2000 – 2015, Surveillance, Smartphones, and Addiction by Design

1. Dot-Com Crash & Recovery

The dot-com bubble peaked on March 10, 2000. This period of market growth coincided with the widespread adoption of the World Wide Web and the Internet, resulting in a dispensation of available venture capital. Wikipedia

When the bubble burst, the wreckage was catastrophic:

During the dot-com crash, many online shopping companies like Pets.com, Webvan, and Boo.com, as well as several communication companies, such as WorldCom, NorthPoint Communications, and Global Crossing, failed and shut down.

Layoffs of programmers resulted in a general glut in the job market. University enrollment for computer-related degrees dropped noticeably. Wikipedia

Three years of companies and venture funds failing. And three years of less investment in and by venture capital funds. Without new investment, VCs and companies struggled to find their footing. Medium

What Survived:

As growth in the technology sector stabilized, companies consolidated; some, such as Amazon.com, eBay, Nvidia and Google, gained market share and came to dominate their respective fields. Wikipedia

The lesson Silicon Valley learned wasn't "build sustainable businesses." It was: "The winners take everything."

2. Google - Surveillance Capitalism (2004–2007)

A. Google's IPO: A New Business Model

Google's initial public offering took place on August 19, 2004. A total of 19,605,052 shares were offered at a price of $85 per share. The sale raised US$1.67 billion, and gave Google a market capitalization of more than $23 billion. Wikipedia

The Financial Performance:

Google's strong financial performance—reporting revenues of $1.5 billion in 2003, with profits of $400 million—gave them the confidence needed to proceed. UMA Technology

At $23 billion, Google priced at a trailing revenue multiple of just over 10. Google's PE ratio at the time was around 120. It was already profitable, and profitable revenue is worth more than unprofitable revenue. TechCrunch

The Advertising Model:

The AdWords program, which allowed advertisers to bid for keywords and display their ads alongside relevant search results, revolutionized online advertising. This innovative model not only propelled Google to financial success but also provided a sustainable revenue stream for countless businesses worldwide. Medium

Specifically, of the $84 billion brought in during Q2, 2024, approximately $64.6 billion came from advertising. Most ($48.5 billion) was generated by Google Search, with another $8.6 billion from YouTube and $7.4 billion from other advertising channels. SmartAsset

The Critical Shift:

Although Google was already deriving the vast majority of its income from advertising at the time of its 2004 IPO, it did not use any HTTP cookie-based web tracking until 2007. In 2007, Google agreed to buy DoubleClick for $3.1 billion, marking the start of its use of cookie-based tracking. Wikipedia

This was the moment Google fully embraced surveillance capitalism—not just showing ads, but tracking users across the entire web to build behavioral profiles.

B. The Birth of Surveillance Capitalism

Harvard Business School Professor Emerita Shoshana Zuboff coined and defined this new economic order:

"I define surveillance capitalism as the unilateral claiming of private human experience as free raw material for translation into behavioral data. These data are then computed and packaged as prediction products and sold into behavioral futures markets." Harvard Gazette

In her 2014 essay A Digital Declaration: Big Data as Surveillance Capitalism, she characterized it as a "radically disembedded and extractive variant of information capitalism" based on the commodification of "reality" and its transformation into behavioral data for analysis and sales. Wikipedia

The Four Key Features (identified by Google's Chief Economist Hal Varian, analyzed by Zuboff):

The drive toward more and more data extraction and analysis.
The development of new contractual forms using computer-monitoring and automation.
The desire to personalize and customize the services offered to users of digital platforms. Wikipedia

This architecture produces a distributed and largely uncontested new expression of power that I christen: Big Other.

It is constituted by unexpected and often illegible mechanisms of extraction, commodification, and control that effectively exile persons from their own behavior while producing new markets of behavioral prediction and modification. Association for Information Systems

The Extraction Cycle:

Surveillance capitalism relies on what's called the data extraction cycle: users generate data, companies collect it, algorithms process it, and predictive models sell it to third parties.

The cycle never stops—every digital interaction feeds it. CambridgeAnalytica

The Power Imbalance:

These have been declared as proprietary information produced from the free raw material of our experience.

We can't request this information, because we don't even know what exists.

