Morici: Facebook blundered, but Congress should not kill it

Facebook users and politicians are absolutely justified in their anger about abuses of personal data and Russian operatives exploiting shill accounts, and Mark Zuckerberg’s testimony in Congress illustrated just how immature or worse, purposefully tone deaf, its senior management chooses to be.

He acknowledged mistakes and outlined steps to better ensure that third-party app developers and malefactors do not obtain unauthorized access to personal data or spread fake news. Yet, he continued the droll that Facebook is motivated by “all the good that connecting people can bring” and hardly acknowledged the opportunity to make himself and others fabulously rich by aggressively marketing ads targeted at specific users.

Such cynicism deserves to be regulated – and perhaps harshly disciplined – but Congress should be cautious not to destroy the industry.

These platforms are handy for communicating with friends and family, expressing views on social and political issues, and sharing Thanksgiving recipes but in contrast to their web cousins – Amazon and Google – they have more fragile financial foundations.

Amazon can generate revenue directly from users – it charges merchants as they make sales and shoppers for its Prime service. Facebook, Twitter and other social media would not have billions of users if they imposed fees.

Like early telephone systems, their value to each user is enhanced as the total number of members increases. However, these services have not become a necessity akin to telephones, and charging subscription fees would greatly limit the number of users and their viability. And from the very beginning, the creators of Facebook and Twitter struggled to find revenue streams to finance their expensive-to-maintain platforms.

Like Google – which provides all of us with remarkable search, email and other services free–Facebook turned to selling targeted ads to businesses who a decade ago mostly hawked their wares through broadcast and print media. To make inexpensive targeted ads effective, Facebook collects troves of personal information about where we go on the web and our personal preferences and views.

Google and Amazon have branched into other activities–for example hardware such as tablets, personal assistants and cloud services–that truly make the U.S. economy more competitive, efficient and grow more quickly, but Facebook and other social media mostly have not.

Social media is not like internet tools for collaboration or on-line shopping like Amazon, which drive down costs and prices and inspire innovation. Rather, Facebook and other social media mostly shifted more eyeballs and advertising revenue from electronic and print media to their platforms. Whatever ad dollars social media loses as result of the Facebook scandal will move to other web platforms or back to traditional media, including radio and newspapers.

The current imbroglio has to do with Facebook becoming too aggressive in the personal data it collects–for example, through some apps it logs users’ text and cellphone histories.

It shared users’ personal data with app developers and academics in hopes of building an app retailer similar to iPhone’s app store. Then revelations emerged that a professor violated Facebook’s rules by providing a huge data trove to Cambridge Analytica, which sells services to political campaigns.

Social media has become an easy target because Russia infiltrated their networks with disinformation to undermine the presidential campaigns of Bernie Sanders and Hillary Clinton.

And Facebook and many other purveyors of advertising on the web have perfected strategies to keep us logged on longer and come back more often. Academic researchers and media analysts now charge the purposeful cultivation of addiction contributes to depression and polarization on social and political issues.

The Federal Trade Commission and British regulators are justifiably investigating Facebook’s data gathering and sharing activities but 37 states attorneys general have jumped into what should be a federal and international regulatory issue.

Social media data collection will likely face stricter regulation but if the information these services collect is severely curtailed, targeted advertising will become ineffective and Facebook and others could disappear.

It’s the ancient problem of the free lunch. If users want Facebook, Twitter and other social media, they have to pay with something – in this case, a reasonable amount of personal information to drive advertising.

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist. © 2018, The Washington Times, LLC.

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