A Blog by Jonathan Low

 

May 13, 2018

What Might A Paid Version of Facebook Look Like?

There will be some erosion - maybe a lot - but would the substitution of 'qualified leads,' eg people willing to pay, be more valuable than the 2 billion lurkers currently?

Paid cable tv, which morphed into a paid internet model, may be instructive. JL


Alex Salkever reports in Fortune:

Facebook has the one thing that every business wants: 2 billion users. But it needs to sell those users more things and make them the customers rather than product. And the best way to copy the successes of other tech companies where users are used to paying cash for online services. (And) it’s possible to envision Facebook as a competitor for the same original programming eyeballs as Netflix, and asking the same price for subscriptions. Then there’s the giant social elephant in the room: the workplace.
What would a paid version of Facebook look like? That’s a question I have been thinking about for the past year as I have become weary of the ads, incessant interruptions, and attempts to get me to post pictures and like posts on the giant social networking platform. I would pay for Facebook. Gladly, in fact. I even think Facebook could fix its data privacy issues by charging users. But I might be in the minority. It is very hard to flip a core product from free to paid without chasing off users. But that doesn’t mean there might not be other ways Facebook could make money off new and related activities.
We got a glimpse of that potential future with the announcement of a Facebook dating app at the F8 Conference in San Diego. Indeed, Facebook has the one thing that every business wants: 2 billion users.
But it needs to sell those users more things and make them the customers rather than product. And the best way to do that is to do what it’s already been doing: Copy the successes of other tech companies where users are used to paying cash for online services. Facebook has already done this with Messenger, a clear clone of WhatsApp, and with Instagram’s “Stories” feature, which was copied from Snapchat (snap, +0.00%). (In fact, Facebook is even copying more features internally from Instagram, which still operates as a largely separate subsidiary.)
A dating service is a perfect example of something Facebook could add on seamlessly and make money off of. Facebook has said it will not put ads on its dating applications, but has not ruled out charging for the service. It has no history of offering a dating app, so it’s starting from a clean slate and can charge users for it without turning them away. Facebook also has better user interaction data than anyone else on the planet. Users change their status from married to single on the platform already. It could use a Freemium model—much like Tinder or Bumble—to have users pay for a certain number of swipes or a certain number of messages. In fact, Facebook could be both Tinder and Bumble—a “woman makes the first move” setting could be one that’s available to users. Facebook is unlikely to put ads into its dating apps because it would make the app unpalatable to the legions of Tinder, Match.com, and OKCupid users who are allergic to ads. Videos, a la Netflix (nflx, -1.06%), are another good line of possible revenue streams. Netflix and Hulu have taught users to pay for their videos. Google (goog, -0.06%) is experimenting with a cable television-lite bundle sold through YouTube as well as an ad-free version of YouTube. For Facebook to order up original programming, it would need to commit real money like Netflix has done. But it’s quite possible to envision Facebook as a competitor for the same original programming eyeballs as Netflix, and asking the same price for subscriptions. Facebook has some original video on its “Watch” tab, but has not really put significant effort into this product—and has actually said it would be shutting this down. Given how video-happy Facebook’s userbase is, that seems insane. But perhaps if Facebook is willing to look at the world through a paid lens, more like Amazon (amzn, -0.36%) and Netflix, then investing some money into premium content that users need to pony up to access might make sense.
In addition, Facebook could and should be charging nominal sums for photo and video storage. Apple (aapl, -0.39%), Amazon, and Google all do this. It’s a total blip to pay $3 per month for that service. The cost of memory continues to plunge. Facebook should ride this wave and charge a nominal fee, such as $3. That amount across 2 billion users adds up to a lot of nickels and dimes—even if the fee is levied only for users in the developed world that can afford to pay (for the most part).
Then there’s the giant social elephant in the room: the workplace. LinkedIn has been the anti-Facebook in its aggressive attempts to monetize users directly. But LinkedIn is a source of great frustration for many who dislike the limitations on search results and the stiff annual price for LinkedIn Premium. (You can’t actually message other LinkedIn users that you are not connected to without paying for Premium.) Facebook has made noises about moving into LinkedIn’s turf. Maintaining an active presence on both platforms is inefficient and time consuming. Facebook already has a lot of our work information. With a simple resume upload, it could create work-only profile pages with similar functionality to LinkedIn, but at lower prices, and still remain highly profitable because of its far greater number of users—which serves as a ready pool of Facebook work network users. And because Facebook can see across the web of work and social contacts, it could be perhaps even more useful.
A case in point: Recently I needed to reach someone with certain connections in Hollywood. I had people like that in my LinkedIn network, but the connections were weak and I was reluctant to ask for a favor from people that get barraged by them. On Facebook, I remembered that a high school classmate was actually in the business and tangentially related to my ask—they would probably know someone. And that was a far more comfortable ask, as well. In other words, both the broader overview across our entire social network and, in many cases, the higher fidelity of the degrees of separation can be extremely useful in achieving better connection results than LinkedIn.

To that end, Facebook is pushing significant resources into its Workplace product, a social network and chat application designed to take on the
segment leader Slack. This includes Facebook building out partner and channel sales programs and stepping up integration with third-party applications. Facebook already sells its social network as a workplace tool. But as yet, Facebook hasn’t put its sights on LinkedIn. Considering the obvious overlaps and the willingness of LinkedIn users (and recruiters) to pay big bucks for enhanced access and features like InMail messaging, this could be an easy way to keep the existing social network very cheap or free, but use the benefits of the social side to build capabilities for workers and employers.
Collectively, these sorts of initiatives could add tens of billions of revenues to Facebook over time and they would, in theory, work closely with or even enhance Facebook’s still dominant free platforms. Just as important, these might allow Facebook to start to move away from its difficult, long-term position of selling highly targeted ads based on super granular data culled from its users social connections and activities. That would put Mark Zuckerberg in a far stronger position over the long haul—and would align the company more closely with its users’ best interests.

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