Although Facebook user numbers are continuing to increase, European users by over 300% alone, people are still asking the question of how Facebook can truly monetise it’s service.
The cost of running such a service must be massive, and although Facebook haven’t released figures, the $1million+ they spend on electricity each month goes some way to detailing their outgoings.
Microsoft acquired a $240million stake in Facebook in late 2007, that stake valued the company at approximately $15billion. However after trouble finding ways to make money through the service, chief executive and creator of Facebook Mark Zuckerberg has found the valuation of the company declining alarmingly. It’s reported that Zuckerberg recently turned down funding which valued the company at $4billion, and that a possible new investor has gone in at an even lower $2billion valuation.
This is worrying for Facebook, and potentially it’s users as Facebook look for new ways to make money through it’s service and attract new investors. It already has a comprehensive ad placement structure in place but it seems that with so many new users flocking to Facebook every day, that the ad structure is buckling under the shear weight of new and existing users.
Perhaps the most obvious way of making money through the service would be to charge users a fee for using the service, with over 100million active users using Facebook this could mean a hefty chunk of ‘additonal’ income for the company and ease the worries of declining valuations.
While the thought of paying for a once free service will inevitably irk some (or more than likely most, if not all) users, there are some interesting approaches to a paid Facebook service, most notably a tiered access system. Facebook would then consist of tiers allowing several levels of restrictions i.e. the free basic level would allow for up to 200 friends, one status update a day and a very small message capacity. For $5 a month those limits would be lifted meaning that many occasional users would be unaffected.
Of those 100million active users, if even 80% were to leave the service or at least keep using the basic service that would still leave approximately 20million people paying $60 a year, meaning an additional $1.2billion in possible revenue. However a reduction in the number of users to Facebook, even with the introduction of paid members, could see a decrease in advertising revenue with potential advertisers concerned at the reduction of those potential customers.
Facebook have denied this at every opportunity and has shown no signs of implementing any kind of paid service, however what is clear is that the service is beginning to stagnate and much like Twitter, is struggling to make money through their massive user bases.
So we ask, how much would you pay to use Facebook?
Here are some opinions from the Union Room and Projector team…
Paul Arnold: I personally wouldn’t pay a penny to use Facebook. They get enough finance from me in the form of advertising revenue, forcing me to pay a subscription would turn me away. I’d use the cut down free service or move onto another site altogether.
Jon Park: I probably wouldn’t. I might keep the free one just to keep in touch with other people on there but, being in the industry, build my own homepage and use that instead. I’m on the verge of doing just that simply because I don’t really use Facebook any more, but that’s another issue.
James Machin: Personally I wouldn’t pay for Facebook – I don’t find it that useful other than catching up with what friends are up to!
Phil Lowery: I would pay to keep my membership if everyone I knew did so too.
If I could have an ‘inner-circle’ of 200 friends then it would be fine for me as I don’t have over that now. And, I’d certainly not need to update my status anymore than that so it’s hard for me to say how much I’d pay – but if there was no inner circle and I had to pay a subscription to join then I think about £30 a year – no more.