- - Tuesday, April 3, 2018


Facebook users should be outraged by recent abuses of personal data but be very wary of calls for government regulation.

Social media platforms are handy contraptions for keeping up with friends and family, expressing political views and posting recipes for cranberry muffins but unlike their web cousins — Amazon and Google — they have fragile economic foundations.

Amazon can generate revenue directly from users — it charges merchants as they make sales and shoppers for its Prime service. Facebook, Twitter and other social media would not have billions of users if they imposed fees.

Like early telephone systems, their value to each user is enhanced as the total number of users increases. However, these services have not become a necessity akin to telephones, and charging subscription fees would greatly limit the number of users and their viability. And from the very beginning, the creators of Facebook and Twitter struggled to find revenue streams to finance their expensive-to-maintain platforms.

Like Google — which provides all of us with remarkable search, news, email and other services free — Facebook turned to selling targeted ads to businesses who a decade ago mostly hawked their wares mostly through broadcast and print media. To make inexpensive targeted ads effective, Facebook collects troves of personal information about where we go on the web and our personal preferences and views.

Google has diversified into many other value creating activities — for example, neat tablets that are giving iPads fits and web services — that truly make the U.S. economy more innovative, efficient and grow more quickly but Facebook and other social media mostly have not.

Social media is not like Internet tools for collaboration or online shopping like Amazon, which drive down costs and prices and inspire innovation. Rather, Facebook and other social media mostly shifted more eyeballs and advertising revenue from electronic and print media to their platforms. Whatever ad dollars social media loses as result of the Facebook scandal will move to other web platforms or back to traditional media, including radio and newspapers.

The current imbroglio has to do with Facebook becoming too aggressive in the personal data it collects — for example, through some apps it logs users’ text and cell phone histories.

It shared users’ personal data with app developers and academics in hopes of building an App retailer similar to iPhone’s App Store. Then revelations emerged that a professor violated Facebook’s rules by providing a huge data trove to Cambridge Analytica, which sells services to political campaigns.

Social media has become an easy target because Russia infiltrated their networks with disinformation to undermine the presidential campaigns of Bernie Sanders and Hillary Clinton. And Facebook and many other purveyors of advertising on the web have perfect strategies to keep us logged on longer and come back more often. Academic researchers and media analysts now charge the purposeful cultivation of addiction contributes to depression and polarization on social and political issues.

Some liberal bias may be coloring their objectivity. Conservative commentators do mass to social media largely because in most cities they are frozen out of mainstream print and broadcast outlets. And academics and analysts see nothing polarizing or abusive about the handiwork of The New York Times or CNN in that regard.

The FTC and British regulators are justifiably investigating Facebook’s data gathering and sharing activities but 37 states attorney’s general, who no doubt are prowling for votes and prospecting for another big tort settlement, have jumped into what should be a federal and international regulatory issue.

Social media data collection will likely face stricter regulation, and the scope and sale of personal information collected should be curtailed. However, the public should be wary of regulators going too far or becoming downright devious.

If the information social media may collect is severely curtailed, targeted advertising will become ineffective and social media platforms could become economically nonviable — Facebook and others would disappear. Or third-party access to the data could be limited by the left leaning federal bureaucracy to liberal academics for “research purposes” but ultimately abused for the professional left’s political agenda.

It’s the ancient free lunch problem. If users want Facebook, Twitter and other social media they have to pay with something — in this case, a reasonable amount of personal information to drive advertising.

EDITOR’S NOTE: This column initially referred to Cambridge Analytica as Oxford Analytica. The Times regrets the error.

Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.

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