Time for Facebook to move to a subscription model

Facebook moved further into virtual-good sales on Monday, with a micropayment platform that's no longer tied to the dollar, but rather points that can be purchased and earned.

This is a common enough scenario in virtual worlds and online games such as MapleStory, but the gamelike metaphor that this brings to social networking may introduce confusion and annoyance to the users who have made Facebook such a powerful force.

With more than 120 million users, perhaps a better move would be to start offering subscriptions. Personally, I would pay to NOT get certain invitations or for the simple function of not being forced to use the craptacular Facebook e-mail, especially considering that Facebook already has my address.

Slate's Farhad Manjoo lays out some logic behind a subscription model:

100 million people use Facebook regularly. Judging from some of the folks in my social network, a sizable minority of Facebook users have hundreds of "friends" and check into the site multiple times a day--call them superactive users.

Let's imagine that Facebook became a tiered service. A free plan would limit you to 200 friends, one status update per day, or some other nondraconian combination of restrictions. But for $5 a month, the limits would be lifted.

Certainly, many users would balk; tens of thousands would join Facebook groups to protest the new pay model. Let's assume that 95 percent of users will refuse to pay a dime. That still leaves 5 percent, or 5 million people, to pay $60 a year. That's $300 million in the bank.

I am a fan of virtual goods. I like the direct analogy of dollars equaling goods, even if they are not physical. I also think that they can provide a great revenue stream, when offered in the right environs.

Facebook definitely is the right place, but this new system doesn't make total sense. A micropayment system obscures the amount paid for the virtual good, and the true value becomes unknowable and therefore diminished.

For example, consider a dating site where someone can gift you a red rose for $10 or a daisy for $1. There is a clearly established value (and message where you communicate how much they are worth to you). Contrast that with a virtual gift that you earned from completing a puzzle. The gift may be the same, but the value is diminished, and the recipient may not be as thrilled.

It's hard to believe that with all that traffic, Facebook still hasn't figured out more revenue mechanisms. And the ecosystem seems to be faltering a bit as the company usurps applications and doesn't deliver on things like a payment platform, on which others can generate revenue and Facebook takes a cut.

A subscription offering wouldn't necessarily hurt traffic, and it would undoubtedly increase revenue. If we learned anything from the dot-com crash, it was that eyeballs don't equal dollars. Facebook needs to capitalize now, before it becomes a true utility with a diminished value.

[gopnick]

If Facebook starts charging users, they'll simply migrate to a free service. They have to make the ad model work.

[manos_sem]

Are you kidding???? As soon as facebook asks for one cent, they'll see a FLOOD back to myspace, friendster, or any other service. Trust me, people won't stand for it. There's nothing that says I NEED to use facebook, especially when I'm being held hostage.
They need to stick with their traditional revenue sources, and skip the fancy subscriptions. Nothing will ruin them faster.

[Harrison912]

I agree. I typically use FaceBook to socially market my safety and security web site and raise awareness for it's products. There are so many free social sites that most FaceBook users, even those who are there for marketing purposes, will simply migrate to one of the other free sites. Most of their friends will follow them.

[PaulTwo]

Think about it for a minute. Facebook is already making tons of money. Do you really think they would implement such a thing? You would see millions of upset customers who would simply delete their accounts. If you think people are ok with paying a $60 fee to use facebook then you are nuts.

[mike.loux]

I am a Facebook user, and if they pull any of that subscription tripe, I will be gone faster than you can say "competing sites".

[joshuajmaret]

That sounds like a great idea. People already hate the new facebook, so let's really test whether they think a service that is barely "good enough for now" is worth paying for. I just tried out myspace's new karaoke....if Facebook goes pay, I'd go BYE BYE....

[bourgtai]

One status update a day is non-draconian? Hi, have you heard of Twitter?

[Mr. Dee]

Facebooks real definition is not social, its more like useless, waste of time and something you easily get bored with. I rarely check my Facebook profile, only just to add new friends and leave. Traditional social networking tools will prevail, IM, E-mail and Forums. Facebook has also gotten too crowded. There are some people on it right now I am blocking and others I don't want to be friends with who are insisting to be friends with me because of ulterior motives.

[TV James]

The article right above this in this morning's CNEWS News Morning Dispatch:

|| Web freeloaders can breathe easy at Web 2.0 Summit
|| The freemium model makes more sense than ever in
|| this rough economy.

A subscription model is a stupid idea (hello, AOL). Social is not difficult and if they started charging, someone would come along and offer a free alternative. There are other ways to make money, but you need to get them in the door for free first and keep them coming back.

[spm82]

Facebook would need to offer some seriously powerful filtering technologies, anti-spam and other features (perhaps complete privacy and ownership of your own data?) in order for the freemium model to work.

