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If Facebook charged 2$ a month for their services, would they not make more than their operational costs? They choose to exploit and straddle areas that are mor

If Facebook charged 2$ a month for their services, would they not make more than their operational costs? They choose to exploit and straddle areas that are morally and legally dubious because they want more money.

skocznymroczny 6y ago
They'd lose many users. $2 a month might not be a lot, but any non-zero amount of money is a barrier for users. On one side some users might not have an easy way to pay, others will still have to reconsider whether Facebook itself offers enough to be worth the $2 a month (even if it totally does). Also, a more likely outcome would be Facebook charging $2 a month on top of their usual data collection practices.
- mrweasel 6y ago
  That's really the scary part, most people wouldn't pay $2 per month for Facebook. Most wouldn't pay the $1 for WhatsApp. That shows you how little value these services actually provide to most people. The remaining users wouldn't pay for year two, because to many others would have left the platform.
  - CallMeMarc 6y ago
    Didn't WhatsApp actually cost like 1 EUR/year before FB bought it?
    - mrweasel 6y ago
      It did, first year free, then $1 per year, but I think many just created a new account, or WhatsApp perhaps didn't really enforce the payment much.
      - akoncius 6y ago
        I think it was highly profitable business because before FB acquisition it was very small company (~100 people) compared to user base (hundreds of milions). but FB did acquisition not because of profits but because of userbase to collect more data. So to increase userbase even more, FB got rid of payment plans and made service for free. Edit: tried to google concrete numbers what revenue was back then, could not find any clear answer, because it was doing some juggling with stocks etc. https://techcrunch.com/2014/10/28/whatsapp-revenue/ https://techcrunch.com/2014/10/28/whatsapp-revenue/
      - CallMeMarc 6y ago
        IIRC I even bought the app on the app store and then had some kind of "lifetime" plan, easier times
      - fakedang 6y ago
        Yep, first year free, then $1 payment, but if you wanted, you could just uninstall, reinstall and it would reset the entire schedule. Acton and Koum really wanted it to be something different than what it is now.
    - akoncius 6y ago
      as far as I remember - yes, it was 1 dollar/euro per year after first year for free.
  - durovo 6y ago
    Most wouldn't pay because there are alternative free services with a somewhat similar model. This analysis would be more interesting if all these 'free' alternatives go away.
  - rootusrootus 6y ago
    It's not just Facebook and WhatsApp, it's pretty much any service we've become accustomed to getting for 'nothing'. As a comparison, I run the domain my family uses for e-mail (not just my spouse/kids, but my brothers and parents and a few extended family members as well), and it's currently hosted on GSuite, grandfathered in from way back when you could get it free. I wanted to switch us away from Google to FastMail, but everyone balked at $5/month for e-mail. Even the ones making well into six figures didn't want to cough up $60/year for something they've been getting for free. So I could pay it out of pocket, or we stay on GSuite, or I kick everyone off that won't pay and deal with hurt feelings.
  - Shish2k 6y ago
    > Most wouldn't pay the $1 for WhatsApp. That shows you how little value these services actually provide Most people don’t pay for air, therefore those people would be happy if their access to air was removed?
  - MajorBee 6y ago
    I think most people do manage to get at least a buck or two's worth (adjusted for local purchasing power) of use out of WhatsApp (if not facebook.com); surely, the ability to instantly contact people via text/call/video must be more useful than music streaming? The problem seems to be that if competing services remain free, then users might start questioning the fee and eventually the base might migrate. Really, while "free" internet services appear as if they are straight out of a post-work utopia, all they seem to be doing is trivializing the social cost of accurate and insidious targeting of groups jazzed up in sexy terms like "digital marketing" and "adtech".
    - Retric 6y ago
      People using WhatsApp are holding a cellphone, so it’s not about suddenly being able to communicate with people.
      - MajorBee 6y ago
        Holding a cellphone is step 1; step 2 is having a tool that can facilitate frictionless communication to one or more people -- easy and cheap enough for pretty much any demographic to grasp. Contacting someone from what was essentially a portable landline is surely very different from using WhatsApp (or any chat application) on a modern smartphone?
      - filleduchaos 6y ago
        > People using WhatsApp are holding a cellphone Have you actually used cellphones? They're extremely expensive to actually communicate with, especially in the countries where WhatsApp is near ubiquitous (and we're talking within country, let's not even get into how horrendously expensive communicating with people internationally can be via regular cell service). I really don't understand why so many people on HN are this adamant about trivialising the value that apps like Whatsapp provide.
        Retric 6y ago
        WhatsApp adoption clearly demonstrates they are providing value to people. My point is people are looking at what the app does rather than why people use it. Phone conferences for example have been a thing for decades, but they weren’t free.
  - chongli 6y ago
