Investor Argument Set 1 for Facebook value.

It’s grossly over-valued.
It won’t unleash corporate capital spending.
It doesn’t change much for Facebook insiders.
It won’t boost the overall venture financing market.

Investor Argument Set 2 for Facebook value.

Facebook is becoming one of the biggest sources and referrers of traffic on the internet—and on the internet traffic is money.
Facebook has oodles of data on you, including your identity.
Facebook is the biggest social platform.
Facebook is unstoppable because it has a network effect.

When you’re getting contrasting Arguments on the same thing at the same time from the same kind of experts, you know you are in a persuasion rich environment. Facebook is worth what I convince you it is worth!

Facebook could have paid both guys to write opposite Arguments just to keep things uncertain, ambiguous, and fluid. Confusion favors persuasion over information.

More sand! More sand! More sand!

Facebook could file papers for the IPO as early as this coming Wednesday, but that timing is still being discussed, said a person familiar with the matter. The company is currently looking at a valuation of $75 billion to $100 billion, this person said.

This from the Wall Street Journal. I will not be buying Facebook if only to maintain a foolish consistency between my public disdain for the company and my wallet. Please understand my concerns.

Facebook is a huge Reception/Exposure machine. Hundreds of millions of people look at Facebook everyday for several minutes. Anyone can place a message in that channel anytime with a high degree of targeting. Facebook delivers a lot of Exposure, but still not as much as the formerly great broadcast networks like CBS or even the great cable nets like ESPN.

People are still thinking that activities like Facebook are the new interpersonal, the new relational when it’s just another kind of technological device people use for communication. Sure, it can function as a relational or interpersonal tool and sure, some people might function relationally or interpersonally only through Facebook. But, the fundamental things like kisses and sighs will always apply: That’s why they are fundamental. Facebook is like phone sex and anyone who thinks that phone sex will triumph over the back seat of Your Father’s Oldsmobile understands neither technology nor human nature.

The persuasion problem with Facebook is that you get WATtapping, those tiny twitches of social meaning, mouse clicks. If you can tie your TACTs to WATtapping, Facebook makes sense. Music, ebooks, games. Sure. WATtapping TACTs.

However, if your TACTs require a larger behavior than “click,” Facebook is at best an adjunct to your main approach. I appreciate all the activist groups on Facebook and other social media, raising awareness for their cause and I’m sure they feel good about the experience. But, look at all the cases of failure. OWS. Al Gore’s Climate Day. George W. Bush selling his book.

If Facebook survives into the future it’s going to be more like the Dollar Store than Bloomingdale’s or even Walmart. Lots of penny transactions.

Facebook provides people with a sense of having a megaphone in a network, but look at the effects. Individuals and groups are not hitting large success with persuasive behavior change through Facebook. Any success is always confounded with many other huge factors. Take Arab Spring. Yeah. All those smartphones and twitter. The fact that the US Military has been on the ground since 2003 doesn’t make any difference at all. And, why no North Korean Spring? Cuban Spring? Why did Arab Spring take down the Pharoah and the Colonel, but still can’t remove the Dynastic Son in Syria?

Muggles love that Wisdom of the Crowd wisdom without thinking carefully about Crowds, Wisdom, and the actual outcomes. Add groovy new technology like an iGizmo in a cool social platform and the infatuation is complete.

I also observe the great live database of personal and social information that Facebook provides. Anyone who wants a snapshot or even a movie of people can acquire that from Facebook. It’s a fabulous surveillance and analysis tool. But realize that Facebook as marketing database is not Facebook as persuasion tool. Facebook is a research resource and not the actual persuasion play to achieve your TACT.

Finally, investors are sick of this slow market. S&P 500 is trading around 1300 which is 250 points under the 2008 high. Globalization is still popping along and while nearly 9 percent of Americans are unemployed, the 91% employed are working over time. We’re tired of fear and can’t wait for a greed market. If Facebook positions itself properly it could be not only the New New Thing, but also the start of the next great bull market. Wouldn’t you buy that IPO?

Thus, Facebook may well be worth $100 billion even if you can’t use it to persuade your spouse to give you a back rub. And that tells you something about the Moral Consequences of Peace and Prosperity, even in down times. When shared photo albums and back fence chatter is worth a hundred billion bucks, you know there’s a lot of fat out there.

Over a two week period, Facebook engineers would assign a Feed story with link to one person while randomly assigning two other people as a no Feed control.  They did this repeatedly for two weeks over the 250 million selected accounts.  They then tracked how the link got diffused through the friend networks.

Talk about a big data set.  Huge, Jerry.  Huge!  Here’s the key finding.  Click to enlarge.

Look again at those underlined values.  Those randomly assigned to get a news story with URL in their feed showed a diffusion rate of 0.191% while those in control showed a rate of 0.025%.

Make sure you understand those little percentages.  About two tenths of one percent diffused the link in the treatment condition.  Thus, not even 1% of treatment people passed the link along.  Not even one half of 1%.  Barely 2/10 of 1 percent.

You can read the paper which I found at scribd.com.  Given all the kinds of variables you can generate from a database this large, there’s more to the paper with lots of graphs, but they depend upon relative ratios rather than absolute effects.  When you read that Outcome paragraph just above what probably struck you first was that huge relative risk ratio of 7.37.  A Large RR would be 4.50, so this is absolutely Stupendous.  The rest of the paper focuses upon those RRs while blithely skipping past the absolute diffusion rate.  I remind you:

0.191%.

