Two factors are going on. That result in the current social media gold rush.
# Factor 1
The first is the fact that the people who have disposable income already own more tangible items than the ultra wealthy of our cave dwelling ancestors did. In terms of value.
# Factor 2
Since people already own most of the tangible things needed to live a comfortable life, consumer focused companies need methods to find the specific consumers that are currently interested in buying tangible things, or who can be convinced to be interested. They then need to profile these people and then present them with messages engineered to elicit feelings of hope for fulfillment (I say hope, because often the fulfillment does not come). This is describing classic consumer research and classic advertising. This is currently a costly process*.
U.S. ad spending grew 6.5% in 2010 to $131.1 billion, according to new data from Kantar Media.
# The Result
A huge market has been created. A very real market. As an aggregate our private information and attention (market research & advertising) is quite valuable. Not to say this market is so vast it eclipses all others. Facebook is valued at over 100 Billion according to some. Selling tangible goods like oil or Apple products seem to still be larger than this market. So a few individual markets are larger than social networking market?
We live in a world where the ability to line people up, study then and then use psychological tactics to hook into their desires and wants, on an aggregate, is worth more than the products on an individual case are worth.
# An Analogy
If this is hard to wrap your brain around, think of this analogy. Imagine a world where the automobile, plane, boat etc were never invented and no roads exist. However a few Rail Road companies exist. The FB RR, the Twitter RR, Instagraam RR and the Pinterest RR company. The FB RR just bought Instagram RR. Companies like Coca-Cola sell tangible products (sugar water) And before the 4 mentioned Rail Roads existed Coca-Cola did quite well selling its sugar water. It has become a billion dollar business. By way of Pony Express (Television, magazines, research groups) many people have chosen to buy Coca-Cola. However, from its point of view it could sell more and hiring men to carry large sums of sugar water long distances on horseback is expensive. And worse now that Rail Roads are popping up in small towns competing companies such as Pepsi, Jones soda, etc are delivering their sugar water for cheaper.
The truth is if no Rail Road existed and no Pony express, you or I would be fine. We would drink water, we would tend our farm and trade carrots for apples. Which we would use to make apple juice. Evolutionary speaking we don't need Coca-Cola. And the heads of Coca-Cola know this. If they don't start paying the FB, Twitter, Instagram and Pinterest RR to ship their sugar water to local towns people will stop buying Coca-Cola. A billion dollar business is at the mercy of these 4 Rail Roads. But it’s not just Coca-Cola. There are millions of businesses in the same boat.
So yes, social networks provide intangible goods to you and I, however, to consumer focused companies they are essential for Sugar Water Co to be a billion dollar company in today's economy.
The result is a gold rush, and though you may feel morally against this gold rush, you can’t deny it’s not real money, real value being created. A better mouse trap has been built. It creates wealth. In this case this mouse trap tracks you, analyzes you and convinces you to spend your money on Sugar Water. This is a tanigable, valuable and desirable good to many rich people.
Because the parts of the economy providing food and housing take up a small fraction of the total work available to be done. The rest of the work (ie surplus) can go to one of three things:
1. "Storing food for the winter". R&D to prepare us for challenges we'll face in the future. Ex: alternative energy research. This sort of thing is extremely difficult to fund in a capitalist society. We need more of it.
2. Waste. Accounting and lawyering and sales and such.
3. Entertainment. Everything from movies to luxury goods.
If given a choice between 2 and 3, I'd pick 3 any day. I'd like for there to be more of 1, but I guess that makes me a socialist :).
I don't see any functional difference between a Farmville cow and a ceramic cow that sits on a mantlepiece. They have exactly the same practical use, but one cost way more energy to produce than the other. My argument for how Farmville will save us from global warming is a post for another time.
tl;dr: Value is what the market says it is, not what you say it is.
Have you ever met an accountant that gets up in the morning excited to get to accoutning? Have you ever heard someone say: "Today is my lucky day! I get to go see my accountant!"?
I'm not saying they're not necessary. But if the economy were a mechanical system, law and accounting would be the friction between the belts and the wheels that produces waste heat.