    Most people wouldn’t pay but some would pay a lot, in the form of donations. I can easily envision a world where Facebook was a nonprofit along the lines of Wikipedia. Ad-free and supported by donations, the site would serve to connect the world (Facebook’s ostensible mission) without resorting to dark patterns or A/B testing for addictive engagement. I think there are plenty of wealthy people out there who would love to support such a site, if it existed. Technology-wise, such a site could be built today, no problem. I have no idea what to do about the network effects that comprise Facebook’s moat, however.
    - yrimaxi 6y ago
      So a company that, in your own words, uses dark patterns and addictive engagement, could possibly be this [rose-tinted glasses conception of] Wikipedia? That’s ridiculous. That’s not even alternative history as you are reimagining the whole foundation of the company. Really, this must come from some utopian idea that company-founders really want to make the world better above else, but then profit-seeking—the modus operandi of all for-profit companies—intervenes just because the world is not pure enough for their vision.
  - skinkestek 6y ago
    > Most wouldn't pay the $1 for WhatsApp. It had explosive growth despite (or to some degree because of) the yearly $1 fee. I'd happily also paid for my kids and a number of my friends to keep them on old WhatsApp, pre-Facebook, if they needed it. Instead they sold out.
  - shadowprofile77 6y ago
    >That shows you how little value these services actually provide to most people. The remaining users wouldn't pay for year two, because to many others would have left the platform. No, I'm extremely critical of many aspects of Facebook (and implicitly Whatsapp as an FB property, especially now) but to say they provide so little value based on how few people would possibly pay these amounts uses flawed assumptions. If people didn't pay it wouldn't be because they don't gain at least 1 or 2 dollars in value (many people almost certainly do, I certainly do with my own use), it would be because the model of offering high value for free in exchange for massive amounts of saleable user data is so lucrative that alternatives with free versions would quickly take over market share. In absolute terms, the use value of FB or Whatsapp to a user is often much more than 1 dollar per month, but compared to the ease of switching to someone who in the existing market again offers the same for free, it could quickly descend to less than 1 dollar.
- helsinkiandrew 6y ago
  What would be interesting if they offered an ad free option - like Amazon Kindle, youtube etc. Back of the envelope calculation suggests they make about $2 a month from each user (~$70B revenue/year divided by ~2.7B active users/month)
  - SCNP 6y ago
    I would love this if I trusted any online service to maintain the paid option as truly ad-free over time but I've been burned by the TV industry too many times. Ad creep ruins every paid service and ultimately just drives the price up.
    - Spivak 6y ago
      * Offering an ad-free version devalues their ad network so it would end up being more tha $2/mo. * Even if they didn't show you ads they have no reason to not still obsessively track you and monetize that data in other ways.
      - JKCalhoun 6y ago
        Yes, but if they continue to hemorrhage users they may come to wish they were making $2/user. Long term, Facebook is dead. Perhaps internally they know that and are already planning for it.
      - SCNP 6y ago
        This is kind of my point, too. Free market will incentivize getting money both ways so without regulation, this is what we get. And I hate it.
- seppin 6y ago
  I don't value Facebook at $2 a month, I bet most people don't either.
- LdSGSgvupDV 6y ago
  Sounds like cheaper version of linkedin.
hairofadog 6y ago
A family member recently relayed the story of his kid begging for $20 for a “bunny suit” Fortnight skin and how he, the adult, slowly came to understand that the skin didn’t even do anything; it just ever-so-slightly changed how the game looked (which I already knew, but his exasperation was amusing). We were like, huh. Kids today. Anyway, for reasons I don’t totally understand, in my experience this dad’s bunny-suit exasperation is how most people feel about paying for software of any kind. It’s not just frugality but indignation at the very idea that they be asked to pay for software.
- jpttsn 6y ago
  What does a real world bunny suit do that a Fortnite bunny suit doesn't?
  - hairofadog 6y ago
    TERRIFY CHILDREN
  - germinalphrase 6y ago
    For one, you own it - so you can sell it when it’s no longer amusing.
    - conistonwater 6y ago
      Do you mean to say there is a market for used bunny suits? I think 'jpttsn might have a point specifically with respect to useless nonsense products.
      - germinalphrase 6y ago
        Whether or not anyone wants to purchase is a separate concern from the fact of ownership. Edit: there are approx. 1000 used bunny suits for sale on EBay, so...
        sbierwagen 6y ago
berkeleyjunk 6y ago
Facebook made approximately $30 (USD) per user in advertising revenue last year. I think the bigger issue (IMHO) is that the people who are prepared to pay to not be profiled are the people who are the most valuable to advertise to. i.e. they are worth way more than $30 in revenue per year.
- thatguy0900 6y ago
  On the other hand, the people willing to pay to not be profiled are probably already using adblockers and piholes everywhere they can, no?
  - Nextgrid 6y ago
    Facebook is relatively immune to ad blockers as most Facebook, WhatsApp & Instagram usage is mobile (and why Instagram's web version is very bare-bones and lacks critical functionality).
    - thatguy0900 6y ago
      That's fair. I'm still using Firefox mobile with adblocking, so I didn't consider that.
godzillabrennus 6y ago
Facebook grosses about $22/user/year from their platform. If all users paid $2/month they’d be fine. Problem is, not many people would shell out $2/month to socialize online.
- FalconSensei 6y ago
  Also, let's say I'm willing to pay $2 to use facebook and socialize with my friends. If 2 or 3 close(-ish) friends drop off because of that, facebook would no longer be worth $2, so I would also drop off

