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Not A Foregone Conclusion:
The Early History of Facebook’s
Political Economy of Social Media
Todd L. Wold
Asbury University
While Facebook has come under scrutiny in recent years amid scandals
and user data privacy concerns, its early history indicates that today’s
algorithm-driven advertising platform business model was less of a
foregone conclusion when the website was first launched. Mark
Zuckerberg’s earliest discussions with news media, early versions of the
Facebook site, and initial advertising sales materials reveal how his
thinking about profits evolved throughout Facebook’s first year. As recent
news has revealed alleged harm rooted in Facebook’s profit model
prompting new public scrutiny of social media platforms, historical
research into Facebook’s earliest monetization strategies provides useful
context. This research explores Zuckerberg’s public statements, artifacts,
and documents for the first indications of Facebook’s embrace of a
commercial model—specifically, the earliest indications that Zuckerberg
believed the value of Facebook was rooted in an advertising model, as
well as any evidence that he considered other fee-based or non-profit
models. This research makes use of the digital archive of Mark
Zuckerberg’s public utterances, The Zuckerberg Files, housed within the
University of Wisconsin-Milwaukee’s Digital Commons website.
Public concern about Facebook’s business model mounted
in the wake of revelations about advertiser misuse of user data and
a targeted misinformation campaign by a foreign power during the
Todd Wold (M.A., Bethel University, 2008) is an assistant professor of
communication at Asbury University and a Ph.D. candidate at Regent University.
His research interests include the political economy of social media and crowd
patronage platforms, the digital disintermediation of faith practices in church
communities, and transcendence in filmmaking. https://orcid.org/0000-0001-6687-
1739. Contact at todd.wold@asbury.edu
© Todd Wold 2022 [CC BY NC]
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2016 presidential election (Lee & Kent, 2017; Rosenberg,
Confessore, & Cadwalladr, 2018; Shane, 2017). In 2018, a former
employee of the now-shuttered political research firm Cambridge
Analytica revealed how private user data was collected from
Facebook applications and used to build a targeted advertising tool
for political campaigning (Cadwalladr & Graham-Harrison, 2018).
Most recently, former Facebook product manager Francis Haugen
gathered and leaked hundreds of internal documents and research
reports to the SEC and the news media to expose Facebook’s
conflict of interest between profits and the public good (Horwitz,
2021).
These controversies have renewed calls by critics for
alternative revenue models such as membership fees or non-profit
approaches where personal data is not the basis of profit generation
(Fowler, 2018; McNamee, 2018). Such models would shift the role
of the user from value producer and commodity (Fumagalli et al.,
2018) to that of a direct consumer of a service. While the likelihood
of any changes to Facebook’s approach might seem remote at
present (Ovide, 2018), the earliest history of Facebook and its
creation by Mark Zuckerberg and his Harvard collaborators may
indicate that today’s advertising platform business model was less
of a foregone conclusion when the website was first launched.
Accordingly, this article looks at Zuckerberg’s earliest statements
about Facebook’s potential as a business venture. His discussions
with news media, early versions of the Facebook site, and initial
advertising sales materials reveal how his thinking about potential
profits evolved throughout Facebook’s first year. Major influences
on the direction Zuckerberg took Facebook’s profit model included
fellow student and co-founder Eduardo Saverin, whose initial seed
money allowed Facebook to launch, as well as the rationale that
was developed to attract funding from venture capitalists.
The purpose of this paper is to explore Mark Zuckerberg’s
public statements and other available artifacts and documents for
the earliest indications of Facebook’s commercial model. As
research and investigative reporting have continued to reveal
evidence of public harm rooted in Facebook’s profit, questions
about regulatory approaches and alternative profit models have
been raised. Historical research into Facebook’s earliest
monetization strategies provides useful context for discussion of
alternative business models for social media that are potentially
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less harmful. To that end, the researcher poses the following
questions to guide the investigation of artifacts and sources:
1. What is the earliest evidence showing that Mark Zuckerberg
believed the business value of Facebook was rooted in a
commercial advertising media model?
