Facebook claims to have 160MM users worldwide. If this is the case and 30% decide on the subscription model at $5 a month, thats, $2,880,000,000 in revenue. Facebook in fact only needs 3.5% of their current users to make the $300MM revenue, suddenly a 5% retention is looking better...or am I wrong...comments please?
Wednesday, January 21, 2009
Facebook - Can you live without it?
So as many of you know, I live on Facebook. It is constantly an open page on my desktop. I have come to rely on Facebook as a communications hub for all my friends. Facebook doesn't make any money, it's loosing bucket loads of cash through a frightening monthly burn rate and is only projecting, ($300MM), in revenues this year. Here is an open question to anyone who might read this...if it were a choice of Facebook going away, or paying $5 a month for it, would you pay the $5 a month...I would.
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Interesting Idea.
ReplyDeleteMalcolm:
ReplyDeleteYou make good sense. I too, live on Facebook, as does my wife, a reluctant convert, but now a fierce fanatic. At the risk of sounding a bit ridiculous Facebook has changed our entire communication structure. It is central to our 40-something lives, and central to the life of almost all of my 40-something friends. This is a very powerful fact, not just in and of it's reach, but in it's reach to a wide sampling of demographics. I am even beginning to feel I am even beginning to see it creep upwards to my parents generation.
I mention this not as merely anecdotal evidence of a good idea, but it is evidence of a wildly successful product that insidiously inserts itself into the core of your personal communication, and it continues its conversion of young and old(er).
So yes, if a subscription mode was imposed, I do believe I would pay it, and my wife would pay it, and I would pay for my kids to have it (I see a 'family plan' in the works here), but we have seen too many online subscription models wither and die, dragging down users of venerable online cornerstones of users (you can fill in the blanks here). I say let Facebook rise to the challenge to create a revenue model that wrks without subscription. They have a fanatical user base that will most likely toerate anything and everything. Sponsor every corner, every application, every function up and down... double, triple, quadruple the advertising... I doubt that the addicted will take offense... or create some as yet untested model that is a combination of those things plus more. They have the numbers, they should use them.
And if none of that works, well I would hate for it to become cable TV, but it very well may just be headed in that direction. With all of my thoughts notwithstanding it may just be inevitable.. Because as we all know... social nets are the new portals, and who doesn't (didn't) love a good portal...
Check out this article from Business Week:
http://www.businessweek.com/technology/content/jan2009/tc20090121_557202.htm
...Josh Mutchnick
I would love to see Facebook grow their revenues without resorting to a subscription base, but not sure it will happen. They are attracting network CPM's because of lack of targeting. I would put up with more advertising...would love to see a solution, however the big question is, if they did go subscription it would have to be all or nothing and that is frightening. Thanks for your post :)
ReplyDeleteWhile I agree with what has already been stated, the fact of the matter is that it's nearly impossible for a business to go from an offer of FREE to one of a recurring payment (see AOL churn rates for reference).
ReplyDeleteThat said, the main reason that Facebook has become so central to people's lives is that it has attained the holy grail of ubiquity... just about everyone is on it, so therefore in a a social networking context, it's the place to be!
Once recurring payment is required, I think we'll find that the masses will move on to the next free venue along the line. Again... see AOL as case study... as soon as there were better/ faster options and ubiquity was lost, there was no reason to stick around.
Thanks for the post Mal! - Kris
Very astute observations Miss Stevens, and indeed you're right people abandoned AOL in droves, but AOL never had the ubiquity that Facebook had for it's social pages, (I forget what they ended up calling it, it changed three times or so lol). The whole question is...with all of your friends on Facebook, would you pay...now remember if they had a 6% retention rate, from a business point of view they double their current earnings.
ReplyDeleteI second the note about Facebook becoming central to your relationship management. If they added a layer of tools that allowed you to more actively manage your reltaionships - turning it into a utility for strengthening bonds, generating business and discovering new friends- then I could see that as a subscription upsell (Facebook 'Pro'). That way they can keep their wide casual user base- do you think that 5% of the users would go Pro? I probably would, but I work in the field.
ReplyDeleteI like the idea of Facebook Pro
ReplyDeleteThe main attraction of FB is being connected to all of my friends/relationships. So if they changed to a subscription model and only 5% of my friends ponied up, then what would be the point of me continuing to use it?
ReplyDeleteOn a separate note, FB has definitely crossed generational lines, at least in my experience -- I'm connected to my teenage nieces as well as to my 70-something parents and in-laws (and the latter are nearly as active on FB as the former).
I think it's an interesting idea to charge a monthly subscription but I agree that it would have to have more value to it for me to actually pay for it. I am finding it very central to my everyday and just like you, it is always open on my desktop.
ReplyDeleteI think it's a little bit like AIM, e-mail and TV...we all take it for granted but life would really suck without it. I think it's a fun debate.
ReplyDelete