skocznymroczny 6y ago

They'd lose many users. $2 a month might not be a lot, but any non-zero amount of money is a barrier for users. On one side some users might not have an easy way to pay, others will still have to reconsider whether Facebook itself offers enough to be worth the $2 a month (even if it totally does). Also, a more likely outcome would be Facebook charging $2 a month on top of their usual data collection practices.

mrweasel 6y ago
That's really the scary part, most people wouldn't pay $2 per month for Facebook. Most wouldn't pay the $1 for WhatsApp. That shows you how little value these services actually provide to most people. The remaining users wouldn't pay for year two, because to many others would have left the platform.
- CallMeMarc 6y ago
  Didn't WhatsApp actually cost like 1 EUR/year before FB bought it?
  - mrweasel 6y ago
    It did, first year free, then $1 per year, but I think many just created a new account, or WhatsApp perhaps didn't really enforce the payment much.
    - akoncius 6y ago
      I think it was highly profitable business because before FB acquisition it was very small company (~100 people) compared to user base (hundreds of milions). but FB did acquisition not because of profits but because of userbase to collect more data. So to increase userbase even more, FB got rid of payment plans and made service for free. Edit: tried to google concrete numbers what revenue was back then, could not find any clear answer, because it was doing some juggling with stocks etc. https://techcrunch.com/2014/10/28/whatsapp-revenue/ https://techcrunch.com/2014/10/28/whatsapp-revenue/
    - CallMeMarc 6y ago
      IIRC I even bought the app on the app store and then had some kind of "lifetime" plan, easier times
    - fakedang 6y ago
      Yep, first year free, then $1 payment, but if you wanted, you could just uninstall, reinstall and it would reset the entire schedule. Acton and Koum really wanted it to be something different than what it is now.
  - akoncius 6y ago
    as far as I remember - yes, it was 1 dollar/euro per year after first year for free.
- durovo 6y ago
  Most wouldn't pay because there are alternative free services with a somewhat similar model. This analysis would be more interesting if all these 'free' alternatives go away.
- rootusrootus 6y ago
  It's not just Facebook and WhatsApp, it's pretty much any service we've become accustomed to getting for 'nothing'. As a comparison, I run the domain my family uses for e-mail (not just my spouse/kids, but my brothers and parents and a few extended family members as well), and it's currently hosted on GSuite, grandfathered in from way back when you could get it free. I wanted to switch us away from Google to FastMail, but everyone balked at $5/month for e-mail. Even the ones making well into six figures didn't want to cough up $60/year for something they've been getting for free. So I could pay it out of pocket, or we stay on GSuite, or I kick everyone off that won't pay and deal with hurt feelings.
- Shish2k 6y ago
  > Most wouldn't pay the $1 for WhatsApp. That shows you how little value these services actually provide Most people don’t pay for air, therefore those people would be happy if their access to air was removed?
- MajorBee 6y ago
  I think most people do manage to get at least a buck or two's worth (adjusted for local purchasing power) of use out of WhatsApp (if not facebook.com); surely, the ability to instantly contact people via text/call/video must be more useful than music streaming? The problem seems to be that if competing services remain free, then users might start questioning the fee and eventually the base might migrate. Really, while "free" internet services appear as if they are straight out of a post-work utopia, all they seem to be doing is trivializing the social cost of accurate and insidious targeting of groups jazzed up in sexy terms like "digital marketing" and "adtech".
  - Retric 6y ago
    People using WhatsApp are holding a cellphone, so it’s not about suddenly being able to communicate with people.
    - MajorBee 6y ago
      Holding a cellphone is step 1; step 2 is having a tool that can facilitate frictionless communication to one or more people -- easy and cheap enough for pretty much any demographic to grasp. Contacting someone from what was essentially a portable landline is surely very different from using WhatsApp (or any chat application) on a modern smartphone?
    - filleduchaos 6y ago
