10 Reasons Why Nationalizing Facebook Would Be Ridiculous
Would our Facebook experiences improve if the federal government owned and operated the popular social networking site? Philip N. Howard thinks so. In a Slatecolumn this week entitled “Let’s Nationalize Facebook,” Howard, a professor of communications at the University of Washington, says that Facebook “is now public infrastructure, and it should be treated as such.”
Calling Facebook a “monopoly” and a “public good,” Howard says that we need “public ownership and at least a majority share at first” so that the federal government can “restore the public trust” and ensure the site protects user privacy while also ensuring it can “fulfill its true potential for providing social good.”
A common response to Howard’s essay in both the comments left on Slate as well as on Twitter was to ask: Is this a gag from The Onion? It’s tempting to dismiss the column as a parody or just a desperate effort to grab attention—and here I am writing about it, so it worked!—yet calls for some sort of public utility-like regulation of social networking services, and Facebook in particular, have been growing among Ivory Tower elites.
In a paper I penned early this year about “The Perils of Classifying Social Media Platforms as Public Utilities,” I outlined several objections to the idea of regulating social media services in the fashion Howard suggests. Building on that piece, here are 10 reasons nationalizing Facebook is a moronic and dangerous idea.
1) Facebook is neither a natural monopoly nor a public good
Howard claims that Facebook “is already a monopoly,” “has become a public good” and represents “public infrastructure.” He seems to misunderstand these terms.
Facebook is not a public good, which economists define as goods or services that are nonexcludable and nonrivalrous. Access to such goods cannot be easily controlled, and charging for such services can be challenging and sometimes even impossible. National defense and law enforcement services are prime examples. Clearly, Facebook does not qualify as a public good. Facebook can easily control who is part of the service, and although it does not charge a direct fee for its service, it has been able to monetize its service through advertising support.
By contrast, Howard seems to believe a public good represents any good or service that becomes popular and is in widespread use by the general public. He implies that once it is, we suddenly collectively own it and nationalization is sensible. By that logic, every shopping mall and supermarket should be government-owned! Regardless, Howard misunderstands the true meaning of the term.
Facebook is also not a monopoly. Howard claims the firm controls 80% of the market but never tells us where he gets that number or how he determines what the relevant market should be for purposes of antitrust analysis. Determining the extent of the “social networking” market is challenging. Clearly, Google, LinkedIn, and MySpace represent direct competitors—and their existence alone makes it clear that Facebook is not a monopoly.
But what about Twitter, Pinterest, Yelp, and so on? These and the countless other interactive services that we enjoy each day represent a challenge to Facebook. Even older forms of “social networking”—email, instant messaging, blogs, message boards, and even phone calls—compete with Facebook for user attention. Moreover, almost all these services are competing with Facebook for the same advertising dollars to cross-subsidize their services.
2) Social networking markets are evolving rapidly
Related to the previous point, Facebook operates in a highly dynamic environment. The breakneck pace of change in social media makes these sites and services distinct from traditional monopolies and public utilities. Not only are most of these services relatively new, but they keep displacing each other in fairly rapid fashion. In the Web’s short history, we’ve witnessed creative destruction on steroids.
Today’s social networking platforms evolved from a market we called “web portals” just 15 years ago. Social networks and algorithmic search engines quickly overtook the giants of the web portal era—AOL, AltaVista, CompuServe, and Prodigy. Meanwhile, the first generation of social networks has already largely come and gone. In the early and mid-2000s, Six Degrees, Friendster, Live Journal, and MySpace were the leading social networking sites, but they faded quickly from the spotlight. Just five years ago, MySpace’s dominance of social networking had The Guardian wondering, “Will MySpace Ever Lose Its Monopoly?” A short time later, MySpace lost its early lead and became a major liability for owner Rupert Murdoch. Murdoch paid $580 million for MySpace in 2005 only to sell it for $35 million in June 2011.
Could Facebook be disrupted in a similar fashion? It seems ludicrous to suggest that today since the site remains tremendously popular. Yet, considering how turbulent digital markets have been, it is entirely possible users could bolt to a superior service in short order. Investors seem to have less faith in the firm with each passing day. Facebook’s stock has been declining steadily, down roughly 50% from its IPO.