For the people who are complaining that they would leave immediately, perhaps you should read the actual article. "Offering" subscriptions is not "forcing payments". This model has worked quite well for Flickr among other sites (1% pay for the costs of the other 99%).

[sanjaysarathy]

The question isn't whether social is difficult or not [per TV James' comment] but whether people find enough value in the Facebook experience to pay extra for specific features.

A valuable case study in this regard is deviantART which has a huge social community which was originally all ad-supported and recently introduced the notion of subscriptions for the small % of people who didn't want to get bombarded by ads and wanted access to "premium content". They've continued to service the free community while adding a revenue stream that subscribers are willing to pay for. It has been a win for all sides.

[daverosenberg]

@spm82--You are exactly right. My point is that the 1% would be meaningful revenue and not hurt the service.

I do find it amazing how adamant people are that everything should always be free. Why don't you want to pay for something that you find value in?

[askgees]

I would assume from the posts I've read that a subscription based service would destroy the company. Hopefully no one from Friendster is reading this board. If so then one would have to assume that their even laughing at the writer. His ideas are sad and considering the fact that Friendster has made millions of off a GOOD IDEA I doubt they would consider Mr. Rosenberg?s plan. Hopefully he doesn't persuade C-Net to start charging for his advice. LOL

[daverosenberg]

Do you mean Facebook? You are clearly a genius too.

[sting7k]

This is probably the worst idea I have ever heard. I don't even know what your talking about with facebook selling "virtual goods". As soon as any of these sites (myspace or facebook) charge for anything as a requirement you can consider me gone, probably the same with most of the users. College kids have no money, how are they going to charge?

[spm82]

This is not to mention, no stakeholder in a currently free web 2.0 company (Digg, delicious, facebook) would suggest the idea to require paid subscriptions. Even without existing competition, competitors can pop up so quickly that it would be instant suicide.

I have a feeling that ad revenue is not generating a world of profit for facebook. According to Alexa, 11% of global Internet users access facebook, and on average a user views 15-18 pages per day. That's a lot of bandwidth to serve up, and they do it very quickly.

WAKE UP, PEOPLE, and read the article. FACEBOOK WILL NEVER CHARGE FOR THE USE OF ITS CURRENT SERVICES. Freemium is the best current business model choice for affording to offer heavily trafficked consumer services to the large majority of users for free. The problem is that offering an ad-free service is not enough, thanks to great things like AdBlock used largely by tech-proficient browsers. Somebody has to help the business pay for bandwidth, and it makes sense for it to be the super enthusiasts and self-admitted "power users".

[kurgun09]

I recently joined Facebook and quite honestly I don't understand what people like about it. The interface is mundane, not user friendly at all, the site has no customization options for individual pages. The add friend feature is actually not too bad, but people join facebook not to network, but to just have their own little friendship circle. Does that make any sense? If you have local friends or people you know that live close enough to you to drive to them or say call them on the phone, why do they also need to be your facebook friends? People join social networking sites to do just that, network and socialize. So now Facebook needs to charge people or consider charging people for talking to the people that are local to them?

Makes no sense at all, the people I've already tried networking with all ask me, Do I know you? What difference does THAT make? Facebook, simple put caters to Yuppies that are too lazy to talk to their friends on the phone or drive to their friends houses to do stuff, simply put. 120 million yuppies all using the service, as of this writing I've deactivated my account because Facebook sucks as far as I'm concerned.

[knowles2]

"site has no customization options for individual pages"

This one of the key reasons why I used Facebook and why I gave up using Myspace and any other that allow people to customise their pages. People slapping full page pictures on their pages, or the god awful flower backgrounds, they make the pages virtually impossible look at, let alone read and enjoy reading.

So time giving people to much power is bad.

As to Facebook making money, it will do that by selling stuff to users, music, films downloads, games. virtual gifts , and showing adverts of their profiles. Unfortunately because Facebook is younger and smaller company it lagging behind in building these services compare to facebook. Fortunately for it is they have plenty of money in the bank from investers as well as income from adverts and so fourth to buy it time.

Pay subscription = people move on to a other site.

[kit_plummer]

Ok people. It is just fine if all you want is free, no worries. Just consider what you are doing to the already stale economy.

But anyway...I don't see what Facebook has to offer that is _worth_ paying for. I'd probably pay to get the pointless ads off my views. However, this is contrarian to the intent that I believe exists where I would pay, and still have to see ads. If you could embed Campfire-like features into Facebook, which my engineering teams use, then I could see potential. Unfortunately, there's nothing there that is close to a _useful_ application. It really is a shame...and maybe I'm mistaken. Until then Facebook can not convert social networking to commercial networking.