Facebook’s monetization strategy

If Facebook were to charge their 50 million uniques just $2 a month for membership, they would instantly become a billion dollar business.  While you as a user might not like the idea of having to pay, given that you’ve invested so much time on the site and that your friends are there, would you really want to have to re-enter all your information somewhere else?

So the hypothetical question is– what percentage of Facebook users would just leave versus having to pay.  And what share of high school and college kids don’t have credit cards, which would then require a mobile payment gateway (stick it on your phone bill, just like ringtones).  We know that mobile payment is a highly viable option, given that I personally know affiliate marketers who have made tens of millions selling products euphemistically called “premium SMS” on Facebook and even MySpace.

Adult Friend Finder, who was recently bought by Playboy for $500MM, has just over 20 million monthly uniques, which is about half of Facebook’s traffic.  Thus, apples-to-apples, Facebook should be worth about a billion dollars, instead of the crazy $15BN figure that they try to get people to believe. However, it’s not an apples-to-apples comparison.  AFF is a pay site– they make money via recurring credit card transactions for memberships.  Their demographic is older and is willing to pay for services.  Facebook, on the other hand, is still primarly teenagers.  Thus, if you were to compare AFF (an adult dating site) and Facebook, then you might say that they’re similar in value.

Now consider that Adult Friend Finder filed for an IPO for $460MM two days ago.  They did this to avoid having to sell assets to make an upcoming debt payment. This is an act of desperation, from a company that has #1 market share, by far.  If the dominant player in a market cannot succeed, what does that say for Facebook or all the other guys who are spending money exuberantly, only to find that the destination they’re racing towards is not a pot of gold, but a graveyard.

3 thoughts on “Facebook’s monetization strategy”

  1. Hi David,

    Seems like the younger folks are, the less they care about privacy– most college kids use Facebook as their address book. And the power.com vs. Facebook legal battle is especially interesting, since Facebook wants to block Power.com from allowing users to share their data– yet Facebook wants users to import all their contacts into Facebook and syndicate the other way. People have had fear of Big Brother watching us. Guess what– we’re doing it to ourselves willingly.

  2. Hi Adam,

    Monetizing identity I think will eventually occur when people realize that their influence is a tradeable commodity that can be redeemed via affiliate marketing. But that also requires that we have frictionless markets, where the tracking of recommendations to sales is easy enough for your mom and my mom to participate– not the hodge-podge of affiliate networks we have now, with a near undecipherable system. Meanwhile, there’s selling your soul for ad dollars, such as Magpie tweets on twitter, pay-per-post, and banner ads hawking diet pills.

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