Facebook appears to be sliding backwards because of recent missteps. Will it become a cautionary tale for start-ups in the future? In another Tough Things First podcast, Ray Zinn is asked about what Facebook’s struggles may mean going forward.
Rob Artigo: Welcome back. I’m Rob Artigo, entrepreneur and writer. Happy to be back for another edition of the Tough Things First podcast. Hi, Ray.
Ray Zinn: Hey, hey, Rob. Good to be with you today.
Rob Artigo: Facebook’s slide that we’ve recently, some are calling it an implosion. We don’t know if there’s ominous signs on the horizon for Facebook. I looked at some numbers that I found on the internet today. It shows Facebook’s traffic in the past two years has gone down from 8.5 billion visits per month to 4.7 billion visits per month. 4.7 billion visits per month is still huge, but that’s a drop of 3.8 billion. The stock had a big dive in late July, early August, went down significantly from its high. You deal with entrepreneurs and investors all the time. In the shadow of Facebook’s troubles, view it in terms of what has happened to other companies as well, do you think there’s in impact here for startups going forward?
Ray Zinn: Don’t know. It depends upon how many of them are using their website as data mining. The big bucks are in data mining. Google not withstanding, all of them do data mining, insurance companies, banks. That’s the problem that Wells Fargo got into. Whenever you start using your base, as you would, your customer base for data mining, that really upsets the customer because he’s not getting paid for that. In other words, they’re gathering information from you or me, but we’re not getting paid for giving out that information. We think it’s private. We think it should be proprietary and not something that they just freely give away. The big money, just like people who sell their mailing lists, which has now gone down the tube but people used to sell their mailing lists, that’s how they made their money. That’s data mining.
Rob Artigo: I think it might be one of those things that is behind what’s turning people off on a lot of these, Facebook, social networks, and that sort of thing. If a startup thinks they’re going to rely on data mining going forward, is there a danger that they’ll run into a problem with pushback from users and maybe even governmental intervention to prevent people from overusing the data that you’re giving them when they’re data mining?
Ray Zinn: Absolutely. That’s the big rub is that we all like our privacy. We like that protected. As soon as you start using that for your own exploitation, then you’re upsetting the customer. If you’re going to be a company that’s using your customer base for data mining and selling it off that way, you’re going to have a problem.
Rob Artigo: This is something that you’re seeing actually occur. Have there been other fields that you’ve seen this occur in where there’s, let’s put it this way, a discussion among investors and the high end crowds where you’ve got people that are a lot of guys like you who are CEOs and former CEOs who do a lot of investing in the tech field? Are you hearing people talk about this as being a potential major problem going forward?
Ray Zinn: Not a lot, but if you look at a hospital or a medical firm who collects a lot of private data, proprietary data, they’d love to be able to sell that. They figure out ways that they can close the information in a non-nefarious way so they can get that information to insurance companies, to medical firms, to pharmaceutical companies because they would love to have that data available for their own use. My brother who works for UC Davis in California, he actually makes more money from the medical companies by doing medical research than he does from donations to doing research. In other words, he makes money selling information. His information is off the cattle and on animals, and that’s different than human beings because most people don’t care if their animal information gets put out or gets data mined. There’s a lot of money out there for companies that are getting information. As my brother does at UC Davis, he data mines or he gathers information for companies. These are medical companies, but they’re using animals for research as opposed to human beings.
Rob Artigo: Is there a cottage industry that may spring up, one that fights this for the end user, say a person who wants to make sure that they have a phone cover or something that protects the information that the microphone setups on their phones, or that controls what’s being seen through the camera, or other aspects of using your social media so that when you’re using the internet or using Facebook, or using Twitter or something like that, that it’s unable to gather a lot of information on you? In other words, it has to deal with just bare bones info.
Ray Zinn: You’re dealing with companies that you have to divulge information, whether it be credit report, whether it be a bank, your banking data, what you have in savings or checking. You can protect that because that’s something that you input to them, and they have that available. They’re not supposed to use that data without your permission, but they do somehow or another and in some superfluous way been able to …
Rob Artigo: Yeah, right.
Ray Zinn: … get around that and be able to supply that data to people who want it and who need it. It may not have your name on it, but it has maybe your age, your area of where you live. It knows, for example, your address. Instead of giving the specific address, they might say, “In the general area of,” and then Sacramento, or Sunnyvale, or Menlo Park, or something. Then they say, “Okay.” If they know the demographics of that area, they can draw a lot of conclusions just from your data.
Rob Artigo: We could wrap this up by talking a little bit about a recent development where Facebook is talking to banks. They’d like to partner with banks and have a payment service that they start to provide on Facebook. They already sell stuff on Facebook. You can already pay for things through Facebook including advertising, but you can also buy gifts and what not. Recently they’ve said, “No, we’re going to go to banks, and we’re going to have a partnership with banks, and we’re going to have a payment.” I was listening to a talk show host yesterday, national syndicated talk show host, who said that he saw it as a step towards essentially eventually becoming a bank itself, Facebook. I was reading it as not a matter of making money off of being the payment provider but be able, again, to get more data, to have access to the bank’s data and everything else, and just become even more of a behemoth in data mining. Have you heard this, and what’s your reaction to it?
Ray Zinn: Certainly eBay does that with PayPal and these other forms of banking. Any time you use something like a PayPal, or in the case of Facebook a Facebook Pal or whatever, then you’re going to have to give credit information. Once you do, that’s all available now to Facebook like it is to eBay. They can draw all kinds of conclusions from that because there’s no way they can issue payment if you’re not a good credit. It’s like a credit card. To use any of these non-banking services, they’re going to have to get crediting information from you, your Social Security numbers, your financial statement in some cases. Yes, you’re going to be opening up Pandora’s box when you do this. Credit card companies do it already.
Rob Artigo: Right, because they’re looking at buying habits. They’re looking at where you’re going. They’re looking at trends. What they’re doing, and I’ll tell you a little experience with the Facebook deal is when you’re trying to advertise to somebody, and this whole controversy about the targeted ads used by the Russian organizations and these other so called bad actors out there is they take the data that Facebook has available to them, and they can use so much of that mined data to figure out people’s emotional states, and their attitudes, and what they need to move them and motivate them to take action of some sort. I think that as more of that becomes available, it gets out there as public knowledge, people will start to push back and say, “You know what?” For example, I never use Facebook Messenger. I would never put it on my phone. I would never use it on my computer. It’s just too intrusive. I’m giving up some info because I still use Facebook and I have Twitter. Who knows how long that’ll last? I think that as time goes by, people are going to start getting more upset with this kind of stuff. Facebook will continue to have a problem, but so will other companies that are delving so deeply into your life with their data mining.
Ray Zinn: Just today I got a Facebook message came through about this woman dressed provocatively. She wanted to be friends. She’s poking at me, which is another term they use. If you answer that, then now she now has access to your account, to your friends. There’s all kinds of unscrupulous things that are taking place using Facebook as a medium.
Rob Artigo: I think we’ve pretty much determined the fact that some of Facebook’s troubles might be related to people burning out on the social media platforms based on worries about privacy, and it’s legitimate.
Ray Zinn: Yup.
Rob Artigo: All right, Ray. You can visit Ray Zinn at toughthingsfirst.com. While you’re there, you can subscribe to the podcast, Tough Things First, but also you can rate it and share it on any of the platforms where you find your podcasts. Don’t forget Ray’s new book, The Zen of Zen, is available now. Thank you, Ray.
Ray Zinn: Thanks again, Rob. Sure good talking to you.