Second-quarter results show Facebook is reaping the rewards from its investment in advertising technology on both desktop and mobile, but is there revenue-making potential in the social network adopting the ‘freemium’ model as has been suggested in some quarters?
Twitter founder, Biz Stone, seemed to think so when he attempted to stir things up by mentioning that users might prefer to pay a subscription rather than see a deluge of advertisements on Facebook.
“I’ve got an idea for Facebook,” confessed Stone. “They could offer Facebook Premium. For $10 a month, people who really love Facebook (and can afford it), could see no ads. Maybe some special features too. If 10% of Facebook signed up, that’s $1 billion a month in revenue.”
Facebook Users Not Averse to Freemium
As if to reinforce remarks made by Stone, digital marketing agency, Greenlight, has shown that 15% of the users it polled in its Search and Social Survey (2012-2013) would be prepared to pay a fee for an advert-free Facebook.
The same research also revealed that 8% would be willing to spend $5 right up to $10 and possibly more each month. When taking into account the social network’s current volume of registered users, there is some serious money-making potential here.
By our calculations, annual earnings based on 8% Facebook’s monthly active users paying $10 a month, would be approximately $1.1 billion. Considering the company is now public, it is a figure shareholders are certain to be interested in.
Will Facebook Follow Spotify’s Lead?
Greenlight’s 8% will surely rise as advertising becomes more prevalent on Facebook. We would expect the percentage to be closer to other big freemium models such as music-streaming service, Spotify, which, according to latest company data counted 27% premium subscribers among its user base.
Whether or not the freemium model is under any serious consideration by Facebook remains to be seen, but Andreas Pouros, chief operating officer at Greenlight, fears the social network’s approach to advertising has a downside if it continues along its current path.
“Facebook may need to pace itself a little less aggressively when it comes to cashing in on its advertising sweet spot,” said Pouros. “Greenlight’s survey also showed that close to 70% say they ‘never’ or ‘rarely’ click on advertisements or sponsored listings in Facebook, indicative that consumer apathy is very real.”