These are not data that we gave, but rather information that has been inferred and computed based on the surplus extracted from what we gave. Centre for International Governance Innovation

3. Facebook - Surveillance Capital at Scale (2004–2012)

A. Facebook's Founding and Explosive Growth

Facebook was founded as TheFacebook in February 2004 by Harvard University sophomore Mark Zuckerberg and fellow classmates Chris Hughes, Eduardo Saverin, and Dustin Moskovitz. HISTORY

The Growth Trajectory:

2004: By the end of 2004, Facebook had a respectable 1 million monthly active users. The Motley Fool
2008: Facebook passed 100 million registered users in 2008. Wikipedia
2010: 500 million in July 2010. Wikipedia
2012: In October 2012, Facebook's monthly active users passed one billion, with 600 million mobile users, 219 billion photo uploads, and 140 billion friend connections. Wikipedia

The Revenue Model:

Access to Facebook is free of charge, and the company earns most of its money from advertisements on the website. Britannica
Facebook focused on generating revenue through targeted advertising based on user data, a model that drove its rapid financial growth. Wikipedia

B. The 2012 IPO: The Largest Tech IPO in History

When Facebook went public on May 18, 2012, it was one of the most anticipated IPOs in tech history. The company raised $16 billion, valuing it at over $100 billion, an incredible leap for an eight-year-old startup. Influize

The Financial Picture:

In early 2012, Facebook disclosed that its profits had jumped 65% to $1 billion in the previous year when its revenue, which is mainly from advertising, had jumped almost 90% to $3.71 billion.
Facebook also reported that 56% of its advertising revenue comes from the United States alone. Wikipedia

Zuckerberg's Wealth:

At the time of the company's much-anticipated IPO on May 18, 2012, Zuckerberg was worth some $19 billion. HISTORY

The Disappointing Launch:

Despite all the fanfare surrounding Facebook's IPO, its shares closed the first day of trading at $38.23, only slightly above the $38 IPO price, which many investors considered a disappointing performance. HISTORY

C. The Mobile Pivot: Surveillance Goes Everywhere

The Problem:

The filing noted that the company's increases in membership, as well as its incomes, were slowing and that the deceleration was likely.
Facebook was struggling to monetize mobile users. Wikipedia

The Solution:

In early 2012, the company launched its first mobile ads (Sponsored Stories), integrating them seamlessly into the News Feed.
These allowed advertisers to reach users in a more native and engaging format.
By the end of 2012, Facebook had over 680 million monthly active mobile users, which was a 57% jump from the previous year. Influize

During this time, Facebook's mobile advertising revenue grew from 3% of total advertising revenue to 41%. The Motley Fool

The Result:

By 2021, the company generated $114.93 billion in ad revenue, up 16.2% from the previous year.
By 2021, Meta's ad platform supported over 10 million businesses, contributing to $360 billion in global economic activity. Influize

What This Meant:

Surveillance capitalism was no longer confined to desktop computers.
Facebook buys data from third parties, gathered from both online and offline sources, to supplement its own data on users. Wikipedia
Now, your phone tracks you everywhere—your location, your purchases, your conversations, your photos, everything you do.

Facebook (and Google) knew more about you than you knew about yourself.

4. The iPhone Revolution: Big Brother in Your Pocket

A. The iPhone Launch

"An iPod, a phone, and an Internet communicator," Steve Jobs famously said on stage at Macworld in 2007 when unveiling the first iPhone.

"Are you getting it? These are not three separate devices. This is one device." Time

The original iPhone was announced by Steve Jobs on January 9, 2007, and it was released on June 29, 2007. It was priced at $499 for the 4GB model and $599 for the 8GB model. Seamgen

Why It Mattered:

Prior to the iPhone, mobile phones primarily featured physical keypads and small screens, with limited functionality and rudimentary user interfaces. The iPhone, however, introduced a large, high-resolution touchscreen display and a sleek, minimalist design that eliminated physical buttons in favor of intuitive, gesture-based controls. Thedigitalgrapevine

Before the iPhone, smartphones were mostly used for texting, calls, and email; more advanced functions were harder to use and inconvenient on a small screen. They were also hard to develop for, and lacked a thriving app ecosystem like the App Store (released in 2008). Wikipedia

B. The App Store: Platform Power

The launch of Apple's App Store in 2008 further cemented the iPhone's status as a game-changer, creating a thriving ecosystem for mobile applications and opening up new opportunities for developers and businesses alike. Thedigitalgrapevine

The Scale:

In July 2008, one year after iPhone launch, Apple introduced the App Store with 500 applications. This addition transformed iPhone from impressive device into revolutionary platform. Arthnova

More than 100 million applications (or "apps") were downloaded in the first 60 days after Apple opened its online iPhone App Store in 2008, and by January 2010 more than three billion apps had been downloaded from the store. Britannica

The Economics:

Developers kept 70% of paid app revenue while Apple took 30%, a split that compensated Apple for infrastructure while leaving developers sufficient incentive to invest in iOS development. By 2024, the App Store generated over $85 billion in annual revenue while paying developers over $1.1 trillion since 2008. Arthnova

The Network Effects:

The App Store created network effects that made iPhone increasingly valuable as more developers and users joined the platform. Developers targeted iOS because iPhone users spent more on apps than Android users, creating financial incentive for best developers to prioritize iOS. Arthnova

C. What Was Really Created: Permanent Surveillance Devices

The iPhone wasn't just a better phone. It was a tracking device that you paid for and carried everywhere.