2. What evidence exists that Mark Zuckerberg considered other
financial models apart from advertising, such as membership
fees where the user is the customer, or as a non-profit public
service, such as open-source software or public television?
This research makes use of a digital archive of Mark
Zuckerberg’s public utterances, The Zuckerberg Files (Parry, 2013).
Housed within the University of Wisconsin-Milwaukee’s Digital
Commons website, the archive has spawned research since its
introduction in 2013, leading to conference papers, scholarly
articles, and news reporting on Facebook’s mission (Hoffmann,
Proferes, & Zimmer, 2018), privacy (Casilli, 2015; Cirucci, 2015;
Segovia, 2015; Zimmer & Hoffmann, 2014), Zuckerberg’s public
apologies (Proferes, 2018), sharing (Hoffmann, 2016), identity
(Haimson & Hoffmann, 2016), and authenticity (Salisbury, Pooley,
Salisbury, & Pooley, 2017). To date, researchers have not used The
Zuckerberg Files to interrogate Mark Zuckerberg’s articulations
about Facebook’s business model as they relate to its political
economy. In addition to The Zuckerberg Files, Internet research for
this paper has produced a copy of an April 2004 advertising sales
“media kit” (Marshall, 2012) and screenshots of the first and second
versions of the Facebook website (Shontell, 2014) from 2004
showing where links for prospective advertisers were added.
Theoretical Framework: Methodology and Relevant
Literature
Investigating the origins of Facebook’s commercial model,
this historical study applies critical theory with a lens of political
economy, as the social networking platform monopoly extends and
expands the commercial model inherited from broadcast media.
Political economy is concerned with the production, distribution,
and consumption of media, as opposed to the analysis of symbolic
meaning, ideology, or the effects of media messages (Mosco, 2009).
Fuchs (2011) calls for an integration of concerns in critical media
studies, citing the work of Knoche (2005), which highlights how
power and ideological manipulation are embedded in media capital
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accumulation, commercialization, and audience commodification.
Such an approach accounts for the necessary shift in media content
from commercial broadcast programs to social media platforms
such as Facebook. Where broadcast content is produced by those
with media power which lends itself to the critical analysis of
power imbalance and cultural hegemony, social media content is
derived from users, making Knoche’s integrated political economy
a more appropriate framework for an analysis of audience
commodification.
The materials in The Zuckerberg Files archive, reportage,
and other sources written from a historical perspective were
purposively sampled, and a document analysis was performed
using the search terms “Facebook,” “advertising,” “business
model,” “profit,” and “revenue,” with attention paid to dating the
material as early as possible to Facebook’s launch and
development period. Scholarly literature and other sources were
searched and reviewed using the query terms “Facebook,”
“political economy,” and “history” to reveal literature specific to
Facebook’s history and political economy, along with more general
research on the political economy of social media platforms.
Drawn from the public communication of Zuckerberg and pertinent
figures in the origin of Facebook, the documentary findings were
organized by source type and chronology to address the research
questions in the context of how Facebook’s present business model
emerged.
Facebook has more than 2.60 billion monthly active users
(“Facebook Quarterly,” 2021), with 400 hundred people signing up
every minute and users accessing Facebook an average of eight
times a day (Osman, 2018). Along with the enormous growth in the
number of users, monetization of user data has become more
effective over time leading to growth in annualized revenue per
user from $5.00 in 2011 to $32.03 in 2020 derived from $69.7 billion
in advertising revenue (“Facebook: Revenue per user,” n.d.).
Subsequently, the market value of the company has risen from
$71.8 billion (at year-end 2012) to $761.77 billion by January 1, 2021
(“Facebook market,” n.d.). Facebook’s enormous financial success
has prompted political economists and critical theorists in media
studies to produce research in the past decade that endeavors to
“critically analyze the economic structures and power relations of
the platform” (Fuchs, 2012, p. 139).
