Facebook is Not Quite a Sovereign State–But it’s Beginning to Tax Like One

August 3, 2010

With around 500 million users, Facebook has become the most successful and powerful social networking company in the world. So powerful in fact, that some are going as far as comparing the site to a nation state. An interesting article in last week’s Economist posits, “…Facebook is not quite a sovereign state-but it is beginning to look and act like one.” And by some classic definitions of the nation state, it is hard to disagree:

“[Facebook] is a device that allows people to get together and control their own destiny, much like a nation-state,” says David Post, a law professor at Temple University. If that sounds like a flattering description of Facebook’s “groups” (often rallying people with whimsical fads and aversions), then it is worth recalling a classic definition of the modern nation-state. As Benedict Anderson, a political scientist, put it, such polities are “imagined communities” in which each person feels a bond with millions of anonymous fellow-citizens.

In many ways it appears absurd to refer to ‘Governor’ Mark Zuckerberg and the ‘state’ of Facebook, but there is one aspect of the website that would legitimize that claim, the presence of taxes.

Recently, Facebook has developed its own online economy. Its virtual currency, known as Facebook Credits, can be used to purchase online applications and upgrades on its platform. But, of course, Facebook takes a 30% cut on every transaction involving credits.

Facebook’s 30% take seems to mimic a rather hefty sales tax. But as with any government tax, the tax collectors claim the revenue will be reinvested into the system for the good of the people. Deborah Liu, a member of the Facebook Developer Network Team, writes about Facebook’s 30% take,

“We are committed to investing heavily in the ecosystem and will explore a number of ways to improve the program and increase conversion and net revenue for developers, including user education and marketing, testing innovative ideas such as bulk discounting and seeding Facebook Credits to drive discovery and repeat engagement.”

This idea of paying a 30% tax has, no doubt, infuriated some Facebook citizens who do not fully appreciate ecosystem investments. In fact, they may want representation before being taxed in such a heinous manner. Someone should start a “group.”


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