Why Facebook Will Charge Users
Our standard in journalism school was The New York Times. Articles and long-time columnists at The Times were put on a pedestal that only the very best and brightest of my classes could even dream of reaching. For those on the print track, you wanted a byline in The Times and for those on the public relations track -- like me -- you wanted to be quoted about your client in The Times.
I purposely avoided the documentary "Page One" about The Times. I didn't want to consider the notion that such an institution was potentially on the precipice of collapse. When the documentary was added to Netflix streaming, I added it to my queue. I had avoided it long enough.
How This Relates to Facebook
Listening to editors and staff writers at The Times talking about the paper with the same reverence I had and interviewees listing off possible reasons for its demise, my mind wandered to Facebook.
Could the same reasons that The New York Times opted for a pay wall lead Facebook to start charging its users?
Here's why I think it will happen.
1. Ad Revenue Will Dry Up Facebook is going to have to innovate to keep from facing the same problem The Times had -- ad revenue drying up.
For The Times, preferences changes and print circulation dwindled as their core readership aged and other sites like Craigslist came in to vulture the classifieds market right from under The Times' nose.
For Facebook, it is already trying to battle studies that find that younger web users flat out ignore the right side of webpages thanks to years of similar ad placement.
As ads are ignored and other social platforms like Twitter give advertisers access to more premium space - like promoted tweets in a user's tweet stream -- Facebook's ad platform just seems flat out ancient. Just as at The Times, Facebook needs to freshen up its ad platform or risk losing out to competitors stealing advertisers with cheaper rates or better placement.
If ad revenue dwindles advertising, charging users for a premium service or premium options -- as The Times does, charging users to access the paper on their preferred channel -- might be in the cards.
2. A Rapidly Greying Audience I just saw an infographic from JESS3 that blew my mind. In 2008, the average age of a Facebook user was 33. In 2010, it was 38. From a platform that just six years earlier was populated primarily by 18-to-24-year-olds, that is a heck of a leap.
This is a concern for two reasons.
The first being that Facebook used to be the best place to reach young people. Now it is a place to reach everyone. It's losing its exclusive youthful edge. To advertisers and marketers, if you are competing for the same mass group of users that you can get elsewhere, then you are going to start looking at other options -- maybe more niche or less expensive -- to reach your user.
The second being that generational habits will change. Just as the majority of my generation is more comfortable getting their news online -- an issue The Times faced before erecting a pay wall on their website recently -- future generations may not want to use Facebook.
Without an exclusive, youthful audience, advertisers may look elsewhere. And older users -- with more disposable income -- may be willing to pay to stay in touch on Facebook.
3. Facebook Has a Lot of Addicted Users Entrepreneur Sean Parker said they went about the Spotify launch like a drug dealer. Give users a little bit for free and if your product is good, they'll be hooked and come back willing to pay. I am listening to ad-free music on Spotify Premium as I type this.
Right now, there are a lot of people who are painfully Facebook addicted.
They upload photos, share their location via check-ins, and comment and like posts on Facebook as if they literally have nothing else to do. They would find life drastically changed without access to the Facebook platform. And if Facebook doesn't innovate with this data quick enough, the ads will be ignored no matter how relevant.
Right now, Facebook's got you hooked. If it can't get advertisers to subsidize your addiction, it'll come right to your door with its hand out, looking for you to pay for access. Don't pay and Facebook will cut off your supply.
Why Facebook Can Charge
The one thing that The Times has that should endure as long as it doesn't drop its standards is a brand that represents great journalism, allowing it to lure the best and brightest journalists -- on any platform they want -- into its camp.
I will pay for that level of journalism because I can't get it elsewhere and The Times introduced a pay wall to take advantage of it.
What Facebook does is aggregate all of these great services -- from photos to videos and now video chat with Skype -- that you couldn't find elsewhere in one bucket before Google+ was introduced. The difference right now is Facebook has about 700 to 800 million more users.
The question is, when will Facebook take that "first mover" advantage and stop relying on advertisers? Or when will it be forced to?