Combined with Google and Facebook's surveillance capitalism model, smartphones became:

Location Trackers: Every movement was logged and monetized
Behavioral Monitors: Every app interaction was recorded
Attention Extractors: Designed to maximize "engagement" (addiction)
Data Generators: Cameras, microphones, contacts, and messages—all raw material for behavioral prediction

By 2012, with Facebook's mobile ads and Google's ubiquitous Android OS, surveillance capitalism was in everyone's pocket.

5. The 2008 Financial Crisis

A. The Crisis Hits Tech

In 2009, venture capital was down 50%. According to Dow Jones, Bay Area deals fell by 57%—a faster rate than the rest of the country. TechCrunch

The 2007–2009 period saw a reduction in the deal value of VC investments by approximately 25% in late and growth-stage deals and 35% in early-stage deals. GoingVC

The Market Pullback:

Median Series A financing size fell only 4% from 2008 to 2009, but Series A pre-money valuations fell 27% that year, to $7.1 million, essentially returning to the post-dot-com crash low. Median Series B size fell 14%, from $12.0 million back to $10.0 million, and median Series B pre-money valuation fell 27%, from $30.5 million to $22.3 million. Wing

B. But Tech's Giants Thrived

Unlike the broader economy, tech's surveillance capitalists grew stronger during the crisis:

Google: Already dominant in search, expanded tracking with DoubleClick (2007)
Facebook: Grew from 100M users (2008) to 1B users (2012) during the recession
Apple: iPhone sales exploded even as the economy collapsed

Why?

"Free" Services (funded by advertising) were attractive during a recession
Network Effects made it impossible for users to leave (everyone was on Facebook)
Mobile Shift accelerated as people spent more time on cheap smartphones than expensive activities
VC Flight to Quality: The "flight to quality" was back, most clearly evidenced by a spike in the "capital raised prior to" both Series A and Series B financings. This figure rose sharply for both Series A and Series B companies in 2009 after the global financial crisis. Wing

The Result: Concentration accelerated. The rich (Google, Facebook, Apple) got richer. Everyone else struggled.

6. The Prevailing Philosophy (2000–2015): Move Fast and Break Things

A. The Ideology of Disruption

By the 2000s-2010s, Silicon Valley had perfected its self-mythology:

"Move Fast and Break Things" (Mark Zuckerberg's motto until 2014)

What it actually meant:

Break Privacy: Track users without consent, apologize if caught
Break Labor Laws: Gig economy contractors instead of employees
Break Regulations: Uber, Airbnb—ignore laws, and fight them later
Break Democracy: Algorithms optimizing for engagement → radicalization, disinformation
Break Mental Health: Addiction-by-design, teen depression epidemic
Break Journalism: Facebook steals ad revenue, and the news dies

"Fail Fast, Fail Often"

Translation: Workers burn out, startups collapse, but founders and VCs walk away rich from the 1-2% that succeed.

"Data is the New Oil"

But unlike oil:

Users generated the data for free
Companies claimed ownership
No compensation to data creators
No environmental regulations on "data extraction"

B. The Zuboff Analysis

The stakes could not be higher: a global architecture of behavior modification threatens human nature in the 21st century just as industrial capitalism disfigured the natural world in the 20th.

Vast wealth and power are accumulated in ominous new "behavioral futures markets," where predictions about our behavior are bought and sold, and the production of goods and services is subordinated to a new "means of behavioral modification." Harvard Business School

At the level of the superstructure, we can see that surveillance capitalism's extreme concentrations of knowledge—and the power to modify behavior that accrues to such knowledge—reproduce the social pattern of a pre-modern and pre-democratic era, when knowledge and power were restricted to the absolute power of a tiny elite. Centre for International Governance Innovation

Meaning, Silicon Valley has created a superstructure that

They can track your every move and thought
They can 'modify' your behavior for profit
They can use the knowledge that they harvested from us to control society

7. How Silicon Valley Changed the US

1. Accelerated Wealth Concentration

Google IPO (2004): $23B valuation → many Google employees became millionaires
Facebook IPO (2012): $100B valuation → Zuckerberg alone worth $19B at age 28
App Store Economy: $1.1 trillion paid to developers (2008-2024), but 30% to Apple

2. Normalized Surveillance

By 2015:

Google tracked your searches, emails (Gmail), location (Maps), and video watching (YouTube)
Facebook tracked your social connections, likes, messages, and bought data about your offline purchases
Apple controlled the hardware you used to access all of it
Your smartphone knew more about you than your own family does

And People Accepted It because the services were "free."

