s help in order to become the dominant player in the social networking market. But this does not seem to be the case as Facebook currently has over one billion users. Another incentive would be if the government made laws that enabled Facebook to be the only social networking platform, but there are other social networks that compete with Facebook, such as Google+. Therefore, though we know that the government uses Facebook, as well as other websites, to data mine, I have trouble seeing what Facebook’s monetary benefit from this arrangement is. Further, if Facebook does receive value from its relationship with the government, than maybe this helps to explain why the market (e.g. investment banks) speculated that Facebook’s shares would be worth much more than their current, actual value.

Why Do I Continue to Have a Facebook Account?

I am somewhat embarrassed to admit that even after taking this class, and knowing what the government does with my information, that I continue to have a Facebook account. I have not posted any new information on it in over a year, yet I go on the website nearly every day, mostly just to see what other people are up to. Also, going on Facebook is one of the main ways that I am able to plan seeing a group of friends because most of the parties I get invited to are through the Facebook platform. Thus, though I do not really want to be on Facebook, I feel obligated to do so in order to maintain- and perhaps even expand- my current social status. I feel that I would quit Facebook if all of my friends did, but because I know they will not quit Facebook, I know I will continue to have a profile.

Does this mean that I value my ability to maintain friendships more than my privacy? To be honest, I am not sure if I know the answer to this question. However, I do know that because I have never felt the effect of Facebook limiting my privacy, I have never felt the need to quit cold turkey. Additionally, I have trouble seeing how the government could use the content that I choose to put on Facebook to restrict my privacy and freedom in a harmful way in the future. I am aware that the government “knowing everything about everyone everywhere” creates a problem for society as a whole, but I am unclear (perhaps naively) of how it affects me individually.


The last thing I wonder is what would happen if the United States government publicly announced that it used Facebook as a surveillance mechanism? Even if this were the case, I think I would still use Facebook, but I would put even less material on it; for example I would take down all my pictures and be much more selective in deciding who I friend on Facebook. Because I do not egregious things, I do not feel there would be any consequence from this announcement.

However, I do know, if Facebook started charging money, I would stop using it almost immediately.


Webs Webs

r3 - 16 Oct 2012 - 03:58:44 - DavidKorvin
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