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Just how does Facebook make its profit?

Despite its tiny staff, the company has enormous wealth. This has as much to do with data-scraping its users as it has to do with another concept Marx detailed: religion

ONE of the consequences of the Covid-19 pandemic has been a huge increase in social-media use. Facebook alone has seen an increase in total messaging of over 50 per cent in countries most affected by the virus, and use of WhatsApp, owned by Facebook, has grown by 40 per cent.

Facebook isn’t a big employer. It has just under 45,000 employees in total — up from just seven individuals when it was launched 15 years ago. But its profits are vast — about $22 billion (£17bn) last year.

And that’s despite its $5bn (£3.8bn) fine for allowing Cambridge Analytica, consultants to President Trump’s electoral campaign, to harvest the data of its users.

That’s about £½ million profit per employee (PPE).

Profit, in capitalism, is realised surplus value. And surplus value is the value created by a worker over and above what she or he takes home as wages.

Within capitalism, workers sell their labour power for an agreed time generally determined by prevailing social norms. But when labour power is transformed into a day’s work it produces more exchange value than what the worker receives in return.

Marx illustrated this (in Capital, volume I) by a simple metaphor. Perhaps half a day’s work produces goods or services equal in exchange value to a day’s wage. For the rest of the day the worker is effectively working for free, producing “surplus” value — the source of the employer’s profit and of rent and interest for other owners of capital. That’s what Marx means by exploitation.

So: compare Facebook’s profits with the average PPE of Britain’s 100 biggest private companies of £20,000 and for all British companies, around £22,000, roughly equivalent to the median industrial wage.

But, leaving aside the data shipped illegally to Cambridge Analytica, Facebook produces no physical products for sale. Despite having over two billion “customers” — Facebook doesn’t like the term “users” — it doesn’t actually make any money through its user base or by selling content.

So what is it selling that enables it to make more that £½ million for each of its employees — and where does that money come from?

The answer: 85 per cent of Facebook’s income is from advertising. Yes, this is “surplus value.” But is it being “created” by Facebook’s highly paid employees?

Surely nobody can work so hard as to produce that amount of surplus value for their employer?

Let’s go back to Marx. Marx’s illustration of how surplus value is created is just that: an illustration. Elsewhere, Marx makes it clear that it rarely makes sense to consider the surplus value produced by any single individual.

The labour required to produce a commodity is the “socially necessary labour time” — the time required by a worker of average skill and productivity, working with tools of the average productive potential, to produce a given commodity.

But it’s not just the machine operator. The accountants in the factory office, the cleaners, the maintenance engineers, the sales-people: all are essential either to the production of the commodity or to realising the value of it in money terms.

Also essential is the rest of the supply chain: raw materials, distribution, retail outlets; the factory is one node in an often global web of linked enterprises.

As Marx makes clear (in volume III of Capital — see how far we’ve come in just a few paragraphs), while the example of the individual worker “working for free” might illustrate the principle, Marx’s analysis relates not to individual workers producing single commodities with an easily discernible selling price but rather to the whole of capitalist production in the aggregate.

Surplus value does accrue to individual employers and companies, but its realisation as profit depends on part of it being taken by other enterprises.

Workers in an Amazon warehouse or on a supermarket checkout for example do not themselves produce a commodity with a clearly identifiable “price.” But their work enables the surplus value of goods produced by others to be realised as profit.

Facebook’s activity can be illustrated by another metaphor. Individual workers and often individual enterprises themselves create relatively small “streams” of surplus value. But these streams contribute to a massive global “pool” of surplus value — value that is not returned to the workers who create it.

Facebook makes its profits, to extend the metaphor, by “fishing” in this pool.

From one perspective, Facebook is “selling” a commodity: its power to increase the sales of those who have paid it to advertise. From another, its profits come from the “surplus,” unpaid labour of those who actually produce the commodities — goods and services — that their employers pay Facebook to advertise.

Google and other companies dominating the web including Facebook and other social media that provide their services supposedly for free, monetise their activities, and make their profits, by selling their product to advertisers.

Effectively, they “capture” surplus value from a pool created by directly productive labour; they consume part of the surplus value created by their client’s workers whose employers “invest” some of it as advertising to increase sales, secure further growth and make more profits down-line.

Facebook of course exploits its users in a host of other ways as well. As Facebook’s billionaire ex-president Sean Parker himself admits, the site is constructed deliberately to exploit human vulnerability.

“God only knows what it’s doing to our children’s brains,” he declares. Another early Facebook investor, Roger McNamee, argues that Facebook’s takeover of potential rivals such as Instagram and WhatsApp, its near-monopoly of social media, as well as its ability to spread misinformation, are a threat to democracy and to public health.

If Marx were around today he might well have included Facebook and other social media alongside religion, as (another metaphor) “the opium of the people.”

Incidentally, Marx didn’t mean by this that the “opium” was deliberately dispensed as a drug — though medically one of the “rewards” you get for using social media is a small dopamine hit when your post receives a comment or a “like.”

Marx meant, rather, that in bleak times, people cling to religion as a comfort. Marx himself took opium (laudanum) to relieve the pain of his carbuncles.

Facebook’s founder Mark Zuckerberg has himself said that for many people, Facebook provides “a sense of purpose and support” that was once provided by religion.

Add to that the purchases you make as a consequence of Facebook’s targeted advertising of products — purchases that you may or not need, but which help capitalists to realise the surplus value embodied in the goods and services produced by workers like you — and you have the answer to your question.

So: how does Facebook make its profit? The answer, in a nutshell, is, for most readers of this answer: out of you!

This answer is number 62 in the series. If you have a question, feel free to write in to the Star. Previous answers and details of all MML’s courses and lectures can be found on https://tinyurl.com/FullMarx.

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