Decline and Fall?

I liked this para in an otherwise fairly predictable rant:

It’s the public outrage that should be most worrying to Facebook. Other tech giants have managed to escape the opprobrium directed at Facebook because they have obviously useful services. Amazon delivers things to your house. Google helps you find things online. Apple sells actual objects. Facebook … helps you get into fights? Delivers your old classmates’ political opinions to your brain?

“Decline”, certainly. “Fall”? Doubtful. 2.24B users don’t just melt away.

How about an Angry Founders Club?

Lovely rant by Dave Winer:

We should start an “Angry Founders of the Internet” social club to discuss what the fuck happened and how can we tell people about the magic that underlies the crapware that the bigco’s are shoveling at us. It really is beautiful and amazing in there. Think of it this way. It’s easier to take the Interstate highway everywhere, but if you do that, you miss the charming B&Bs, the dramatic beaches, restaurants, jazz clubs. The thrill of riding a bike, hiking the Appalachian Trail, skiing. All that intellectually unperpins this.

I’m not a ‘founder’ — though I count some of them among my friends. But I sympathise with Dave. The technology remains as magical as ever. It’s the corporate capture of it that rankles — plus the passivity and gullibility of so many of our fellow-humans.

The truth about Facebook

My take on the Facebook IPO. From this morning’s Observer

There are two classes of share – A and B. Each class B share carries 10 times the voting rights of its class A counterpart. Zuck owns 27.1% of the class B shares outright and the company’s pre-IPO filings to the Securities and Exchange Commission revealed agreements with other owners of class B shares to assign their voting rights to him. The net result is that he has voting control over at least 57.1% of the class B shares. In other words, he’s omnipotent.

This would be a problem even if Zuck had the brains of Einstein and the wisdom of Solomon. But, alas, he doesn’t. He is undoubtedly a smart and talented guy, but he also happens to have a megalomaniacal obsession – that everything has to be social, ie public. And if you’re a Facebook user and don’t like that – well, tough.

So we now have another powerful media company with a shareholding structure that renders its charismatic, single-minded founder immune from shareholder pressure. Remind you of anyone? Hint: it begins with “News”.

So what exactly did Facebook buy for a billion dollars?

This morning’s Observer column.

So Facebook has bought Instagram, a company with a single product – a photosharing app – for $1bn in cash and (FB) shares. Just to put that in context, Instagram has been in existence for 18 months, employs 13 people, has 30 million users and has had a grand total of $7m in investment funding. Oh, and it has precisely zero dollars in revenue.

Sound familiar?

There’s been lots of really interesting commentary about the Instagram deal. Writing in the FT, John Gapper made two interesting points:

  • The deal looks much more like the kind of thing companies do after they go public and start to run out of steam. The fact that Instagram was snapped up (if that is the right way to describe paying a billion dollars for something) is a measure of how scared Mark Zuckerberg has become of what might happen to facebook.
  • What’s he scared of? Well, says Gapper, scared of repeating the fate of many earlier Internet poster-children (like Bebo, for which AOL paid $850m in 2008 and flogged off in 2011 for $10m).
  • And Frederic Filloux, one of my favourite commentators, is also sceptical about the deal — and about facebook generally. “When I read the news of the Instagram acquisition”, he writes, “I wondered: Imagine Facebook already trading on the Nasdaq; how would the market react? Would analysts and pundits send the stock upward, praising Zuckerberg’s swiftness at securing FB’s position? Or, to the contrary, would someone loudly complain: What? Did Facebook just burn the entire 2011 free cash-flow to buy an app with no revenue in sight, and manned by a dozen of geeks? Is this a red-flag symptom of Zuckerberg’s mental state?”

    Other points Filloux makes:

  • Zuckerberg controls 57% of facebook shares, and therefore can do what he likes. This can be a mixed blessing.
  • Zuck is beginning to look like Bill Gates in the early years of Microsoft’s dominance — the years when he decided that Netscape had to be eliminated. Every challenge is seen as a potential threst. Only the paranoid survive, etc. etc. Facebook’s photo-sharing dominance was beginning to leak, and Instagram was one factor in that. So it had to be acquired or destroyed. “With this transaction”, writes Filloux, “the ultra-dominant social network acted like an elephant scared of a mice. Instagram has 35 million users? Fine. But how many are using the service more than occasionally? Half of it? How many are likely to switch overnight to a better app? Most likely many will. Especially since Instagram is not a community per se, but a gateway to larger ones such as Twitter and Facebook.”
  • LATER: Andy Baio has made an interesting attempt to work out an empirical rationale for the price Zuckerberg paid for his new toy.