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The study of the political economy of media distinguished
itself from other critical cultural approaches in the latter third of the
twentieth century by an emphasis on the ownership, value, profit,
and regulation of media (Armstrong, 2011). Mosco (2009) noted the
range of political economy research in media studies over time,
such as the waning value of public interest broadcasting as
commercialism gained preeminence, the rise of conglomeration
and monopoly capitalism in media industries, and the
commodification of media audiences. Smythe (1977) first
conceptualized the political economy of commercial media as an
audience commodity. Broadcast entertainment and news
programming assembled mass audiences, which media companies
quantified, cultivating their leisure time in order to sell access to
marketers’ for their advertising messages. Viewing television
generated economic value in the commercial media system through
a type of labor—lending conscious attention to advertising in
exchange for news and entertainment (Smythe, 1977).
In the digital era, the coupling of communication and
information technology expanded the market for media products
and labor (Mosco, 2009) and erased distinctions between the two.
The progression from broadcast to digital media changed the nature
of audiences and value production in the political economy,
shifting them from passive value generators in a commercial
attention economy (Smythe, 1977) to active “prosumers” (Fuchs,
2012; Ritzer & Jurgenson, 2010) and “produsers” (Bruns, 2008, p. 29)
within digital media platforms: audiences became both the product
and the content. Facebook’s social media platform business model
is indicative of “important changes in media structures and
practices that can therefore be adopted through critical studies”
(Fuchs, 2012, p. 143).
A key feature defining social networking sites, such as
Facebook, as they developed over the past 15 years, was the
containment of users’ social interactions and online activities
“within a bounded system” (Boyd & Ellison, 2007, p. 211). Srnicek’s
(2017)
Platform Capitalism
provided a useful historical analysis of
the rise of digital information platform businesses predicated on the
vertical integration of users and software. Fisher (2015) described
the value of the Facebook platform (in Fuchs & Mosco, 2015,
Marx
in the Age of Digital Capitalism
) as derived from audience
“communication and sociability” (p. 189), which is highly sought
after by advertising, public relations, and marketing customers.
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Artifact Analysis
The efficiency with which Facebook creates value from its users’
labor is evident in a survey of 551 social media marketers cited by
Fumagalli et al. (2018), showing that 96 percent of them believe the
platform provides the best return on their advertising investment
(“For social media,” 2016). While a considerable number of articles
have been published in peer-reviewed, communication-related
journals covering a broad range of subjects, as evident by reviews
of the literature (Caers et al., 2013; Soukup, 2018; Stoycheff et al.,
2017), research into Facebook’s political economy has been more
narrowly represented in critical media studies literature. For
example, Fuchs (2012) and Fumagalli et al. (2018) investigated the
transformation process of privacy and personal data into economic
value using the Facebook platform as an exemplar. Cohen (2008)
examined Facebook’s surveillance of its users to create capital
accumulation via “extensive commodification” (p. 5). Cohen noted,
“there is nothing inherently capitalist” (p. 18) about social
networking sites. Citing research into the political economy of
MySpace from Coté & Pybus (2007), Cohen (2008) made the critical
point underlining the importance of studying Facebook’s political
economy from a historical perspective: “There is vast potential for
social networking sites that have not yet been fully realized outside
of a commerce-driven model” (p. 18). The earliest accounts of
Zuckerberg’s ideas for Facebook’s business potential indicate that
user data commodification was not a foregone conclusion but
necessitated by the high need for investment capital to grow and
sustain the service.
Findings and Analysis
Literature Relevant to Facebook’s Business Model
Few book-length biographies of Mark Zuckerberg or the
history of Facebook exist. The most well-known treatment comes
from Mezrich (2009), whose “sensationalist” (Pogue, 2010, para. 7)
account,
Accidental Billionaires
, became the basis of a 2010
Hollywood movie. Where Mezrich takes dramatic license,
Kirkpatrick’s (2010)
The Facebook Effect
is viewed by critics as
“well researched” (Pogue, 2010, para. 6) if somewhat deferential to
Zuckerberg’s legacy. Kirkpatrick enjoyed a high level of
cooperation from Facebook and Mark Zuckerberg, adding in an
epilogue a caveat that they “neither requested or received rights of
approval” (Kirkpatrick, 2010, p. 338). While a host of insiders and
technology luminaries were interviewed for the book,
Zuckerberg’s Harvard contemporary Eduardo Saverin, Facebook’s
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first investor and self-proclaimed CFO, was not among
Kirkpatrick’s primary sources. For this research, Saverin’s role in
the development of Facebook’s business model is crucial. While a
first-hand account of how he developed the initial advertising sales
strategy is not available, a handful of media interviews with
Saverin pertain to Facebook’s founding year and address the
dramatic license taken in Mezrich’s (2009) book and the subsequent
film (Altman, 2012; Hardy, 2012).
