An open letter to Sundar Pichai and Sergey Brin of Google and Mark Zuckerberg of Facebook on auctions
Do forgive me for writing this open letter as I tried to get Mark Zuckerberg email address but Facebook tech support ignored my requests and I guess I would face the same problems with Google.
Before I mention anything let me take a step back to the period between 1979 and 1982. I was an Engineering student at Lanchester Polytechnic, Coventry, England. While there, the administration changed the name to Coventry Polytechnic. Many years later, after I graduated, it became known as Coventry University.
One day while trying to solve some circuit analysis problems I decided to use Gaussian Elimination to carry out the calculations. Those days we used paper tape, punch cards and mop terminals. I later began to print out the program and the results and submitted it to my lecturers. Soon after that one of my lecturers displayed my work on the Computer and Control Systems Department's notice board to say that he was submitting it for his Ph.D. thesis. Looking back I think he was trying to find out who I was and probably trying to share the credits with me as he could not match the name on my paper to a face of one of the students.
I kept quiet as I was afraid that I may be expelled from the course for doing something wrong. I had already dropped out of Bath University the previous year and could not take the risk of returning to Malaysia without a degree in something. This is because the Home Office had held my Malaysia passport the previous year until I was admitted into a course of study.
Looking back a whole industry sprang up out of this. I believe my lecturer's thesis started the electronic circuit analysis and simulation programs. This means that I may have been the one who started a new multimillion dollar industry in the West. Please do verify and approve or disapprove this claim.
The Great Recession of 2008
Do you remember the Great Recession of 2008? I wrote many articles on my website, drpetersnews.com, from 2009 to about 2011, to help President Barack Obama steer the USA out of the recession. I explained my theories on economics and revealed many of my mathematical models to do this.
I am a non-Muslim in Malaysia so I could not get any government grants to fund my research. Finally, after many years of solitary work I developed an Alternative Theory of Economics which was very mathematical and explained many economic behavior mathematically including predicting commodity and stock trends two to three years into the future. I was awarded a Doctorate in Economics by the Americans for this research work.
There are many charts on my website and there is even a prediction in 2012 that Brent Crude price could collapse in 2014. You can read my letters to then Prime Minister of Malaysia during the 1998 Asian Financial Crisis at pmletters to guide Malaysia out of the 1998 recession.
Let me quote Wikipedia on Auctions, "An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder".
During a recession the banks auction off properties where the loans are becoming non-performing. When no one buys the property the banks hold off for one or two months and then re-auction the property at a 10% lower price. They keep repeating this process until the price is very low.
I explained this to President Barack Obama and the American government that this process of auctioning would cause the property market to collapse and to stop the auction process to prevent the property market from collapsing.
Did you see what happens? They can't find a buyer so they reduce the price and they still can't find a buyer so they reduce the price some more. And they keep reducing the price as they can't find buyers until it becomes a worthless piece of property. This results in a price collapse everywhere and a collapse in the property market. During a recession there are hardly any buyers so why auction. Potential buyers will wait until the prices are almost worthless. This is the wrong approach. Let water find its own level.
When the next recession comes, and it will as my theories show that economies oscillate, don't let the banks auction off properties. Don't let the banks auction properties during a recession and the recession will not be that severe. It may even result in mild recessions.
What is the explanation on auctions worth?
Is my explanation worth anything? If I could put a monetary value to it what should it be? I quote Zillow Website "According to the report, the cumulative value of all homes in the U.S. declined by $6.4 trillion from 2006 to 2012 as the housing market collapsed." I have seen other reports that showed the drop from US$29 trillion to US$20 trillion. There are many different reports and this is probably due to how they do the calculations.
Even Malaysia banks are now following this understanding of not to push for too many auctions in one go.
If the banks did not auction off the properties they could have prevented such a huge collapse in the housing market. Now I propose that this explanation is worth about US$6 trillion, right? Let us see if it prevents the next recession from being severe one.
Tech engineers and scientist are facing the same problem. See Yahoo article, 60% of the tech workers can't afford to live in San Francisco. The landlords are going for the highest price they can get. It is almost like an auction without the auctioneer being present as they try to get the highest offer.
Watch the auctions of famous art or other stuff during normal times. During an auction prices keep rising until almost everyone runs out of money to purchase the product. Auctions keep setting new price records.
This is the danger of auctions - it swings prices to either extremes depending on the state of affairs.
