Twitter co-founder Biz Stone put forward an idea for Facebook yesterday, suggesting the social network offer a premium service at $10 per month.
What would users receive in return for their annual $120 fee? An ad-free social network, where “people who really love Facebook (and can afford it), could see no ads. Maybe some special features too.”
According to Stone, if 10 per cent of Facebook’s global users signed up, “that’s $1bn a month in revenue.”
So, could an ad-free subscription model, similar to music services like Pandora and Spotify, work for Facebook?
The short answer is no, with Arena Media’s Mark Holden explaining why.
“Biz Stone’s idea is interesting, but I doubt it will ever happen and am not entirely sure it could feasibly work at present given where Facebook is now. It’s worth saying that I think many users seem to find the wallpaper of advertising over Facebook annoying, occasionally intrusive, and at times a bit creepy, despite Facebook’s efforts to make ‘stories’ an integrated ad product,” said Holden. “The fact that a simple search for ‘annoying Facebook ads’ returns 29 million Google results is a pretty clear indication of this.”
But Holden believes Facebook is between a rock and hard place in terms of keeping advertisers and users equally happy: “Advertisers demand more visually impactful ads that users can’t easily ignore, which means an increasing number of ads in the newsfeed. And for their part users are prone to feeling that ads somehow ‘invade’ their newsfeed experience.”
He continued: “However, Facebook makes a bold promise on its login page - “it’s free and always will be” - and for that simple reason, I don’t believe they’d consider an ad-free premium version. If it were to happen, users would be confronted with a moment of truth: is it worth paying $10/month to remove the ‘creepy’ ads from a service they use regularly?
“I believe, faced with this kind of trade off, they’d continue to tolerate the ads that are there to save them money, because they expect the service to be free. But the most vocal users accept the tacit trade-off between data, advertising and access to a free service,” he said.
“The horse has already bolted – a paid-for option may have worked if launched some time ago when Facebook was in its novel, exciting, growth stage,” he added. “The reality is that there are other social networking options out there, and Facebook needs to remain free in order to retain its user base.”
Despite Stone observing that people are paying for an ad-free service, most notably on music streaming services - “of all Pandora’s revenue generators, the highest growth year-over-year by far (114 per cent growth rate) is in subscriptions” - Holden explains that online music services and social networks cannot function in the same way.
“Social networking is quite different to music subscription. Users are ‘trained’ to pay, in some form, for access to music. They have never been trained in the same way to pay for access to social networking,” he said.
However, Holden adds that it is perhaps to Facebook’s detriment that it didn’t embrace a ‘freemium’ model much earlier, limiting its reliance on advertising to monetise the site.
“But it seems totally committed to advertising as its primary source of monetisation, even when at one point Facebook credits and virtual currency seemed promising,” he said. “Given its position, it would be very brave to introduce a service that would effectively erode its advertiser proposition – when they need to do everything they can to fight for the increasing competitive share of social networking ad spend.”