The economics of digital sharecropping

Nicholas Carr writes: With a reported 900 million active members, Facebook is, by far, the largest digital-sharecropping operation that the internet has yet produced. About one out of every eight people on the planet sharecrops for Facebook today – and their collective labor is expected to put about a billion dollars of cash into CEO Mark Zuckerberg’s pocket when the company goes public in a few weeks. In a 2006 post, I explained why sharecropping is such a powerful business model for social networks and other online businesses:

One of the fundamental economic characteristics of Web 2.0 is the distribution of production into the hands of the many and the concentration of the economic rewards into the hands of the few. It’s a sharecropping system, but the sharecroppers are generally happy because their interest lies in self-expression or socializing, not in making money, and, besides, the economic value of each of their individual contributions is trivial. It’s only by aggregating those contributions on a massive scale – on a web scale – that the business becomes lucrative. To put it a different way, the sharecroppers operate happily in an attention economy while their overseers operate happily in a cash economy. In this view, the attention economy does not operate separately from the cash economy; it’s simply a means of creating cheap inputs for the cash economy.

Facebook’s most recent financial filing provides a great illustration of the “two economies” that underpin digital sharecropping. As Techcrunch noted, Facebook reported that it earned an average of $1.21 in revenue from each of its members during the first quarter of this year. [Continue reading…]

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