Reportage on Facebook’s Early Development
While biographical accounts are limited, a more significant
amount of reportage on the creation of Facebook and its rapid
growth is available, including one of the critical artifacts
addressing the central questions posed in this paper. The first news
article about Facebook was published by
The Harvard Crimson
(Tabak, 2004a) just a few days after Facebook went live on the web,
and in which Zuckerberg expressed an aversion to monetizing his
fledgling social network:
He said that he did not create the website with the intention of
generating revenue. “I’m not going to sell anybody’s email
address,” he said. “At one point, I thought about making the
website so that you could upload a résumé too, and for a fee,
companies could search for Harvard job applicants. But I don’t
want to touch that. It would make everything more serious and
less fun.” (para. 24-25)
Tabak followed the initial article with a story that gathered student
impressions of Facebook’s explosive growth on the Harvard
campus (Tabak, 2004b). Ostensibly the rapid rise in Facebook’s
popularity began to influence Zuckerberg’s thinking about the
business potential of the platform. Apart from
The
Harvard
Crimson
, college and university newspapers from across the
country began publishing news articles and columns about the
Facebook phenomenon as the platform spread from the Ivy League
to other schools. As Facebook launched at the first three schools
beyond Harvard (Columbia, Stanford, and Yale),
The Stanford
Daily
published a feature on the phenomenon, including an
extended interview with Zuckerberg. As he had stated to
The
Harvard Crimson
just one month earlier, Zuckerberg was in no
hurry to find a way to make money:
There are no immediate plans for recuperating the start-up
costs. “In the future, we may sell ads to get the money back,
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but since providing the service is so cheap, we may choose to
not do that for a while,” Zuckerberg said. (Sharif, 2004)
Several city newspapers picked up on the trend from their
collegiate counterparts (Fitzgerald, 2004; Jarosz, 2004). National
news publications took notice, with pieces appearing in
The New
York Times
(Applebome, 2004),
The Washington Post
(Copeland,
2004), and
Newsweek
(Ma, 2004). None of the reporting from this
early time period addressed Facebook’s prospects for making
money, with the exception of
The Washington Post
in December
2004, which cited an unnamed founder who stated that the social
network hoped to become profitable through “corporate ads and
student announcements” (Copeland, 2004, para. 25).
Network and cable television news also took notice of
Facebook’s meteoric rise. Zuckerberg appeared on CNBC’s
Bullseye
program for his first television interview with Rebecca
Quick, most likely dated early May 2004 (Zuckerberg & Quick,
2004). The only available transcript for this interview is partial,
obtained from a portion of a rebroadcast news segment years later,
which makes determining the date difficult. The interview noted
that Facebook’s user base had grown to 100,000. Both Mezrich
(2009) and Kirkpatrick (2010) mentioned user milestones that
confidently place this interview in the May 2004 timeframe. In
2010, CNBC aired a one-hour documentary,
The Facebook
Obsession,
that explored the social network’s early history and
social impact, along with data privacy and profit model concerns
(“The Facebook Obsession,” 2010). A brief segment drawn from
this program highlighted Facebook’s Palo Alto period in 2004 and
was aired on NBC’s
Today Show
on January 6, 2010, to promote
the evening CNBC broadcast (“Facebook frat house,” 2010).