This may sound crazy, but there are people drawn to accounting or insurance who are simply numerate, who love numbers and precision and carefully designing rules that accomodate the fascinating special cases of the real world, and who do enjoy that kind of work. It sounds dreary and gray, and we like to scoff at it as bean-counting, but it does appeal to a certain detail-oriented mindset that isn't all that far off from some forms of engineering.
Here's another view: Accounting is the instrumentation that lets you make sure the machine (the business) stays calibrated, and that the inputs match up to the outputs.
Correct me if I'm wrong, but fluff and entertainment has a much lower barrier to entry than tackling real, tangible problems. Writing software is "free" in that I can sit and code for a few months in my free time, and put out a halfway decent game or piece of "fluff" software as you call it. Inventing the next battery technology, on the other hand, requires several PhD's and millions in funding.
Because heavily regulated industries are much harder to disrupt. The risk and barrier to entry to medicine, food/nutrition, finance, etc. is very high mainly due to heavy regulation and cronyism.
I don't hope it does. I'd rather we have fluff made of ones and zeroes that costs virtually no marginal energy to produce than fluff that you have to ship from China at great energy expense. Unless you live in a tent and eat nothing but cornmeal, tofu, and nutritional supplements everything you own is fluff.
There's plenty of action occurring outside of consumer Internet, but it doesn't get much coverage on general interest sites like HN since we need specialized knowledge to understand why those companies are interesting, special and valuable.
# Factor 1
The first is the fact that the people who have disposable income already own more tangible items than the ultra wealthy of our cave dwelling ancestors did. In terms of value.
# Factor 2
Since people already own most of the tangible things needed to live a comfortable life, consumer focused companies need methods to find the specific consumers that are currently interested in buying tangible things, or who can be convinced to be interested. They then need to profile these people and then present them with messages engineered to elicit feelings of hope for fulfillment (I say hope, because often the fulfillment does not come). This is describing classic consumer research and classic advertising. This is currently a costly process*.
U.S. ad spending grew 6.5% in 2010 to $131.1 billion, according to new data from Kantar Media.
# The Result
A huge market has been created. A very real market. As an aggregate our private information and attention (market research & advertising) is quite valuable. Not to say this market is so vast it eclipses all others. Facebook is valued at over 100 Billion according to some. Selling tangible goods like oil or Apple products seem to still be larger than this market. So a few individual markets are larger than social networking market?
We live in a world where the ability to line people up, study then and then use psychological tactics to hook into their desires and wants, on an aggregate, is worth more than the products on an individual case are worth.
# An Analogy
If this is hard to wrap your brain around, think of this analogy. Imagine a world where the automobile, plane, boat etc were never invented and no roads exist. However a few Rail Road companies exist. The FB RR, the Twitter RR, Instagraam RR and the Pinterest RR company. The FB RR just bought Instagram RR. Companies like Coca-Cola sell tangible products (sugar water) And before the 4 mentioned Rail Roads existed Coca-Cola did quite well selling its sugar water. It has become a billion dollar business. By way of Pony Express (Television, magazines, research groups) many people have chosen to buy Coca-Cola. However, from its point of view it could sell more and hiring men to carry large sums of sugar water long distances on horseback is expensive. And worse now that Rail Roads are popping up in small towns competing companies such as Pepsi, Jones soda, etc are delivering their sugar water for cheaper.
The truth is if no Rail Road existed and no Pony express, you or I would be fine. We would drink water, we would tend our farm and trade carrots for apples. Which we would use to make apple juice. Evolutionary speaking we don't need Coca-Cola. And the heads of Coca-Cola know this. If they don't start paying the FB, Twitter, Instagram and Pinterest RR to ship their sugar water to local towns people will stop buying Coca-Cola. A billion dollar business is at the mercy of these 4 Rail Roads. But it’s not just Coca-Cola. There are millions of businesses in the same boat.
So yes, social networks provide intangible goods to you and I, however, to consumer focused companies they are essential for Sugar Water Co to be a billion dollar company in today's economy.
The result is a gold rush, and though you may feel morally against this gold rush, you can’t deny it’s not real money, real value being created. A better mouse trap has been built. It creates wealth. In this case this mouse trap tracks you, analyzes you and convinces you to spend your money on Sugar Water. This is a tanigable, valuable and desirable good to many rich people.