Please think like a maven here and not a muggle looking to move your 401k into the Facebook IPO. What’s the TACT here?  What’s the Change you want from the Other Guy? Clicking on a link with a mouse and forwarding it to your Facebook network.

I’ve derided the social media TACTs before as the smallest units of communication you can create.  Realize that this huge database quivers with the digital signals of the twitch, the click, the WATtap.  That’s all they collected.  A click.

Wouldn’t it be nice to see if this clicking behavior drove other behaviors?  Like going outside of the Facebook network and using email, phone, or, gasp, face to face contact with other people about the information?  Like making a financial contribution?  Like volunteering.  Like calling law enforcement with a tip?  Like any real world, practical TACT?

And, shootfire, even fooling yourself briefly into thinking a click is as fundamental as kiss or a sigh as time goes by, what diffusion rate do you get?

0.191%.

Mavens, recall the fabulous Al Gore Facebook day.  He made a great scarcity play with a one day extravaganza on Climate Change through Facebook and inveigled everyone to donate their network to the cause.  How’d that go?

0.004%.

All folks had to do was click once and Gore’s machine would do the rest to then propagate the Gore message to your friends.  One little click.  And he got 0.004%.

Sure, we are mixing different variables in the comparison between Al Gore’s project and the one reported here.  The Facebook experiment created a forced exposure while you have to go find Mr. Gore on Facebook that day.  But we don’t have good research on social media, so we’re stuck doing these mental comparisons of apples and oranges, bytes and packets.

Social media has proven itself to be a toy, a pastime for killing time, phatic communication par excellence, a quick and easy way to be quick and easy, social without being sociable.  Sure, imagine a big event like the assassination of JFK or the Challenger explosion and doncha know that Facebook and twitter would light up.  But, so what?  Where’s the TACT?  What’s the Change in the Other Guy?

WATtapping clicks.

P.S. For what it’s worth, this paper apparently has not been published in a peer review source.  It’s been submitted to the Cornell University Library at arXiv.org.  I suspect it will get published in a good peer review outlet given the experimental design in a natural, if virtual, setting.  My practical persuasion concerns remain.  Facebook is a failure for Changing the Other Guys.  Focus on the kiss and the sigh, mavens.

To pitch a prospective client for her ad agency, Amanda Zolten knew she a had to take a risk.  But the client’s product—kitty litter—posed a unique challenge.  Lucy Belle, Ms. Zolten’s cat, furnished the answer.  Before she and her team met with six of the company’s executives, Ms. Zolten buried Lucy Belle’s mess in a box of the company’s litter and pushed it under the conference-room table.  No one noticed until Ms. Zolten pointed it out — and the fact that no one had smelled it.

All’s well that ends well and this story ends in a reward for Zolten:  The coveted Heroic Failure award from her agency!  Her bosses are worried that the ad agency is getting too conservative and want to encourage risk taking with this award.  And, they gave this to Zolten without knowing whether she got the account!  Everyone’s taking a chance in this transaction.

So, where’s the persuasion, Steve?

In a crowded and excited conference room with agency and clients all buzzed up about potential business the fact that no one noticed a used kitty litter box hidden from view may not mean what everyone thinks it means.  We tend to think that we are aware, thoughtful, and intentional in our lives while much of the time we are running on habit, cues, and expectations.  Thus, normal human nature would take Zolten’s story and see her clever tactic without realizing that since that odor is so far out of habit, cue, and expectation no one noticed it.  If you had instead asked everyone in the room to give the air a good sniff and tell me what you smell, I think Zolten’s story would have ended differently.

Anyone with a good background in marketing knows that people wildly overestimate the power of their senses which is why Coke and Pepsi, for example, can make billions of dollars on their two brands that most consumers most of the time cannot distinguish.  A prior post on my experience with milk demonstrate the effect.  This is not to say that senses like taste or smell or touch have no effect, but rather people’s awareness of taste or smell or touch is incredibly variable and subject to all manner of situational influences that have little to do with the stimulus intensity and more to do with the limitations of human nature and cognition.

Now, if this doesn’t occur to the potential client, then Zolten may have run a subtle persuasion play based on the difference between human conceit (gee, I’m thoughtful!) and human nature (gee, this is a sharp conference room!).  Kudos Zolten.

And, if this doesn’t occur to her bosses, then kudos again, Zolten.

But, if it doesn’t occur to anyone, there’s no persuasion here.  Just confusion.  And the potential for future disaster.

There’s a Difference between Persuasion, and Smoke and Mirrors; With Persuasion the Illusion Lingers.

With no consensus among the delegates, officials at the International Telecommunication Union, part of the United Nations, kicked the issue into the future and sent it back to a panel of experts for further study. A revised proposal will be introduced no earlier than 2015. Mr. Beaird characterized the delay as “a significant step forward” and said that the burst of interestgreater prominence in surrounding leap seconds “should allow for a decision that will have the widest possible backing.”

One second. Every four years. People meeting. Plane reservations. Hotel stays. Itineraries. Parlimentary procedure. Votes to delay. For three years.