Deciphering the Algorithm

With revenue growth as the North Star for company executives, Facebook has to optimize the platform to increase the number of Ads delivered and the cost per Ad.

Driving revenue growth

Increasing the number of Ads delivered

Depends on:

- the number of users on the platform

- how active they are

- the number of Ad products on the platform

- the frequency of Ads served

Hence, Facebook needs to add new users to the platform at a rapid rate. To keep people active, they need to serve up content that users are most likely to enjoy and consume while delivering on a great user experience. This involves a fine balance between the volume of organic content and paid content. More on this later. Increasing the cost per Ad

Given that their Ads platform is essentially a bidding/auction model, the cost per Ad will increase when more advertisers flock to the platform — a pure demand-supply equation. Quite obvious is that these Ads need to deliver return on investment (ROI) to increase the number of advertisers choosing Facebook.

In order to boost ROI delivered, it is inevitable that they serve you Ads that are most relevant to you and result in some action being performed — a click, a video view, an enquiry etc. The underlying philosophy of Facebook algorithms are serving content that have the highest probability of getting people to spend time on it (reading or watching a video), engage with it or in the case of an Ad, click on it.

From the above, we can infer that Facebook needs to keep getting better at just one thing and this is the North Star of every product manager at the company. To maximize anticipation and deliver a dopamine rush for every action on the platform. Whether it’s a mindless scroll through the newsfeed or waiting eagerly for reactions to you uploaded photo.

Feeding the Beast

So how does Facebook decide the content you’re most likely to interact with? By monitoring your every move — digital and physical. Every post you’ve ever made has been analyzed, the content being parsed by an AI-system to understand you better.

On their platform, they analyze each post — what were you talking about, who were you referencing, what was your emotional state and a host of other things. Each post has contributed to building a profile of your personality. After all, what you say is probably a reflection of who you are. Any content that you’ve liked, commented on watched or shared builds on this personality profile. When you check-in at a restaurant, you’re telling Facebook about your activities. Even spending an extra second looking at or hovering over a post could signify possible interest in the content.

Off their platform, they track activity on websites through Facebook logins, Like widgets and Facebook Analytics scripts. Recently, Ars Technica wrote about how Facebook had been scraping SMS and call logs from Android devices for years, exploiting the way earlier versions of Android handled ‘read contact’ permissions. Mark Zuckerberg recently admitted that Facebook scans Messenger chats for various reasons while pointing out that they didn’t analyze chats for their advertising platform.

A screenshot of a Wall Street Journal article about the cost of data in a simple social event like a pizza night. According to the privacy policies of Facebook, below is a list of some of the kinds of data that could be gathered. This is not an exhaustive list.

Using hundreds and, possibly, thousands of data points to build your personality profile, the contents of your Newsfeed are served with a steady release of dopamine designed to keep you hooked. If you’re interested in the mechanisms behind designing products that keep people hooked, Nir Eyal’s book Hooked would be a good starting point.

To get an idea of just how many data-points Facebook uses to determine what to serve you next, you ought to take a look at Dylan Curran’s tweetstorm.You could also read his article in The Guardian. Believe me, it’s just the tip of the iceberg.

The Advertisers point-of-view

Having been an advertiser on Facebook, it’s unbelievable the level of targeting that is possible. The basics targeting options of age, gender, location and other demographics are a given. I could target people with an interest in absolutely anything. I could pick between which device you used, whether you were on a mobile network or WiFi etc. It could differentiate between citizens and expats! I could target people based on their socio-economic classification of SEC A & SEC B.

Facebook allowed advertisers to reach audiences that were most relevant to their business, thus increasing the probability of engagement, click-throughs and, ultimately, conversion. The platform was focused on maximizing ROI so that advertisers allocated a large share of their marketing budget toward advertising on Facebook. The below chart illustrates some of the parameters you could use to target users. I cannot say if it’s a 100% accurate since it varies by geography and might be outdated.

So, who’s to blame

We’re finally here, at the heart of the problem. The path that Facebook took to become the $450 billion behemoth was inevitable. It couldn’t have survived if it weren’t feeding off of your data. Building a platform of scale required an intimate understanding of its users.

The price of convenience comes at the cost of giving away privacy.

And we were complicit in it. We knew what we were doing but we did it any way. To reiterate, while the Cambridge Analytica was an absolute breach of trust, it was bound to happen. Along the way, Facebook has made mistakes with product. The incident highlights the issue of platform granting too much data to developers of Facebook apps. Back in the day, it made similar mistakes with the Farmville’s of the world allowing users to send spammy messages to their great uncles and long lost friends alike. Sadly, what’s coming to the fore is that Facebook didn’t really care too much about these instances of misuse.

We gave away our data. It’s time we took a look at our habits. The price of convenience comes at the cost of giving away privacy. You could choose to get off the grid or succumb to our digital overlords. Perhaps the alternative is building decentralized platforms. A few people are trying to solve the problem — Mastodon is a good example. I haven’t quite yet dived into it, but I plan on exploring a few of them and will probably write on it sometime down the line.

Conclusion

We built the devil that is Facebook. Each of us individually contributed to what it is today. As a species we have, throughout history, been complicit in acting individually on our selfish motives and motivations to create monsters, whether it be dictators or market crashes. Our predecessors would have blamed it on the inability to communicate more effectively with one another. The irony is that we used, what is among the most advanced communication tools, to commit this blunder.

If you liked what you read, click/tap on the clap icon 👏. I’d love to hear your thoughts in the comments, or connect with me on Twitter, LinkedIn.

I’m working on a few pieces that might interest you: a look at a dystopian Ad retargeting option Facebook, Amazon,Google will soon exploit and a quick dive into how Google Maps will become a multi-billion dollar product. Do follow me here on Medium.