3. Addiction-by-Design

Every click, scroll, or pause becomes raw material for algorithms designed to anticipate what we'll do next. CambridgeAnalytica

Features designed to maximize "engagement":

Infinite Scroll (no natural stopping point)
Autoplay (videos queue automatically)
Notifications (interrupt you constantly)
"Like" Buttons (dopamine hits)
Algorithmic Feeds (optimized for time-on-site, not user wellbeing)

4. The Gig Economy: Surveillance Capitalism Meets Labor

Uber, Lyft, TaskRabbit, and DoorDash—all launched in the late 2000s/early 2010s with the same model:

Misclassify Workers as "Contractors" (no benefits, no minimum wage)
Algorithmic Management (workers monitored in real-time)
Surge Pricing (extract maximum value during crises)
VC Subsidies (burn billions to kill taxis/restaurants, then raise prices)

The Promise: "Be your own boss!"
The Reality: Algorithmic bosses with zero accountability.

8. How Much Money Was Invested/Concentrated (2000–2015)

A. Venture Capital Flows

Post-Dot-Com Crash (2000-2003):

Massive decline in VC investment
Industry consolidation

Recovery Period (2004-2007):

Median Series A pre-money valuations increased 38% from $7.0 million in 2006 to $9.7 million in 2008. Wing

Post-Financial Crisis (2009-2015):

Venture capital down 50% in 2009. TechCrunch
But recovery faster than dot-com crash
Flight to quality → Google, Facebook, and Apple got stronger

B. Market Capitalizations

2004:

Google IPO: $23 billion

2012:

Facebook IPO: $100 billion
Apple: Became most valuable company in the world

By 2015:

Google/Alphabet, Facebook, Apple, Amazon, and Microsoft ("Big Tech") are collectively worth trillions

9. What We as a Nation Lost (2000–2015)

A. Privacy as the Default

Privacy must now be regarded as a collective phenomenon, and the work of interrupting and outlawing surveillance capitalism will require collective action and collective solutions. Centre for International Governance Innovation

Before surveillance capitalism, the default was:

Companies didn't track your every move
Your data wasn't sold to third parties
Advertising wasn't personalized based on behavioral profiles

By 2015, total surveillance was the norm.

B. Attention and Mental Health

The "engagement" algorithms caused:

Teen Depression Epidemic: Instagram's internal research (leaked later) showed it harmed teenage girls
Political Radicalization: YouTube/Facebook algorithms traps users in political siloes
Anxiety and FOMO: Constant notifications and social comparison
Shortened Attention Spans: Infinite scroll and dopamine optimization

C. Democratic Discourse

By 2015, Facebook's News Feed algorithm was deciding what information billions of people saw—optimized for "engagement," not truth. This set the stage for:

2016 Election Interference (Cambridge Analytica and Russian disinformation)
Vaccine Hesitancy (anti-vax content got more "engagement")
January 6, 2021 (Facebook groups radicalized QAnon believers)

D. Journalism and Local News

Facebook and Google Stole Advertising Revenue from newspapers:

2000: Newspapers thrived on classified ads, local advertising
2015: Facebook/Google controlled 70%+ of digital ad market
Result: Local newspapers collapsed, and being a journalist became a pipe dream

E. Labor Power

The "gig economy" pioneered by Uber/Lyft normalized:

Misclassifying Employees as Contractors
Algorithmic Management (surveillance of workers)
Race-to-the-Bottom Wages
ZERO Job Security

F. The Alternative We Could Have Built

If the talent, capital, and infrastructure that built surveillance capitalism had instead been directed toward:

Public Digital Infrastructure:

Public Social Networks: User-controlled, no ads, no algorithmic manipulation, and democratic governance
Public Search: Privacy-respecting, transparent algorithms, and no tracking
Public Cloud Services: Data sovereignty with no corporate surveillance

Cooperative Tech:

Worker-Owned Platforms: Drivers, delivery workers, etc. own their apps
Data Cooperatives: Users own and control their data, decide how it's used
Open-Source Mobile OS: No Apple/Google duopoly

Mental Health Protection:

Regulation of Addictive Design: Ban infinite scroll, autoplay, manipulative notifications
Algorithm Transparency: Require disclosure of how feeds are curated
Right to Disconnect: Legal protection for attention and mental health

Instead, we got:

Zuckerberg being worth $19 billion by age 28
Google/Facebook tracking everything
A teen depression epidemic
Gig economy exploitation
January 6 insurrection (radicalized on Facebook)