The Market Ticker
Commentary on The Capital Markets- Category [Consumer]
2017-03-05 05:00 by Karl Denninger
in Consumer , 487 references
[Comments enabled]  

How's that for a headline?

It's true, by the way.

Here's how the numbers work -- Facebook says that the "average" American user produces about $25/quarter in revenue, or $100/year per-person.  Facebook makes nearly all of its revenue from ads.  It sells those ads to various product and service producers, whether it's a local bar or an auto manufacturer.

In order for such an ad to be worth it to the buyer it must produce more in net profit than it costs.

We can therefore determine the average cost to the American consumer who is on Facebook by taking that $100 in "revenue" and dividing it by the net profit margin of the businesses advertising, on average, then adding to it some sort of premium (since doing something that gains nothing is not worth it; ergo, it must return more than mere cost.)

The net profit margin has to be guessed at in aggregate, but 10% is probably quite reasonable.  Some places (e.g. a grocery store) make far less, some make more, and remember that it's only net margin that matters, not gross.

Now ask yourself this: If you're an "average" family you have 2.53 people in it, as of 2016.  In that average household there are probably two Facebook accounts, so the average family has a cost of using Facebook of at least $2,000/year.

If the average family has $50,000 worth of income (about right) then Zucker****er manages to take about 4% of your gross (pre-tax) family income.  If you're poorer on a percentage basis he probably gets even more.

The worst part of it is that he gets his cut of it, roughly 10%, without you realizing that you've spent the money.

Your auto insurance might be "uprated" without you even knowing it, due to your Facebook activity.
Your HOME insurance might also be.
Health insurance?  Might be.
Job offer with a lower salary (or not offered at all)?  Quite possibly.
But the real 900lb Gorilla is that you are nearly certain to be buying products and services you would not otherwise buy, at all, or for which you could have done better in price and quality absent your presence on Facesucker.

This has to be true or Facesucker would be out of business!

Folks, you may think $2,000 each and every year is a not-so big amount of money.  Anyone who doesn't want that $2,000 is welcome to send it to me; I'll buy rounds of drinks for everyone in my local pub with it until it's gone and the people there will get more value out of it than you will.

Further, I remind you that there are some of us who spend exactly zero as a result of Facesucker yet are on the system, and ARPU is an average so for each of us who spend zero someone else spends $2,000 per person instead of $1,000!

How can you stop bleeding from the ass like this?


Oh, this goes for all the other "social media" sites too - - Twatter, Instragram (owned by Facebook), Snap, etc.

No, you can't avoid it by using a pseudonym, a VPN or whatever.  Your behavior will give you away, and these days it's trivially easy for firms with access to "big data" (Zuckerpig Frankenstein is certainly one of them!) to figure out exactly who you are with a very high degree of reliability.

If you do delete your account and pay attention a few months later you'll likely notice that your wallet -- and bank account -- are both fatter.

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