    The case against the Digger — by the Digger

    Craig Murray nails it.

    By their own admission, the Murdochs’ media empire is too large for effective corporate governance. The fact that Rupert, James and Rebekah claim they had no idea who authorised thousands of illegal phone hacks, and had no idea who authorised tens of thousands of pounds of bribes to policemen, and still say they have no idea even after all the hullabaloo, is positive proof that such concentrations of media ownership become unaccountable and should be banned by law.

    They are condemned from their own mouths, by the line of defence they have chosen. Whether it is true or not doesn’t matter in terms of the policy that must be adopted – the prevention of multiple media ownerships.


    So will the Digger have to swear on the Bible on Tuesday?

    The Telegraph thinks that he might.

    According to Erskine May, which sets out rules governing Parliament, The Parliamentary Witnesses Oaths Act 1871 “empowers the House of Commons and its committees to administer oaths to witnesses, and attaches to false evidence the penalties of perjury”.

    It says: “Where evidence is not given upon oath, the giving of false evidence is punishable as a contempt. It is not usual, however, for select committees to examine witnesses upon oath, except upon inquiries of a judicial or other special character.”

    Paul Farrelly MP,a Labour member of the committee, told The Daily Telegraph: “We will take advice on Tuesday morning from clerks whether we will require them on this occasion to take testimony under oath.

    “That power is available to the committee but it is rarely used and what is appropriate on this occasion given the misleading evidence to this inquiry from News International.”

    The Wall Street Fox

    Joe Nocera on the Foxification of a once-great newspaper.

    As a business story, the News of the World scandal isn’t just about phone hacking and police bribery. It is about Murdoch’s media empire, the News Corporation, being at risk — along with his family’s once unshakable hold on it. The old Wall Street Journal would have been leading the pack in pursuit of that story.

    Now? At first, The Journal ignored the scandal, even though, as the Murdoch biographer Michael Wolff pointed out in Adweek, it was front-page news all across Britain. Then, when the scandal was no longer avoidable, The Journal did just enough to avoid being accused of looking the other way. Blogging for Columbia Journalism Review, Dean Starkman, the media critic, described The Journal’s coverage as “obviously hamstrung, and far, far below the paper’s true capacity.”

    On Friday, however, the coverage went all the way to craven. The paper published an interview with Murdoch that might as well have been dictated by the News Corporation public relations department. He was going to testify before Parliament next week, he told the Journal reporter, because “it’s important to absolutely establish our integrity.” Some of the accusations made in Parliament were “total lies.” The News Corporation had handled the scandal “extremely well in every way possible.” So had his son James, a top company executive. “When I hear something going wrong, I insist on it being put right,” he said. He was “getting annoyed” by the scandal. And “tired.” And so on.

    In the article containing the interview, there was no pushback against any of these statements, even though several of them bordered on the delusional. The two most obvious questions — When did Murdoch first learn of the phone hacking at The News of the World? And when did he learn that reporters were bribing police officers for information? — went unasked. The Journal reporter had either been told not to ask those questions, or instinctively knew that he shouldn’t. It is hard to know which is worse. The dwindling handful of great journalists who remain at the paper — Mark Maremont, Alan Murray and Alix Freedman among them — must be hanging their heads in shame.

    #hackgate and David Cameron

    One of the side-effects of the Digger’s PR-driven ‘conversion’ has been to divert attention from David Cameron’s role in the scandal. He’s up to his neck in it too, so it’s nice to see that the Daily Telegraph isn’t letting go.

    The Prime Minister has also done his best – unsuccessfully – to deflect attention from the fact that he spent Christmas with Mrs Brooks and her husband, and that Mr Coulson visited Chequers as recently as March. In addition, he is planning a long-term diversionary strategy that could impose state regulation on all newspapers, including those that, unlike the News International titles, did not shower him in hospitality.