Periodicals Detailing Facebook History
Secondary sources that address Facebook’s history abound
in periodicals and online publications. Web technology website
Mashable
offered a biographical overview just two years after
Facebook’s launch (Yadav, 2006). A year later,
The Guardian
published a “brief” history of Facebook at three years old (Phillips,
2007). The
Business Insider
website, prompted by Mezrich’s (2009)
book and subsequent movie, provided an in-depth look at Emails
and other electronic correspondence between Zuckerberg and other
Facebook founders about the Winklevoss brothers, his social
networking rivals at Harvard (Carlson, 2010). Web development
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news site
The Daily Dot
took a retrospective look at the evolution
of Facebook’s user interface over time (Knibbs, 2015), while
Business Insider
provided a detailed look at Facebook’s limited
feature set when it launched (Shontell, 2014). Online magazine
Model View Culture
looked back on Facebook’s innovation culture
and its negative effects on users (Hoffmann, 2014).
Business Insider
returned to a historical perspective on the occasion of Zuckerberg’s
34th birthday with a photo album history (Weinberger, 2018).
Investment news website
TheStreet
reappraised Facebook’s history
in light of the current controversies and scandals over user data
privacy occurring throughout 2018 (Sraders, 2018). For its part,
Facebook provides an extensive interactive timeline of its history
from 2004 to the present with photographs, captions, and written
synopses (“Facebook newsroom: Company Info - our history,”
2018). Academic sources tend to address social media history more
broadly (Boyd & Ellison, 2007), often carving out Facebook’s
history within a larger text (Dijck, 2013). Others focus on a specific
aspect of historical criticism, such as its development as a media
text (Brügger, 2015), or take a more sociological approach
assembling user accounts into a cultural history (Miller, 2013).
The year 2010 proved to be very active for news coverage
about Facebook. On the heels of the Mezrich and Kirkpatrick
books and
The Social Network
film, Facebook crossed the 500
million user mark worldwide, including roughly half of the U.S.
population. The news article most concerned with Facebook’s
commercial advertising model was
Bloomberg Businessweek’s
“Sell Your Friends” by Brad Stone, published as a cover story on
September 27, 2010. As the title implies, Stone writes in-depth
about Facebook’s advertising team and user data monetization
strategy. In an interview with Stone (2010) for the article,
Zuckerberg revealed the source of the platform’s great value for
advertisers while trying to describe the value for users: “The whole
premise of the site is that everything is more valuable when you
have context about what your friends are doing…. That’s true for
Ads as well” (p. 66).
Early Facebook Monetization: Chronological Analysis
Facebook originated from Mark Zuckerberg’s freshman
dorm room at Harvard University’s Kirkland House in early 2004
as an online student directory, consolidating separate dormitory
houses’ directories already online (Kirkpatrick, 2010). Prior to
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“TheFacebook,” the initial name of the site, Zuckerberg had
developed other popular sites serving Harvard students, beginning
with Coursematch, which allow students to see what courses their
peers were taking, and Facemash, a site that ranked the
attractiveness of student photos through a user-generated head-to-
head ranking (Kirkpatrick, 2010). The latter ran afoul of Harvard’s
disciplinary Administrative Board for violating student privacy and
copyright concerns. Just prior to creating Facebook, Zuckerberg
was hired by fellow Harvard students to develop a social
networking site for alumni and students called HarvardConnection
(Carlson, 2010). Zuckerberg quickly lost enthusiasm for this venture
and was inspired to create his own social networking site (Carlson,
2010). His actions led to an inevitable dispute with the students
backing HarvardConnection that eventually ended in litigation
after Facebook became a runaway success. Despite these
controversies, “Zuckerberg had a knack for making software
people couldn’t stop using” (Kirkpatrick, 2010, p. 25). While his
website software development activity was prolific his freshman
year and seemed to draw plenty of users and attention, the business
potential of his projects was less interesting to him compared with
creating something popular and cool (Mezrich, 2009). Before
Harvard, he had developed a Pandora-like song matching tool and
made it available for free on the web, reportedly turning down a
one million dollar offer from Microsoft for the code (Kirkpatrick,
2010; Mezrich, 2009). At Harvard, his talent for creating popular
websites did not extend to developing business models or even a
plan for addressing the expenses incurred by growth.
