Facebook: $38/share, $117/user

Why are we assuming that share prices under these circumstances have something to do with fundamental value?

Let’s take a quick look at the facts. According to its S-1, Facebook had 850 million monthly active users at the end of 2011. With annual revenue of $3.7 billion, this equates to an average revenue per user (ARPU) of $4.35. ARPU and Facebook’s IPO price are constantly being flaunted and discussed by Zuckerberg and the media; however, neither Zuckerberg nor the media ever mention an even more important number: $117. What does this $117 represent? Well, based on Facebook’s valuation, Zuckerberg effectively sold each Facebook user – i.e. you – for $117.

That look at the facts is too quick. It doesn't provide context and it isn't thorough. With a revenue one tenth that of Google, what did it earn, not take in, per customer? That princely $4.35, as you could have heard me pointing out in my classroom and on the net last spring, represents real profit on operations of about $0.36/user or so. And this on the basis of a display advertising business which does not transfer well to the mobile screen, as everyone began realizing the minute after the big sell was over, but which once again you could have heard in my classroom last spring for free.

According to its S-1, Facebook derived 85% of its 2011 revenue from advertising. Big deal, right? All Facebook does is let advertisers pay to post ads on its site. Wrong. Facebook’s data gold mine allows it to divide its user base into numerous demographic and preference packages which it then offers to advertisers. Everything you “like” or view is now going to be packaged and sold; however, this doesn’t just affect your experience. This information gathered and sold to advertisers will also in turn grant them more information about your “friends,” thus filling up their screens with more ads.

You are overlooking the whole story, which is data-mining. These "demographic and preference packages" you are talking about are primitive history now.

For a site that was built to make the world more open and connected, it feels like Facebook has sold out. Rather than a contact list of friends, families, and communities, it has become a marketplace where Zuckerberg and advertisers plot on how to extract value and commercial gain from selling and buying you.

Why are you confusing an advertising slogan with a business entity's intentions? Facebook was always what it is now, since it attracted the attention of the gang running it along with Mr Zuckerberg.

Even comical is the fact that while Facebook lists as one of its risk factors the possibility that hackers could steal the information it has, it fails to identify that it is in the same business of the hackers: stealing information and profiting from its obtainment. The privacy and security measures Facebook has taken are merely a tool to safeguard its profits by reducing competitors’ ability to obtain your information, and not to safeguard you, the user.

No. Facebook's security serves far more important purposes. They may not be germane to your analysis, but that doesn't excuse you from thinking about them and refraining from misleading statements.

Zuckerberg has attempted to portray himself as the carefree Gen Y type, and attempted to portray his book of your information as nothing more than an innocent medium to connect with others.

"Has been portrayed." Neither the image of Mr Zuckerberg nor the image of Facebook has been or is being managed by him. Why do you perform financial modeling in order to find out what something is worth, but resort to simplifying personalization in order to explain the behavior of a complex social organism?

This is an image he has attempted to maintain while he made billions by selling your information.

Are you sure that's what has happened? Despite Facebook's denials? On what evidence?

Zuckerberg made billions, the Wall Street fat cats got fatter, and businesses worldwide now have the ability to know your life as well as you know yourself.

That's not a very good way to summarize what big data and the data-mining of personal information accomplishes.

It seems like the only group not getting a cut of this $117 is the people who provide, and by right own, the very material being sold.

Are you now satisfied to reduce the issues you have raised yourself to the question of whether people are getting paid?

I propose that Facebook’s worth is derived from its user base. Why then should they not share in the wealth that is being reaped from it? As the owners and contributors of the information sold, Facebook users should share in the benefit produced by their exploitation, and not just by receiving more narrowly tailored advertisements.

You think the proper discussion is about the users' share of the $0.36/year the owners of Facebook are making on each one of them?

So how do we get it? We could petition Facebook, but seeing as how Zuckerberg is the majority shareholder no action can be taken by Facebook without his approval. And I don’t see him as being interested in giving anything back to the people he took it from, since it was Zuckerberg who eventually decided to sell out to the capitalist ideology and tarnish the at once potentially pure medium of exchange and expression that Facebook represented.

Bollocks. What evidence have you that Facebook was ever anything other than what it is now? What betrayal are you talking about?

