33 ms·

Why not just ask people for $1 per year to use FB, and then have non-targeted ads to cover the rest of the loss in revenue?

p49k 8y ago
Because an insanely high percentage of people will refuse to pay $1/year. Also, because $1 does not come close to covering the cost difference; targeted ads typically bring in 2x or more revenue per impression and the average revenue per user per year in the US is around $25.
- Calib3r 8y ago
  targeted ads typically bring in 2x or more revenue per impression Source?
  - p49k 8y ago
    https://www.researchgate.net/publication/265266107_The_Value_of_Behavioral_Targeting https://www.researchgate.net/publication/265266107_The_Value... Study quotes 2.68x earnings in 2009 but in my experience it’s even higher these days.
    - thinkingemote 8y ago
      Does that mean advertisers pay more for them or that they are actually more effective (or both, or other?)
- llamataboot 8y ago
  I don't know about that. The latest estimates I heard was that you would have to pay the average American $1k not to use facebook for a year. That doesn't mean they would or can spend $1000 on FB, but with the proliferation of subscriptions on app stores that are $10+ a month, I bet FB could get $10 a month from a large chunk of users and start to move towards other revenue models.
  - llamataboot 8y ago
    This isn't to say they could make as much money with such a model, but if they were more concerned with the downsides of surveillance ad targeting capitalism as their revenue stream, they could certainly explore shifting to be a different sort of company - one with different and maybe even less revenue streams. Funny thing that, why do we never hear about a company that wants to stay the same size or shrink? What is facebook decided they wanted to be half the size they are now expense-wise, get out of the ads business, and encourage people to use their platform for less things?
    - gattilorenz 8y ago
      > Funny thing that, why do we never hear about a company that wants to stay the same size or shrink? I guess it's a rhetorical question, but if you went public it would scare away all the investors, right? Who would invest in a company that does not plan to grow, and might even shrink? Private companies sometimes do that, tho.
  - dragonsngoblins 8y ago
    Ah but that is while it is free and presumably everyone else is using it. If it costs a dollar people would have to enter payment information all of a sudden, so it is putting a decision point in front of people where they have to expend effort and money (albeit a small amount of both) to keep using this thing. If their friends seem hesitant about it maybe they won't sign up to pay for it.
- majewsky 8y ago
  Their operating costs would be massively lower if they didn't have to collect every inch of mouse movement etc. for targeting advertisements. So even with lower income, they might still be as profitable or more profitable.
jonathanjaeger 8y ago
Because that wouldn't cover the loss in revenue. $1 per year and non-targeted ads doesn't equate to $50B+ in revenue growing 20-40% per year. Also, advertisers come to FB because they can be ROI positive with the targeted ads. Most advertisers don't want to run non-targeted ads because they would be ROI negative.
dominotw 8y ago
most ppl in the world have no credit card. I didn't have one till i visited the west.
scarlac 8y ago
$1 is vastly different from free for a variety of psychological reasons. People will also be less likely to want to pay to see ads on every other post. You'd have to provide more value. Also, the fees from credit cards companies are so high that micropayments don't make sense (yearly subscription charge + per-transaction fixed fee + per-transaction percentage charge).
brockwhittaker 8y ago
Facebook made $48B in revenue last year. That's around $38/user (with much more coming from people in North America). Even $1/mo doesn't come close to covering it.
Spooky23 8y ago
Zuckerberg would become Steve Case wealthy. Facebook at $X/mo is AOL. AOL was a successful but fairly predictable business. But Facebook offers a promise of growth that promises more return.

p49k 8y ago

Because an insanely high percentage of people will refuse to pay $1/year. Also, because $1 does not come close to covering the cost difference; targeted ads typically bring in 2x or more revenue per impression and the average revenue per user per year in the US is around $25.

Calib3r 8y ago
targeted ads typically bring in 2x or more revenue per impression Source?
- p49k 8y ago
  https://www.researchgate.net/publication/265266107_The_Value_of_Behavioral_Targeting https://www.researchgate.net/publication/265266107_The_Value... Study quotes 2.68x earnings in 2009 but in my experience it’s even higher these days.
  - thinkingemote 8y ago
    Does that mean advertisers pay more for them or that they are actually more effective (or both, or other?)
llamataboot 8y ago
I don't know about that. The latest estimates I heard was that you would have to pay the average American $1k not to use facebook for a year. That doesn't mean they would or can spend $1000 on FB, but with the proliferation of subscriptions on app stores that are $10+ a month, I bet FB could get $10 a month from a large chunk of users and start to move towards other revenue models.
- llamataboot 8y ago
  This isn't to say they could make as much money with such a model, but if they were more concerned with the downsides of surveillance ad targeting capitalism as their revenue stream, they could certainly explore shifting to be a different sort of company - one with different and maybe even less revenue streams. Funny thing that, why do we never hear about a company that wants to stay the same size or shrink? What is facebook decided they wanted to be half the size they are now expense-wise, get out of the ads business, and encourage people to use their platform for less things?
  - gattilorenz 8y ago
    > Funny thing that, why do we never hear about a company that wants to stay the same size or shrink? I guess it's a rhetorical question, but if you went public it would scare away all the investors, right? Who would invest in a company that does not plan to grow, and might even shrink? Private companies sometimes do that, tho.
- dragonsngoblins 8y ago
  Ah but that is while it is free and presumably everyone else is using it. If it costs a dollar people would have to enter payment information all of a sudden, so it is putting a decision point in front of people where they have to expend effort and money (albeit a small amount of both) to keep using this thing. If their friends seem hesitant about it maybe they won't sign up to pay for it.
majewsky 8y ago
Their operating costs would be massively lower if they didn't have to collect every inch of mouse movement etc. for targeting advertisements. So even with lower income, they might still be as profitable or more profitable.

jonathanjaeger 8y ago

Because that wouldn't cover the loss in revenue. $1 per year and non-targeted ads doesn't equate to $50B+ in revenue growing 20-40% per year. Also, advertisers come to FB because they can be ROI positive with the targeted ads. Most advertisers don't want to run non-targeted ads because they would be ROI negative.

dominotw 8y ago

most ppl in the world have no credit card. I didn't have one till i visited the west.

scarlac 8y ago

$1 is vastly different from free for a variety of psychological reasons. People will also be less likely to want to pay to see ads on every other post. You'd have to provide more value. Also, the fees from credit cards companies are so high that micropayments don't make sense (yearly subscription charge + per-transaction fixed fee + per-transaction percentage charge).

brockwhittaker 8y ago

Facebook made $48B in revenue last year. That's around $38/user (with much more coming from people in North America). Even $1/mo doesn't come close to covering it.

Spooky23 8y ago

Zuckerberg would become Steve Case wealthy. Facebook at $X/mo is AOL. AOL was a successful but fairly predictable business. But Facebook offers a promise of growth that promises more return.