In order to launch Facebook, Zuckerberg needed funding
for computer servers and other online services. He turned to
Saverin for help in covering these costs for launch on February 9,
2004 (Kirkpatrick, 2010). Shortly after that, Saverin would increase
his investment significantly as the demands of growth required
more infrastructure. He also established an LLC incorporated in
Florida, laying the groundwork for making Facebook a profitable
venture (Kirkpatrick, 2010). For his seed money, Saverin was
promised a 30 percent stake in the new company and assumed the
mantle of CFO (Carlson, 2010). From the very start, Saverin was
keen on exploiting Facebook’s advertising potential. Mezrich
(2009) depicts advertising as a point of contention between Saverin
and Zuckerberg, with Zuckerberg not wanting to rush developing a
business model and Saverin ultimately taking the initiative to
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develop a media kit presentation (Figure 1) for advertising sales
(Marshall, 2012).
Figure 1 - Page from Facebook’s 2004 Advertising Sales
Media Kit
Note.
From “How Eduardo Saverin sold Facebook ads in 2004,” by J.
Marshall, 2012, Digiday. Used under fair use provisions which may not
apply to reuse of this image.
The Spring 2004 media kit, internally dated by a reference to usage
statistics to sometime after April 19, 2004, provides the earliest
indications of Facebook’s commodification of user profile and
activity data as an advertising platform business:
Thefacebook.com allows for targeted advertisements on the
basis of any (or combination of) the following parameters:
College/university, degree type, concentration, courses taken,
class year, house/dormitory, age, gender, sexual orientation,
home city/state, relationship/dating interest, personal interests,
clubs and jobs, political bent, number of intra/inter-school
friends, site usage. (Marshall, 2012, p. 7)
In addition to the sales kit and sale outreach efforts, Saverin was
able to persuade Zuckerberg to develop advertising placement
options and a contact page on the site targeted to potential
advertisers (Coed Staff, 2009).
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Mezrich (2009) dramatizes the growing relational conflict
between Saverin and Zuckerberg with great effect; however, the
issue they were at odds over pertinent to this study was Facebook’s
potential for making money. Put another way, a growing problem
for Saverin was “Mark’s disinterest in money” (Mezrich, 2009, p.
149). “For [Zuckerberg], the Web site was still primarily about fun,
and it had to stay cool. Advertising wasn’t cool” (Mezrich, 2009, p.
149). While Facebook’s advertising options available at the time
were modest, initial advertisers were enthusiastic about the results
they were getting from their advertising investments. Among the
first major advertisers, Mastercard was promoting a credit card
product for college students. They closed a deal with Facebook that
showed their initial skepticism about the social network, paying
only for card applicants obtained via the ads on the site. It took
only one day for Mastercard to double the results they expected
over a four-month campaign (Kirkpatrick, 2010). Other advertisers
were experiencing similar results. Y2M, the college advertising
firm that had arranged the Mastercard deal was so impressed with
Facebook's results that they began making forays to Zuckerberg
about investing (Kirkpatrick, 2010). By early spring, other
investment offers were coming in regularly. By June, Zuckerberg
would turn down a $10 million offer to buy the company—after
merely four months of existence (Kirkpatrick, 2010).
At the close of the Spring semester at Harvard, Zuckerberg
and classmates Chris Hughes and Dustin Moskovitz, heads of
promotion and programming respectively, relocated to Palo Alto,
CA, where they could continue to develop the site and be in
proximity to venture capital opportunities. Saverin stayed on the
East coast to continue to drum up advertisers and potential
investors while doing an internship at an investment firm. The
ensuing interpersonal drama is beyond the scope or interest of this
paper. The relevant point is that the advertising sales Saverin did
generate created pressures that Zuckerberg resisted: “Advertisers
demand responsiveness,” Kirkpatrick (2010, p. 60) writes of
Saverin’s predicament. “He felt his Partner was blasé, to say the
least, about revenue. When there was a request for some special
treatment from an advertiser…, he frequently met a brick wall”
(Kirkpatrick, 2010, p. 60). Zuckerberg insisted on taking a long
view, developing features and functionality before having a
revenue strategy: “We’ll figure that out later” (as quoted in
Kirkpatrick, 2010, p. 221). His approach was a recurring area of
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conflict with colleagues who were devoted to advertising and other
monetization strategies as Facebook grew. Kirkpatrick (2010)
noted, “There were plenty of angry meetings” (p. 221).
