
How Facebook’s Oracular Algorithm Determines the Fates of Startups - SoftwarePatent
https://www.nytimes.com/2017/11/02/magazine/how-facebooks-oracular-algorithm-determines-the-fates-of-start-ups.html
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ballenf
How Facebook determines ad placement in news feeds:

> Millions of auctions take place every minute as users across Facebook load
> their feeds. ... The algorithm is constantly learning, using past results to
> inform how it weighs bids in the next auction. The intent, Facebook says, is
> to _maximize value for everybody: to pair the advertiser with its likeliest
> customers, and to show ads that users want to see_. And, of course, to make
> money for Facebook. [emphasis mine]

So FB wants:

1\. advertisers to be successful so that they come back and attract others;

2\. users to remain sticky and not be turned off or too distracted by an ad;
and

3\. sell each ad space at the highest price, so long as 1 and 2 remain true.

Interesting business they're in and an incredibly challenging (and
fun/rewarding) algorithm to code.

~~~
dingo_bat
I wonder where we'd be today if all this effort was focused on something like
automatic cars. Instead of spam.

~~~
sebleon
"The best minds of my generation are thinking about how to make people click
ads" \- original FB data scientist

~~~
klokoman
Because it is one of the few sectors where you can be a little creative and
not obey the rules set by corrupted bureaucrats decades ago

~~~
chii
And instead follow rules set by investors or corporate vested interests.

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AndrewKemendo
I think most people overlook the intelligence value that GAFAM + Tencent have
over nearly every other company on the planet. I don't know of any company out
there that doesn't use one or more services from these companies which means
you're giving them business intelligence about your activities even if you
never talk with one of their BD/CD people.

And make no mistake that business intelligence is absolutely one of the most
important things a big company (or nation) can have from a defensibly
perspective.

Speaking as a former spy it's a spy agency's dream to have the kind of data on
possible competitors and collaborators that these groups have. Individually
they can see every threat coming a mile away and then decide to ignore, buy,
invest.

This is why I think "this time is different" from a disruption cycle
perspective. Never in history have companies had so much intelligence on their
competitors and collaborators and actively used it to disrupt themselves -
multiple times. Don't get me wrong, companies have always done this, but never
at this level of granularity and specificity so quickly.

~~~
TheBiv
>>"...and then decide to ignore, buy, invest."

...and then decide to ignore, buy, invest or copy.

~~~
AndrewKemendo
True, though history seems to show that copy only happens after they aren't
able to buy or invest. It's much riskier from a business perspective to copy
than to buy usually.

~~~
finnh
Only for really big things like Instagram that have a network effect helping
them, and as such threaten the incumbent.

For smaller features / ideas, it's much less risky to copy than to buy a
company (for, say, 10-100M) and hope the acquisition goes well. Most
acquisitions don't go all that well.

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daveid
About a year ago I wrote an essay with this idea [1]. You really don't want
your company to be at the behest of facebook/twitter, they can pull the plug
on you, change their algorithms, change their rules, force you to pay up,
since they control the audience. This is why a platform like Mastodon [2] is
attractive (or should be attractive!) to businesses. If you host your own
instance of Mastodon, you have full control over your own megaphone.

And that's just the basic principle. Given that Mastodon does not attempt to
mess with people's feeds using clever algorithms, instead accepting that when
people follow someone they want to see those posts in chronological order, it
should be even more attractive to companies used to facebook hiding their
posts from their own fans unless they pay up.

[1]: [https://medium.com/@Gargron/two-reasons-why-organizations-
sh...](https://medium.com/@Gargron/two-reasons-why-organizations-should-
switch-to-self-hosting-social-media-9a1bbac45b69) [2]:
[https://joinmastodon.org/](https://joinmastodon.org/)

~~~
maksimum
There are many pros to a de-centralized and self-governing social network. The
con is the network effect working against it. So in whose interest is it to
push this network? You argued that businesses should, because Facebook might
cut them off in the future. But in the now Mastodon doesn't have customers.
Individuals may not like what Facebook is doing with their data, but
inconvenience is hard to sell. I'm genuinely curious how people think adoption
of decentralized social networks can be accelerated?

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tw1010
One day there will be a cottage industry focused specifically on exploiting
the edge-case behaviour of these algorithms. It doesn't matter that the
specifics of the algorithms are secret, there are always ways of reverse
engineering them. That's the whole point of statistical inference.

~~~
lithos
There already is looking at Russian ad campaigns during the election. and
youtube junk videos shown here
[https://news.ycombinator.com/item?id=15637504](https://news.ycombinator.com/item?id=15637504)

SEO is pretty much the same thing in my opinion.

