What You’re Worth to Facebook

Recently, people started observing that Facebook might be losing its youthful edge: there had been surveys, analysts’ reports, and even a disclosure from the company which suggested that young people wanted to spend their time elsewhere. When I first heard this, I reacted with a weird defensiveness. This seemed like a bafflingly personal response, even to me, until I realized that all the commentary was making me feel old.
I started using Facebook in 2004, the year that Mark Zuckerberg founded it. I was in college back then, at Stanford, where the site launched early. Its features were, by today’s standards, clunky and retrograde: the logo was an eerie image of a man’s shadowed face; the site announced itself, in type along the bottom of the screen, as a “Mark Zuckerberg production.” And yet being on Facebook was, for a little while, like knowing about a band that few others had discovered. It was cool.

Next month, Facebook will have existed for ten years. The site itself has grown up, too: it lost the weird logo and the Zuckerberg shout-out; it added photo albums, the news feed, better privacy settings, and, of course, advertisements; and it is no longer cool—a status that has been passed on to upstarts like Snapchat (which Facebook has tried to acquire) and Instagram (which it did acquire).

Zuckerberg, who launched the site from his college dorm room, is now a married homeowner. I am married, too, though not a homeowner. Sometimes I idly browse houses on Redfin and mark my favorites—a weird hobby of mine. My Redfin account is linked to my Facebook account, and the site dutifully takes note of my choices. If one day my husband and I start actively shopping for a house—which we surely will—Facebook will know more about our tastes than any human being could. What’s more, the site can probably tell, perhaps creepily, that we might already be in the market for a house, on some level, even though we see ourselves as nothing more than casual lurkers at open houses and on real-estate Web sites.

All of which is to say that people might have been asking the wrong question when, ahead of Facebook’s earnings announcement, on Wednesday, they wondered whether the company had been able to keep teen-agers interested enough. As it turned out, the company trounced analysts’ expectations, announcing revenue of $2.59 billion—an increase of more than sixty per cent from a year earlier.

In a call with analysts after releasing the earnings report, Facebook executives, including Zuckerberg, didn’t discuss “Facebook’s teen problem,” as Mike Isaac, of Recode, has put it. Instead, they focussed on the company’s growth in ad sales—driven largely by the success of the ads that the company displays in people’s news feeds, sandwiched between links to Onion articles and friends’ baby albums.

For a long time, Facebook struggled to convince marketers that these ads were useful. But that’s changed, Facebook’s chief operating officer, Sheryl Sandberg, said. Facebook now has data that helps it prove to marketers that there is a specific—and significant—return on their investment in news-feed ads.

“Our goal is, in an privacy-safe way, to get information we can about what consumers want and then help connect marketers, so the ad experience is great for users,” Sandberg said on the call—whether that information comes from people’s “likes” on Facebook, their activity on other sites, or “contextual statements they might make in their status updates.”

In other words, by figuring out what people are interested in, Facebook can show them ads that are super-relevant, thus persuading them to buy things, thus persuading marketers that the ads are effective and worth the money. Surely, this is as true when it comes to adult Facebook users as it is for teens—and perhaps even more so. (Cutting-edge as I might have been as a teen-ager, my paychecks from my after-school job were pretty modest. And I definitely wasn’t shopping for real estate.)

Facebook’s user growth has slowed, which was inevitable. (Notably, the company spent little time discussing the somewhat unimpressive growth in users who visit the site daily and monthly.) That could eventually be a problem. But it isn’t yet. That’s because Facebook is still making ever-increasing amounts of money from all the information it has collected—in some cases, over the past decade—about its users. The company is getting more and more revenue from each user: on average, $2.14 per user in the fourth quarter, up from $1.54 a year earlier.

Sandberg’s comments on the analyst call sounded, at times, like a sales pitch to advertisers. This was surely intentional. She is a former executive at Google, which, the year that Facebook was founded, was wooing advertisers with a concept that seemed novel at the time: What if you could use people’s search habits to understand what they wanted to buy and show them ads for those products? Facebook might be maturing, but to anyone but the most jaded techies, Sandberg’s description of how some advertisers use the site sounded like a line from a sci-fi novel: “If you look at people trying to find consumers,” she said, “we offer the opportunity to get people before they search.”