With a reported 900 million active members, Facebook is, by far, the largest digital-sharecropping operation that the internet has yet produced. About one out of every eight people on the planet sharecrops for Facebook today – and their collective labor is expected to put a billion dollars of cash into CEO Mark Zuckerberg’s pocket when the company goes public in a few weeks. In a 2006 post, I explained why sharecropping is such a powerful business model for social networks and other online businesses:
One of the fundamental economic characteristics of Web 2.0 is the distribution of production into the hands of the many and the concentration of the economic rewards into the hands of the few. It’s a sharecropping system, but the sharecroppers are generally happy because their interest lies in self-expression or socializing, not in making money, and, besides, the economic value of each of their individual contributions is trivial. It’s only by aggregating those contributions on a massive scale – on a web scale – that the business becomes lucrative. To put it a different way, the sharecroppers operate happily in an attention economy while their overseers operate happily in a cash economy. In this view, the attention economy does not operate separately from the cash economy; it’s simply a means of creating cheap inputs for the cash economy.
Facebook’s most recent financial filing provides a great illustration of the “two economies” that underpin digital sharecropping. As Techcrunch noted, Facebook reported that it earned an average of $1.21 in revenue from each of its members during the first quarter of this year. What Facebook calls ARPU – average revenue per user – is one of its crucial financial measures. Here’s what it said about ARPU in its filing:
During the first quarter of 2012, worldwide ARPU was $1.21, an increase of 6% from the first quarter of 2011. Over this period, ARPU increased across all geographies … ARPU in the first quarter of 2012 declined 12% from the fourth quarter of 2011. We believe the sequential quarterly decline was driven by seasonal trends, which also affected ARPU trends from the fourth quarter of 2010 to the first quarter of 2011, during which period ARPU declined by 10%. In addition, the sequential decline in ARPU in the first quarter of 2012 was affected by the fact that our user growth was higher in geographies with relatively lower ARPU. ARPU increased 32% from $3.08 in 2009 to $4.08 in 2010 and 25% to $5.11 in 2011. In these periods, we experienced ARPU growth across all regions.
Because Facebook’s content is created by its members, ARPU also tells us the monetary value of each member’s labor. If the average Facebook sharecropper were to be paid a revenue share for his or her work on the site, that member would make a buck and change every three months – about enough for one crappy cup of coffee. Needless to say, the amount is so small that Facebook members never think about it. The amounts only become economically interesting when, as I wrote earlier, you aggregate them on a massive scale.
I would argue, in fact, that while Facebook very much wants ARPU to grow steadily, it probably doesn’t want the number to get so large that it becomes a meaningful amount to its members. If that happened, members might start thinking about the cash value of their labor rather than just its attention value. The line between the two economies would blur. By keeping ARPU modest (and focusing on scale), Facebook maintains the all-important divide between the attention economy (in which members see themselves as working) and the cash economy (in which the company reaps the monetary value of the members’ work). The last thing a for-profit social network wants is for its members to start seeing themselves as laborers.