Web 2.0

The Wall Street Journal recently (Thursday July 14, 2011) published an article in the Marketplace section where various analysts reported valuing the company at $100 billion and upwards. Redpoint Venures’ Geoff Yang notes that Facebook created a new ecosystem – the ‘social web’. His valuation was based on a $25BB market in online ad revenue with Facebook having a 27% share. In 2015 that $25BB will grow to $45BB and Facebook’s share translates to $7BB in revenue. Add in the local advertising market today estimated at $133BB and project that to the future for $150BB. With the Internet taking 20% and Facebook 20% of that, add $6BB in revenue. Add in international revenue and the estimated 2015 revenue goes to $19BB. With a P/E of 25, Facebook is worth $140BB in 2015. The high end of the scale in the report was $240BB valuation. Some of the higher P/Es are undoubtedly because Facebook is still a private company, lots of investor want in, and the law of supply and demand is active.

Going back to Geoff Yang’s comment about a new ecosystem, the thing about ecosystems is that they contain lots of niches, some beneficial and some not so beneficial. Looking at Facebook as a social media, people automatically assume that Facebook is about communications. This couldn’t be farther from the truth. In fact, Facebook has the ‘potential’ to be a communications tool but to be specific, one has to remember that, as Claude Shannon established, communications requires three elements: a sender, a channel and a receiver. Social media over the Internet is clearly the channel and the millions of members participating are senders. I am not so certain about the receivers.

Facebook is a means for participants to throw out to the world (dare I say ‘vomit’) pithy comments about life, mostly as a means to assuage their egos and establish that their thoughts are somehow worthy of publication. Admittedly, blog writers succumb to the same predisposition, as do contributors to refereed journals. In our case as well as the case with journals, we impose some sort of peer review.

The problem comes when participants believe and expect that Facebook is, in fact, a means of communication, when it typically is not. Personally, being inoculated by Inter-relay Chat (IRC) in earlier days, I know enough to not assess my self-worth by a post or response to a post that comes flying my way, and do not participate in “flame wars”. There are lots of people out there using Facebook with less unassailable egos, fragile personalities and low self-esteem. When these persons become involved in Facebook interactions; and the inevitable trolls and digital demagogues line up like sharks at a chumming, the potential for damage is high.

In verbal communications, most people learn quickly that a self-imposed delay between thinking and speaking is a survival trait. Facebook provides minimal feedback to reinforce an equivalent delay between thought and post. This is not a new concept – books have been written on email etiquette. What is new is that email did not have the potential to impact participants to the same degree. Technology has provided enablers: streams of friend’s posts requires bandwidth; computational power; and storage – all of which have made significant improvements over the last ten years. The result of which is a much more rapid and wider dissemination of accidental stupidity and intentional cruelty.

A 2009 report showed that 1 in 5 divorces are attributed to Facebook. Verbal bullying on Facebook has been reported and is increasing. Blackmail related to Facebook posting of photos is noted. Some interesting work on the phenomena is found here.

Returning to Facebook’s valuation, an infelicitous confluence of factors – high valuations, widespread usage and the potential for material damage (psychological – resulting in treatment costs; suicides, etc.) make Facebook an obvious target for tort lawyers. Expect novel theories of liability to emerge directly in proportion to Facebook’s rising valuation.

I need to warn our loyal readers about a rather insidious new social networking site, and not just because it’s Yet Another Annoying social netwoRking sIte. The new site, called Yaari, is more than just annoying. It’s dangerous for you and your privacy, and is more Spam 2.0 than Web 2.0. I found out about Yaari from an e-mail I received the other day from a co-worker of mine, which read:

Jane Roe wants you to join Yaari!

Is Jane your friend?

Yes, Jane is my friend! No, Jane isn’t my friend.

Please respond or Jane may think you said no 😦

The Yaari Team
If you prefer not to receive this email tell us here. If you have any concerns
regarding the content of this message, please email abuse@yaari.com.
Yaari LLC, 358 Angier Ave, Atlanta, GA 30312

Looks pretty legit doesn’t it? I did find it kind of strange, however, that I received two invites each in both of my e-mail accounts. Why would my friend Jane send e-mails to all of my aliases at my work and personal address? This seemed kind of fishy so I asked Jane what the deal was, and she was pretty alarmed, turns out she had never sent me an invite, she had just joined due to an invite from a friend of hers who was equally perplexed, having sent no invites either.

Wanting to get to the bottom of things, I headed on over to Yaari and quickly discovered the likely culprit:

Yaari's Password Theft Page

Yaari's Password Theft Page

Scanning the terms of service, I also came across this little gem:

By registering for the Yaari website, … a member agrees to the Terms of Service and consents to allow Yaari to automatically send an email from the member to member’s contacts

The poor folks who were duped by Yari haven’t been taking it well either, here is what they have had to say:

  • Yaari has spammed all the contacts in my address book. The spam invites all contacts in my address book to join yaari or else I will be sad. Try Yaari at your own peril. (link)
  • This site sent out over 600 emails to my entire contact list… [The owner] needs a quick 101 on business ethics before she tries to become an entrepreneur (link)

If using your e-mail to spam your friends wasn’t enough, despite their supposed privacy policy, Yaari’s TOS clearly states that they will sign you up for spam as well:

Members consent to receive commercial e-mail messages from Yaari, and acknowledge and agree that their e-mail addresses and other personal information may be used by Yaari for the purpose of initiating commercial e-mail messages.”

You read that right! By agreeing to Yaari’s TOS, you give them a blank check to spam you and all of your contacts as much as they want, even from your own e-mail account. The lesson here seems to be that just as the web evolves to “Web 2.0”, the douche bags preying on web users will also be evolving to “Douche Bag 2.0”. Be careful to read the Terms of Service for all sites you join, and if something a site asks you to do seems insecure, err on the side of caution, no matter who supposedly invited you. And never, EVER give your passwords out to anyone.

-Angry Midwesterner