~~~
ben_jones
50% of SEO is convincing non-technical users that they need to pay more for
SEO. I imagine this'll be much of the same.

~~~
walshemj
no 90% is persuading businesses that the marketing directors the site the pen
friend hi son built Is not fit for purpose.

Its even worse in big traditional firms took me 3 years at a major publisher
to get a simple dns redirect done

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sparkzilla
I'm surprised the author didn't mention that Facebook has a history of
screwing small business owners.

A few years ago I spent more than $4000 on Facebook to build up about 4000
fans for a karaoke venue I ran at the time. I'd put some news out, and reach
most of the fans. Then Facebook told me that to reach all of my fans I would
now have to "boost" my posts, while the company simultaneously _cut the
organic reach to the fans I had paid them for_.

They used the excuse that "people have to much stuff on their feed" but we all
know that is BS. If I had known they would have done that I would never have
bothered in the first place. Why help a company build its audience for you to
be treated poorly? I suspect many many small business people feel that same
way, and will abandon Facebook as soon as a less greedy alternative comes
along.

~~~
alexbeloi
>They used the excuse that "people have to much stuff on their feed" but we
all know that is BS.

It's really not BS. People's feeds are flooded with content from tons of
sources.

Why would posts from company that I've 'liked' get guaranteed display when
family/friends/friends-of-friends don't get that treatment. Moreover what if
I've 'liked' 100+ bands/restaurants/celebrities/businesses/news-sources, they
can easily produce enough posts each day that I would never scroll far enough
see all of it, nor would I want to.

The thing you want already exists and is called a newsletter.

~~~
sparkzilla
It's not really a choice between a feed tuned to extract cash from small
businesses and a newsletter though, is it? People were seeing my business's
posts without any complaint until Facebook throttled the reach. I was also a
Facebook user at that time, and didn't notice any particular problem either
from pages that I follow. Now we get to see what Facebook thinks makes the
most money for itself.

------
forkLding
I've used FB ads before for business purposes and I feel its a lot more
accessible to SMBs than your standard advertising agency or news media group
where you have to phone up, wait for a quote and then have not-so-transparent
results where you have to be constantly in touch with the news media
group/agency.

FB ads is definitely improvement in terms of the time spent and
approachability, cost on the other hand depends on how effective your
marketing is so its definitely more variable.

~~~
dhimes
One of the things these platforms do is allow you to optimize your message
quickly by gauging response.

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meterplech
One interesting thing to think about is how reliant Facebook is on startups.
If there is a wider reduction in VC investment, Facebook may be dramatically
affected (like Yahoo in early 2000s).

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denzil_correa
> And Facebook has even been taking steps to influence offline sales, in order
> to bring traditional retailers into its orbit. In September, the social
> network introduced a tool that lets businesses with physical stores show ads
> to shoppers and their Lookalikes even if they visit the store but don’t buy
> anything.

Does anyone know how this works?

~~~
flashman
"Facebook will also now know you visited a store based on a new feature that
matches GPS, beacons, WiFi, radio signals, and cell towers with brick-and-
mortar coordinates." [1] Basically harvesting data from your phone's sensors,
where their app is installed.

And: "A new Facebook API, called the Offline Conversions API, works with a
number of in-store sales systems from companies like Square and IBM to match
their customer data with Facebook’s advertising data." [2]

(More science-fictiony: they could broadcast a local audio signal that
fingerprints a particular location. Hmm, startup idea.)

[1] [https://techcrunch.com/2016/06/14/facebook-
knows/](https://techcrunch.com/2016/06/14/facebook-knows/)

~~~
JoshMnem
That's terrible. I hope that removing all of Facebook's software from a phone
and using cash prevents that. I hope you're joking about the audio signal.

~~~
jmgrosen
Not quite used for in-store advertising, but Google's "Nearby Messages API"
does use "near-ultrasound" audio signals to communicate with other devices:
[https://developers.google.com/nearby/messages/overview](https://developers.google.com/nearby/messages/overview).
I don't know if it would work at a larger scale, though (maybe you couldn't
allow dogs in your store!).

~~~
JoshMnem
Also used for other purposes. Consumers would never consent to it if they
understood it.

[https://www.wired.com/2016/11/block-ultrasonic-signals-
didnt...](https://www.wired.com/2016/11/block-ultrasonic-signals-didnt-know-
tracking/)

[https://arstechnica.com/tech-policy/2015/11/beware-of-ads-
th...](https://arstechnica.com/tech-policy/2015/11/beware-of-ads-that-use-
inaudible-sound-to-link-your-phone-tv-tablet-and-pc/)

[https://www.theatlantic.com/technology/archive/2015/11/your-...](https://www.theatlantic.com/technology/archive/2015/11/your-
phone-is-literally-listening-to-your-tv/416712/)

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pcmaffey
tldr; Outsource your relationship with your customers / audience at your own
peril.

~~~
lithos
I figured it would've been to use a second middle man in front of the first
middle man, since you won't stay sane the other way around.

~~~
taneq
Doesn't that just mean you have two unnecessary critical points of failure?

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Maro
Sounds like FB is using a multi-armed bandit approach:

[https://en.m.wikipedia.org/wiki/Multi-
armed_bandit](https://en.m.wikipedia.org/wiki/Multi-armed_bandit)

This appears to be non-news:

[https://teak.io/blog/2014/03/10/facebook-ad-
campaigns/](https://teak.io/blog/2014/03/10/facebook-ad-campaigns/)

