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By Aaron Greenspan PlainSite: Reality Check Jan 24, 2019
On paper, Facebook, Inc. (NASDAQ: FB) is one of the most successful companies in history. With a market capitalization that peaked at over $600 billion, Facebook has been the envy of blue chip executives, entrepreneurs, and venture capitalists since it exploded onto the global stage. Facebook claims to have over 2 billion Monthly Active Users (MAUs), to a large extent determines which media outlets live and die, connects friends and family members across continents, and is nearly its own sovereign nation.
What seems too good to be true often is. The zeitgeist has changed markedly since 2007, when the company was the obsession of virtually every Silicon Valley investor, having built its Platform to make the world “more open and connected.” Yet as bad as things have been of late for Facebook, with endless privacy breaches and Russian interference in the 2016 presidential election hanging over Menlo Park like a spectre, we believe the situation is far worse than investors realize.
Facebook is lying to the public about the scale of its problem with fake accounts, which likely exceed 50% of its network. Its official metrics—many of which it has stopped reporting quarterly—are self-contradictory and even farcical. The company lost control of its own product.
Fake accounts affect Facebook at its core in numerous ways:
- Its customers purchase advertising on Facebook based on the fact that it can supposedly target advertisements at more than 2 billion real human beings. To the extent that users aren’t real, companies are throwing their money down the drain.
- Fake accounts click on advertising at random, or “like” pages, to throw off anti-fraud algorithms. Fake accounts look real if they do not follow a clear pattern. This kind of activity defrauds advertisers, but rewards Facebook with revenue.
- Fake accounts often defraud other users on Facebook, through scams, fake news, extortion, and other forms of deception. Often, they can involve governments.
Preaching programmers should “move fast and break things,” CEO Mark Zuckerberg has clarified over time that growth at any cost is his only priority. Documents recently revealed show that since 2012, management has worried about where it can find more warm bodies to sign on.
Fake accounts keep the company Columbia professor Tim Wu called an “attention merchant” afloat. The cost of Zuckerberg’s dissembling, dating all the way back to 2004, has accrued, and is finally coming due. Accordingly, it is increasingly likely Facebook will go the way of AOL, CompuServe, and Prodigy—if legal liability doesn’t bankrupt it first.
A long-running feud was thrust back into the spotlight today with a contentious report claiming that over half of Facebook’s monthly active users are actually fake.
The report, written by Facebook critic Aaron Greenspan, alleges that the social media giant has no way to accurately measure its true user base — or in other words, accounts that are matched up to real people — and that Facebook’s reported metrics substantially overestimate the number of real monthly active users.
Notably, Greenspan is a former Harvard classmate of Facebook founder and CEO Mark Zuckerberg. In 2009, Facebook and Greenspan reached a confidential settlement over a trademark dispute regarding the term “the Face Book.” Greenspan’s new report, however, alleges substantially more than a possibly stolen name.
“Facebook does not now and will not ever have an accurate way to measure its fake account problem,” claims the report. “Taking all of these factors into account, we estimate that 50 percent or more of Facebook’s current MAUs are actually fake.”
Facebook vehemently disputes Greenspan’s analysis. “This is unequivocally wrong and responsible reporting means reporting facts, even if it’s about fake accounts,” wrote a company spokesperson over email.
At least one group appears to be taking the report’s allegations seriously, however: Facebook investors. Seeking Alpha, a financial analysis website, notes Facebook shares fell on Jan. 24 shortly after the Greenspan report was issued.
So, is this report just empty bluster from someone with an axe to grind? Or is there actually something to the claim? The report itself attempts to weigh in on that, with Greenspan writing that “[readers] are accordingly welcome to dismiss this analysis as biased, but should be aware that nonetheless, it may still be correct.”
He also writes, because I guess why not throw in a little personal shade while you’re tossing around allegations of massive corporate malfeasance, “Mark Zuckerberg is by no objective measure a genius.”
Facebook, for its part, has admitted in the past that fake or duplicate accounts exist on its platform. In 2017, the company noted as many as 270 million accounts could fall into one of those two categories. However, that number is a far cry from what Greenspan claims.
In the end, pinning down the exact number of fake Facebook accounts is likely an impossible task. That doesn’t mean accurate estimates don’t exist, however. Which just leaves us with the 2-billion-plus user question of whose estimate do you find more believable: Facebook’s, or Greenspan’s?