Yes, I actually paid some attention in classes when I was younger. It is hard to prove, but just believe me. But one of the ground rules in working with math and algebra; having a variable that holds no value, its value is nothing. Not ‘zero’, just nothing. Zero would be a value.
But how true is this? I mean, I have been working building websites since 1993. Creating something that physically does not exists. I cannot hold it in my hand, it does not weigh anything, I can’t tell where it is physically stored on a drive on the server. Even my server scatters the data around on the drive. There is nothing there. It exists virtually. What I create is not a physical product.
Still, it is still a production. You can see it, I can store it on a disk, give you the disk and you can install it on your server. I produce, and the result is a production. But with a little bit of philosophical debating, we might come to the conclusion my production delivers not really anything of physical value. Fine. Still, it is something I create. My company is valued on that, and that delivers me new clients and or investors.
So far, it still makes sense.
But now, picture this. You are speeding on the highway, a police officer pulls you over and asks you for your license and registration. This officer should be extremely wealthy right now at that very moment. Not because he can slap you around with a ticket or taking a bribe (for the record, I am not saying here police officers take bribes, it is just for the mental image of this case), but simply because he asked for your private information.
This officer, who only took a glimpse at your information, goes to his police car and immediately says he knows who you are. He even could forget what you look like, forget your birthday, he just only remembers your name and license plate. He could even forget the color and type of car you were driving. The current business and economic model around the globe actually tells us this police officer holds a lot of value.
Knowing a person is worth money. Not the really knowing anything about a person; just the person.
This is weird. Because it is nothing. It is not information that is actually produced. It is there already, out in the open.
If knowing some person – as we established – is worth money, why is being that person not worth anything? I know a lot of people, first name, last name, what car they drive, even where they live. Why am I not rich?
Look at the values of Facebook, Google, previously MySpace… they are worth a lot because they say they have the information about people.
But if Facebook is valued so much with their 500+ million users of which only maybe 75 million are really active and really real – why is the government of the United States not valued at that value. I mean, they have detailed recordings of 300+ million existing people, where they live, how much they earn, what home they have, if they have a record or not, what age they are, how much they have saved. The United States Government has this accurate information… still, they are not valued that much for that part.
This is what I am going to with this story. There is no value in holding someone’s private information. It is not something produced, it is not something that we know is truthful information, it is even not something that can be possessed by someone, no matter how many times they mention it in their terms and conditions. Simply, because it is nothing of value. Knowing someone has social value, and can turn into physical value when that person delivers a service. But knowing someone has no currency. You cannot trade it since you are trading public information.
I am Peter Zuidema. Now that you know, try to sell it. You know already a lot about me simply by reading this blog. Try to sell it, see if anyone cares. Honestly? An old-fashioned telephone book should be worth at least a $50 bill…. at least!
And it is not.
This is not a rant against buying and selling privacy information. It is a reality check to the value of it. Sure, the information is valuable if you want to do marketing. But if that was the official value of knowing people, companies like Facebook should be only valued on that part, what is their marketing department earning now, and how much will it be earning in three years… done. Just like any other economic model.
The NASDAQ took a plunge a couple of days ago and a lot of tech companies lost billions of dollars. I can tell you, once the dust finally settles on IT-world and people see that marketing campaigns on Facebook are not fantastically efficient in per head ratio compared to conventional marketing, there companies will fall down.
Facebook should not be worth a dime more that the department of AT&T or Verizon that just manages the telephone numbers and user accounts. Not the cabling, not the networks… just that account department. THEN it should make sense.
I am not a financial advisor, I haven’t studied for it, but the ground rules in economics are simple; you have to produce or deliver a service to make money. If you do not make a profit, you have no right of existence in the commercial world. And you cannot own public information, and what you don’t own, you can’t sell.
So tell me again, by these economic ground rules, how can social media sites be worth anything? Be prepared for another internet-bubble bursting in the near future. Hold on to your hats!