Facebook: Paid Model or Always Free?

A new poll from Greenlight says that Facebook users would be willing to fork over $10 or more per month to do their liking and sharing without the annoyance of advertisements. But would such a service be profitable?

According to Twitter co-founder Biz Stone — Yes, to the tune of some $12 billion in revenue per year.

Even so, moving to a subscription plan for social media presents a few problems, not least among them: How will businesses make use of social media for lead generation and customer retention if the paid model catches on? Will subscribers welcome corporate communications? Or will businesses and other organizations simply adopt other casual-style methods for reaching consumers – a choice that, in the end, might prove more negative than moving to a subscription model?

If it ain’t broke…

Greenlight’s survey polled just 500 people globally – a mere 10% of what is generally regarded as the minimum needed for a decently representative sample – and generated these findings:

  • 15% of users are OK with paying Facebook for an ad-free experience.
  • A majority of those users, 8%, say they’re willing to shell out anywhere between $5 and $10, or more, per month for that privilege.
  • However, nearly 70% of those surveyed indicate that they “never” or “rarely” click on ads or sponsored posts on Facebook.

With consumers evidently not much bothered by Facebook ads, there’s some concern as to whether interest in a customer-financed, non-ad model would be substantial enough to convince the social media service to offer it.

And that’s not all.

Greenlight’s COO, Andreas Pouros, says that Facebook faces a serious problem when it comes to “reinventing”advertising so that its users don’t feel as though they’re being constantly hounded by sales pitches. One possible solution? Incorporating video ads as part of its photo-sharing app Instagram, recently acquired by Facebook. And even though a re-designed News Feed feature has proved successful on mobile versions of Facebook, Pouros notes that

the conflict between user experience and driving more ad dollars loomed large. It did with AltaVista historically, who were then unseated in the search engine wars with a new upstart (Google), with a cleaner interface and better user experience.

In other words, you might be able to attract and keep users by offering new bells and whistles, but when those noisy features interfere with the overall customer experience, the whole operation might go the way of the tree in the forest that no one hears fall. (And which, as a recent t-shirt said, would still be the man’s fault.)

How much money, again?

Which brings us back to Biz Stone’s contention that an ad-free Facebook could fetch as much as $1 billion per month. His reasoning, as expressed in a blog post: “If 10 per cent of Facebook signed up, that’s $1bn a month in revenue. Not too shabby.”

Maybe. And maybe not.

According to Mark Holden, head of futures at Arena, the so-called freemium ship has already sailed. And there’s no sense at this point in chasing it over the open seas – though Holden adds that the idea might have worked while Facebook was in its early growth stages. With other social platforms providing more than healthy competition these days, he suggests, Facebook needs to remain no-cost in order to keep those users who joined when the service promised that it would always be free.

An article on the subject at The Drum quotes Arena as saying, “…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. The fact that a simple search for ‘annoying Facebook ads’ returns 29 million Google results is a pretty clear indication of this.”

And it makes little sense, Holden adds, to argue that because people are willing to pay for an ads-free version of, say, Pandora, that they’ll be equally willing to debit their accounts every month for the likes of Facebook.

“Social networking is quite different than music subscription,” Holden says. “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.”

Can “free” and “paid” co-exist? Anywhere?

So how does the paid model debate look to influence advertisers and consumers? Not to mention marketers? Arena’s Holden points out that Facebook is in a tough bind – with advertisers wanting more than smallish ads in the page margins, and users unhappy that sponsored posts are showing up in their News Feeds. To keep a healthy business model running, Facebook needs to address both sets of concerns without opting for a solution that alienates either side.

One answer might be for Facebook to shift to more of a customer-centric approach, where ads don’t appear as ads at all, but as messages that offer useful information to the consumer without demanding total attention. True, advertisers might not like such a squishy approach and, in theory, could pull their ad dollars under such a scenario. Likewise, users might regard any form of sponsored post as annoying and start blocking messages as well as those who send them. Either response would likely have negative consequences for Facebook.

It goes back to basics: What do consumers and advertisers see as the benefit of social media? If one side regards its use as gaining “something for nothing,” then it’s highly likely that the other side will feel as though it’s being taken advantage of. If, on the other hand, both sides can tolerate a little of the other’s reasons for using the service, and tailor their respective activities accordingly, there’s a good chance that a workable compromise can be reached that embraces the needs of most.

Much of this depends on the core values of Facebook itself. Can the service stay true to its original promise to users – always free, no strings attached – while finding room for advertisers and the money they bring to the table?

It all comes down to quality of experience over expedience of revenue generation. If Facebook can solve that, the paid versus non-paid model debate should answer itself. With plenty of “Likes” to go around.

Image via Sean MacEntee / CC BY 2.0

Pierce Mattie

Pierce Mattie is a full-service marketing agency that interacts with consumers and key stakeholders at every stage of the journey. With a focus in beauty, health and wellness, we are immersed in the marketing landscape, able to powerfully communicate a brand’s point of difference to acquire and maintaining customers. The content team is obsessed with what's trending in the digital world, and how it intersects with consumer behavior. We are passionate about the changing landscape of the world, including how emergent technologies affect brand attachment, how diversity and inclusivity are critical to success, and where humans fit into the equation.

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