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Feb5

I’ve Got a Revenue Model for Facebook and Twitter

It’s called charging people a monthly fee.

Why are so many web-services scared to charge their user base? Especially when the service kicks ass like Facebook or Twitter. TechCrunch is saying that 1 in 5 people on the web have accessed Facebook. I’m sort of thinking that there is something of value there for that many people have an interest. Why then are these companies still looking for a way to make money when the answer is in their face?

Charge us!

Facebook is struggling with ad supported revenue and Twitter is anyone’s guess. Their customers are asking to be charged and would gladly pony-up some cash if it meant a better service.

Facebook and Twitter set bad examples for start-ups by not charging. It creates the impression that all web-services must be ad-supported. This simply isn’t a good approach to building a long term sustainable service. Locally, I try to attend the monthly Boulder / Denver New Tech Meetup, and I’m continually heartbroken by all the startup founders looking for ways to capture VC funding when they already have a fairly nice service to offer. It’s as if everyone is trying to cash in on building the ‘next big thing’ by growing fast and selling to Google.

I fully understand giving a service away in the beginning in order to draw in the users, but have a clear plan to stop the free services and convert to a paid model. The “try before you buy” model isn’t used enough. Facebook could charge for users who’ve been on their services for over 1 year. Twitter could easily charge by volume of Tweets.

I can already see the comments coming in about how charging will diminish the social / community value of these services. Yet, I would be MORE likely to use these services if I was confident they would be here in the future and not sold off to Google, Yahoo or Microsoft.

posted in: Google, hosted applications, opinion, social networks, software

This post was published on Thursday, February 5, 2009 at 7:29 am

Leave a comment


Comments

1

Addy

February 5, 2009 at 8:21 am

You foresaw this comment to some degree, at least as stated in the last paragraph.

I would agree with you if we’re talking about a certain community. Tech savvy folks who understand how much of this online start-up thing works (not to mention what it takes to keep a site like this up in the background) will likely pay, and be more than willing to do so. Yet, in the Facebook community, a large number of people would not pay to stay in the community. Once my University got Facebook, I signed up within a week. As the community grew, the value grew. If the community were to decline on account of those who aren’t so certain they’d like to stay on the network, I think it would cause a negative spiral.

I can see how you (and many of my colleagues) would be MORE inclined to use the services if they were to charge for them. But the users who couldn’t care less about how the services work and how they’re funded, wouldn’t be prone to see the value in it and withdraw. I believe it would create an over-saturation of one group of people.

2

George

February 5, 2009 at 8:48 am

Addy, that is a valid point for sure.

I believe there are different tiers of people who use these services. There are those who passively interacting with the community by just creating an account and checking it every so often. Those who sign-up and don’t interact and those who interact heavily.

It’s the first two which could easily be lost. Therefore, perhaps a pricing model based on use? What if it was free to use Facebook for 30 minutes each day, but it costs $10/month to use it more then that allotted time?

3

Ted

February 5, 2009 at 8:58 am

As long as Facebook doesn’t do the AOL thing and send out mailers promising X hours online for a special LOW LOW PRICE!

One other way to look at pricing is to charge based on the kind of network it is. We all know college kids are poor, so if you’re on a university network (with your .edu email address) you’d pay less than if you were on a corporate network. Enforcing that becomes more difficult (I still use my du.edu email for facebook, even though I’m now a grad student at a different university and work full time). Some really good research might be able to hone in on the best price, but I’m thinking somewhere in the $2-$5 a month range so that it’s *something* but it’s no more burdensome than a late-night Wham! drunken iTunes purchase or morning coffee run.

I would also gladly throw Twitter a few bucks a month if it meant I could get more API request per hour so twhirl doesn’t blast in 20 updates at once.

4

gregd

February 5, 2009 at 9:17 am

I second that. I would pay between $10-20/month to use LinkedIn. No doubt.

5

Ted

February 5, 2009 at 9:24 am

@gregd How much would you pay for FlockedUp? http://www.viddler.com/explore/rooreynolds/videos/17/

6

Bruce

February 6, 2009 at 8:52 am

George, I think you’ve got the solution on the wrong end here.

Tons of developers that make 3rd party twitter applications (facebook apps too) are monetizing while the services themselves aren’t. This is ridiculous.

What should happen is that twitter should charge an API usage fee. It’d increase API functionality, reliability, and usability for those really popular apps (IE tweetie) but also put money in twitter’s pocket. Clearly this might not cover all their server expenses but if done right I think it’d be a great system.

I just think you’re dreaming if you think people are going to pay money to use a service like twitter. Linkedin maybe, because it’s a professional service for networking, but twitter… no way. They have to find an nice combination or revenue. To me that combination is not reducing their user base by charging fees.

7

George

February 6, 2009 at 9:47 am

Here my friend, we disagree. That doesn’t happen often, so bookmark this.

8

Taylor

February 6, 2009 at 10:58 am

I think there are a lot of opportunities for social networks to make money from their users, but I think they need to be creative with it.

I’m a big fan of pro accounts. Sites like Flickr can be used for free, but you can upgrade to a pro account for a yearly fee. You don’t lose any functionality being a regular member, but you get a few more perks with the pro account.

I also think that the iPhone app store could lead as an example for some social sites. What if Facebook had charged their members 99 cents for the Video application? They’re already charging for gifts, so why not extend that model into the more professional features?