Both the Kirkpatrick and Mezrich texts provide in-depth
and varying accounts of the explosive growth, the need for money
to keep Facebook operating and growing, and the falling out
between Saverin and Zuckerberg. At the close of the Palo Alto
summer, Zuckerberg would accept a $500,000 investment from
Peter Thiel, co-founder of PayPal and angel investor (Kirkpatrick,
2010; Mezrich, 2009). A series of contract maneuvers would lead to
the ousting of Saverin and subsequent litigation.
By 2005, a year and a half into its existence, Facebook had
amassed more than 5 million users at 1,500 college and university
campuses (Zuckerberg & Francisco, 2005). Zuckerberg gave an
online video interview for
Marketwatch’s
Bambi Francisco (2005)
that mentions the milestone, and information from Facebook’s
company timeline places the interview a few months before
December 1 when the site reached 6 million users (“Facebook
newsroom,” 2018). The conversation is significant because it
highlights the business case for Facebook in conjunction with the
venture capital investments that were being made, totaling $13
million at that point (Zuckerberg & Francisco, 2005). Zuckerberg's
response to Francisco’s question about “the pitch to V.C.s”
(Zuckerberg & Francisco, 2005, para. 13) reveals how he then
understood Facebook’s advertising data platform potential:
We can target stuff and provide functionality for users on such
a granular level. …and we have so much data about what
people are doing on the site and how people are using it that it
just makes it that we can really enhance the experience and
target stuff towards those people in ways that no one else has
really been able to do before. (para. 16)
Discussion
An analysis of Mark Zuckerberg’s public statements and
other available artifacts and documents help clarify the emergence
of Facebook’s commercial model. The earliest textual evidence
that Zuckerberg believed that the business value of Facebook was
rooted in a commercial advertising media model was his 2005
interview with
Marketwatch
(Research Question 1). With the fast
growth Facebook was amassing and early advertising success at the
behest of Saverin and others, pressure from venture capital
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investors had shifted Zuckerberg’s previously laissez-faire attitude
about the platform’s profit potential. Social media technology
amassed user-generated content and data that essentially
functioned as a consumer database. While Facebook appeared on
the surface to be a service business for the users, it was clear
Zuckerberg saw the value in the data that providing a “free” social
networking service would generate.
Public communication artifacts show that the monetization
of the platform was a source of conflict between Zuckerberg and
Saverin. While Zuckerberg was in no rush to arrive at a profit
model in the early days of Facebook, there is no evidence that he
considered other financial models such as membership fees where
the user is a paying customer or non-profit public service
approaches (Research Question 2). Instead, the fast-evolving new
media of social networking gravitated toward an existing mass
media political economy, with the power-players of commercial
advertising embracing Facebook’s technological efficiency over
legacy mass media.
Mass media and social media business models essentially
share the same product. From
The
New York Times
to NBC to
Facebook, all media companies assemble and sell commercial
access to audiences. For the television audience commodity
explored by Smythe (1977), programming popularity is quantified
by viewer ratings, and advertising revenue is set accordingly. High
ratings for popular programs equate to more sales. The social
media business model operates on the same premise but cultivates
a more efficient data-rich database of user-generated content and
individual online profiles. Television networks and programs have
been replaced by a networked software platform and “content”
generated by all manner of socially networked and interested
parties, including users (the audience), news organizations, and
marketers of all stripes. Database quantification adds consumer
marketing logic to the process, and intelligent algorithms shape the
flow of all the available content at the individual level in order to
drive higher engagement—another way to describe increasing user
data generation. The process leads to wildly more effective
marketing tactics for Facebook’s paying customers (comprising
consumer product companies, political entities, nations, and more
nefarious interests). Just as with traditional media, the audience is
the labor-based product, and profits are made from those willing to
pay for access to “users.”