But wait, don’t we have privacy laws? Of course, that must be the way. However, because of the fine print you acknowledged when signing up for Facebook, you have no rights to stop them from any of this. In fact, you explicitly approved the sale of your information and have effectively sold yourself, or at least your digital self, into slavery.

This is not true. Didn't you check any of this?

You are a slave to Facebook. You toil in the digital data mines adding further value to them through your posts and likes, and Facebook, your master, reaps the benefits without paying you any wage. Maybe next time you see one of those agreements you should read it. You might be surprised by what you find.

Did you read it? Where did you find what you claim is there? Wouldn't it have been a good idea to link to this language? You didn't just plain make it up, did you?

What about a boycott of Facebook? Maybe we could just go back to using MySpace? . This time let’s just refuse to authorize the new site to steal our information? Sure, this is at least hypothetically possible. Of course, it doesn’t address the injustice that Zuckerberg has inflicted on users for his own pecuniary gain.

Sadly, it seems that there are currently no adequate routes to address the crimes being committed by Zuckerberg.

What crime are you now talking about? The crime of giving you the lousy end of a bad bargain? Even if the bargain were what you say it is, which it isn't, why would that be a crime?

In fact, the very entity we constructed to protect us from injustices such as this – the government – has explicitly allowed Facebook and other companies set up to launder money derived from sales of stolen information to go forward with these acts unpunished.

What stolen information? What money laundering? You're studying to be a lawyer. You have to be responsible in your use of legal language to describe public actors and actions.

So back to our question: how did the wizards of Wall Street reach a $100 billion valuation? They reached such a valuation through the realization of what Facebook is: a theft. And theft has pretty good margins. Wall Street, being familiar with such improper shifts of wealth, saw the value that this scheme represented. Further, having the government in their pocket, Wall Street realized that this was a scheme that could be perpetuated indefinitely with little resistance from the users who were too blind or too unconcerned to rise up against such an injustice.

The only problem with this whole explanation, apart from its wild irresponsibility and broad departure from fact, is that Facebook doesn't make any serious money. So the "it's worth what it's worth because it's the proceeds of theft" position is unfortunately ridiculous: really good theft is much more profitable than Facebook. You've made a story of stock promotion, which isn't important, obscure the story of how Facebook's business and other institutional relations really work.

So will we, the users, the victims of Facebook, ever be made whole from the theft and exploitation of our personal lives and activities? Let’s just say I wouldn’t keep checking your mailbox for any checks.

Let's just say that doesn't seem to me to be a very important statement, because it doesn't capture any idea about Facebook that people can use to understand the issues of privacy for them in their daily lives. You haven't analyzed Facebook correctly, because you haven't made either the financial inquiry or the legal inquiry that the situation called for: you have given up too early on both counts, and in some cases seriously mislead both yourself and your readers. Nor have you explained anything about privacy as people in their lives really encounter the threats. You haven't identified who holds data, who sells, trades in, or reprocesses data, or even what the Internet contribution to the personal data industry is, beyond Facebook, which is just one firm. You haven't explained what is done with the data, or why individuals might or should care. You've thrown words like slavery around, but you haven't made the slightest attempt to justify them in any but metaphorical terms. You have linked nothing, acquainted no reader with any materials or thinkers that would help them to evaluate your ideas. You've conveyed the impression that Facebook is a unique problem, and that if it were paying people some tiny sliver of its infinitesimal profits that even this unique problem would magically not matter anymore.

It seems to me that no effort of self-criticism has gone into this version. Too many issues are left untouched for a really scrupulous and hard-eyed self-evaluation to have occurred. One doesn't have to be an outside reader to see where claims are made that need checking, where legal terms of art are applied to conduct that in no way is shown to fall within the relevant legal categories, where inflammatory characterizations are applied to the behavior of a single business entity that is not yet successfully distinguished from entities in closely-equivalent or interoperating businesses.

The route to improvement is that exacting assessment of every word in every sentence of the existing draft. Factual claims should be tracked down and carefully-selected evaluated sources linked or cited. Legal conclusions or terms of art indicating legal conclusions should be offered with a reasonable basis for factual belief and legal assertion. I was taught when a young man that a lawyer's public statements on professional subjects should meet Rule 11 standards, and I think that's sound advice. That process will, I think, surface most of the issues with the analysis I have indicated in my questions, along with others I needn't be so tedious as to suggest.