The flash crash
Do you remember the flash crash of May 6th 2010? It is on Wikipedia at Flash Crash
I had explained this to President Obama and the American government. It was the same mechanism that occurred in the property crash during the Great Recession that was in operation here in the stock market in 2010. There were no buyers so the computer algorithms kept dropping prices to find a buyer. Since computers react within micro seconds the flash crash occurred within minutes.
Why did I bring up auctions?
Both of your companies use auctions to push the prices of advertisements up. The highest bidder gets to advertise on your media.
The last time I used AdWords must have been in 2015. Then the keywords were very expensive and some were more expensive then my product. I was and still am on a very tight budget. I could not keep advertising for very long.
Many people would like to advertise on Google and Facebook. Like me many of us are small time developers dreaming that one day we would develop the best product in the world, just like you guys did many years ago. Most of us are on tight budgets as we can't get investors until we show good sales. How do we show good sales? We need to advertise and let the whole world know about our products. Now here is the difficulty.
When you have an auction based system the highest bidder gets to advertise. What this means is that if a rich man and wanted to block his competitors, he could bid outrages high prices so that none of his competitors could pay the price of advertising on your systems. By doing this he blocks others from advertising. That makes it very difficult for new entrepreneurs to enter the market and only the rich dominate the whole system.
This is the danger of an auction based system.
Severe difficulties with Facebook
As for Facebook - I just don't understand Facebook. Many years ago when a friend asked me to join Facebook I joined. Then I did not know what to do so I did not use Facebook nor login for 3 years. Later I began to advertise on Facebook but I did not understand what I was doing. This year I took a course on advertising on Facebook carried out by a fellow Malaysian who explained Facebook advertising clearly to me. Then I found out that all these years I was only advertising my BRAND and not selling my products on Facebook.
When I started a new advertising campaign, a month or two ago, on Facebook with the Business Manager, Facebook blocked me and locked me out just for making some mistakes on my Facebook adverts. They said my business model was not allowed. I asked them what was not right about my business model and they kept avoiding the question. Mark Zuckerberg you can check out the communications I have had with your staff. I tried to be as polite as possible but they refused to tell me anything.
Facebook Case : #2008866642459625
Advertiser Account ID : 271802543399317.
I tried everywhere on forums and blogs for help but no one could help. Facebook staff kept quiet and would not answer my questions on their websites.
At first I thought that the staff were afraid that their bosses might scold them or afraid of being sued so they never replied. Then after reading entrepreneur's article I waited until 9 am California time which is midnight Malaysian time and found that there was no chat available. So I tried going through a proxy and I still could not chat with anyone. It then dawned on me that Facebook is not interested in helping non-Americans from advertising on Facebook. My God, my adverts did not target America but some other country. Now I am completely block by Facebook and they just will not allow me to correct my adverts.
Look at PayPal. They are so wonderful and friendly. They allowed me to make mistakes and to correct my work and my final PayPal processing back end works like a dream. They have PayPal sandbox for us to test out our programs and they even allow us to test our programs on their live system by 'selling' products which cost US$0.01. That is brilliant of them. I was so happy to deal with them that I explained the problems I found so that they could improve PayPal even further.
Facebook side tracked
I used to do door to door sales, under APPCO GRANTON, walking the streets to approach everyone to sell products. I may not be an expert but I do know something about marketing and sales.
What happened to Facebook? It was really good in the early days.
I remember in the early days I could advertise to 'WordPress bloggers'. Today it is impossible to do that as words like 'wordpress', 'bloggers' & 'blog' are blocked. Facebook allows advertising to categories like CEO's and what not, but not any real targets. If I wanted to sell my WordPress related programs will I sell it to CEO of NASA or Boeing? No, as they have no time for me and I would want to promote my products to anyone who has an interest in WordPress and especially to WordPress bloggers. I don't want to sell it to Joomla or Drupal users or car mechanics or maids or kitchen helpers, right?
Today you cannot use keywords like 'WordPress' or 'Bloggers' to describe your target market. You can only specify 'Internet Marketing'. What is that? The fact that I am using Facebook is internet marketing, isn't it? Who is my target market with 'internet marketing'? The moment you put an advert or write an article on a blog or on Huffington Post isn't that internet marketing? If I wanted to sell coffee I will want to target coffee drinkers not tea drinkers or whisky drinkers, right? Tech support never even thanked me for explaining this to them. Now I wonder whether it is really worth advertising on Facebook?
Please Mark Zuckerberg go back to the old system and please help your advertisers get their adverts out to their customers.
- Dr. Peter Achutha, 21 August 2018