15
Wold - Facebook’s Political Economy
The key difference between the political economies of
mass media and those of social media is the popularity required for
successful mass media programs and the way social media content
drives engagement. Television programs trade free entertainment
for audience attention, which broadcasters package and sell to
advertisers. Popular programs generate more value. Facebook’s
intelligent algorithms have taught the company that the concept of
popularity is not equivalent to engagement where a social media
newsfeed is concerned. The emotions of fear and anger are far
more effective motivators, as borne out by recent revelations from
Facebook’s internal research (Horwitz, 2021). This dynamic creates
the paradox of increasing profitability in the face of decreasing user
happiness. Steadily increasing revenue is evidence of high client
satisfaction with the commercial influence product Facebook
produces. Yet, the externalities of their business model—the side
effects borne out in previously hidden research —manifest in a
highly divisive, disgruntled, and depressed community of users
(Horwitz, 2021).
Limitations and Future Research Directions
This study was limited to the available artifacts at the time
it was conducted and its narrow scope of the earliest indications of
Facebook’s business model. Facebook does not provide access to
any internal archives that might exist, making The Zuckerberg
Files and other published sources the only available points of
historical inquiry. Widening the focus of analysis to the ongoing
evolution of Facebook’s profit model has become more plausible
from a critical political economy perspective through the recently
leaked internal research that comprises The Facebook Files
(Horwitz, 2021). More research is needed into the introduction of
algorithms and how they shape user experiences and interactions to
drive user engagement and higher profits. A chronology of internal
research could also be assembled to show when signs of user
unhappiness or potential harm first became apparent to Facebook.
Conclusion
The intention of this study was to explore Zuckerberg’s
public statements, artifacts, and documents for the first indications
of Facebook’s embrace of a commercial model. Specifically, the
study looked for evidence that Zuckerberg believed the value of
Facebook was rooted in an advertising model, as well as any
16
Artifact Analysis
suggestions that he considered other fee-based or non-profit
models beyond an inherited mass media commercial, political
economy. The research made use of the digital archive of Mark
Zuckerberg’s public utterances, The Zuckerberg Files, housed
within the University of Wisconsin-Milwaukee’s Digital Commons
website, along with other artifacts drawn from news reporting and
periodicals contemporary with Facebook’s early development.
The historical evidence analyzed in this article suggests
that Zuckerberg was less interested in developing a profit model
than he was in creating a social network that was popular and
addictive at the earliest stages of Facebook. Nevertheless, nothing
suggests that he considered alternative models for sustaining and
growing Facebook beyond commercializing user data. Rather,
deriving revenue was an afterthought or something he avoided
thinking about. As Facebook has grown and become incredibly
profitable over time, Zuckerberg has tended to compartmentalize
Facebook’s mission as a service business meeting the needs of
users on the one hand and an advertising and application platform
serving marketers and developers on the other. This has led to a
mission statement for Facebook, now rebranded as Meta, that does
not acknowledge its core business clientele as the primary source
of their revenue.
Yet, there are signs that Zuckerberg is aware that a
different model for social media could be possible. A 2010
interview with
Wired
magazine indicated that Zuckerberg harbored
an affinity for social networking apart from Facebook’s now
dominant commercial model (Singel). When asked about a group of
NYU students who were, at the time, raising funds to create a non-
profit, user-owned social network called Diaspora, Zuckerberg
responded positively by saying that he donated funds to the
project:
I think it is cool people are trying to do it. I see a little of myself
in them. It’s just their approach that the world could be better
and saying, “We should try to do it.” (Singel, 2010, para. 9)
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To cite this article using APA format:
Wold, T. L. (2022). Not a foregone conclusion: The early history of
Facebook’s political economy of social media.
Artifact
Analysis 1(1).