      > People using WhatsApp are holding a cellphone Have you actually used cellphones? They're extremely expensive to actually communicate with, especially in the countries where WhatsApp is near ubiquitous (and we're talking within country, let's not even get into how horrendously expensive communicating with people internationally can be via regular cell service). I really don't understand why so many people on HN are this adamant about trivialising the value that apps like Whatsapp provide.
      - Retric 6y ago
        WhatsApp adoption clearly demonstrates they are providing value to people. My point is people are looking at what the app does rather than why people use it. Phone conferences for example have been a thing for decades, but they weren’t free.
- chongli 6y ago
  Most people wouldn’t pay but some would pay a lot, in the form of donations. I can easily envision a world where Facebook was a nonprofit along the lines of Wikipedia. Ad-free and supported by donations, the site would serve to connect the world (Facebook’s ostensible mission) without resorting to dark patterns or A/B testing for addictive engagement. I think there are plenty of wealthy people out there who would love to support such a site, if it existed. Technology-wise, such a site could be built today, no problem. I have no idea what to do about the network effects that comprise Facebook’s moat, however.
  - yrimaxi 6y ago
    So a company that, in your own words, uses dark patterns and addictive engagement, could possibly be this [rose-tinted glasses conception of] Wikipedia? That’s ridiculous. That’s not even alternative history as you are reimagining the whole foundation of the company. Really, this must come from some utopian idea that company-founders really want to make the world better above else, but then profit-seeking—the modus operandi of all for-profit companies—intervenes just because the world is not pure enough for their vision.
- skinkestek 6y ago
  > Most wouldn't pay the $1 for WhatsApp. It had explosive growth despite (or to some degree because of) the yearly $1 fee. I'd happily also paid for my kids and a number of my friends to keep them on old WhatsApp, pre-Facebook, if they needed it. Instead they sold out.
- shadowprofile77 6y ago
  >That shows you how little value these services actually provide to most people. The remaining users wouldn't pay for year two, because to many others would have left the platform. No, I'm extremely critical of many aspects of Facebook (and implicitly Whatsapp as an FB property, especially now) but to say they provide so little value based on how few people would possibly pay these amounts uses flawed assumptions. If people didn't pay it wouldn't be because they don't gain at least 1 or 2 dollars in value (many people almost certainly do, I certainly do with my own use), it would be because the model of offering high value for free in exchange for massive amounts of saleable user data is so lucrative that alternatives with free versions would quickly take over market share. In absolute terms, the use value of FB or Whatsapp to a user is often much more than 1 dollar per month, but compared to the ease of switching to someone who in the existing market again offers the same for free, it could quickly descend to less than 1 dollar.
helsinkiandrew 6y ago
What would be interesting if they offered an ad free option - like Amazon Kindle, youtube etc. Back of the envelope calculation suggests they make about $2 a month from each user (~$70B revenue/year divided by ~2.7B active users/month)
- SCNP 6y ago
  I would love this if I trusted any online service to maintain the paid option as truly ad-free over time but I've been burned by the TV industry too many times. Ad creep ruins every paid service and ultimately just drives the price up.
  - Spivak 6y ago
    * Offering an ad-free version devalues their ad network so it would end up being more tha $2/mo. * Even if they didn't show you ads they have no reason to not still obsessively track you and monetize that data in other ways.
    - JKCalhoun 6y ago
      Yes, but if they continue to hemorrhage users they may come to wish they were making $2/user. Long term, Facebook is dead. Perhaps internally they know that and are already planning for it.
    - SCNP 6y ago
      This is kind of my point, too. Free market will incentivize getting money both ways so without regulation, this is what we get. And I hate it.
seppin 6y ago
I don't value Facebook at $2 a month, I bet most people don't either.
LdSGSgvupDV 6y ago
Sounds like cheaper version of linkedin.

hairofadog 6y ago

A family member recently relayed the story of his kid begging for $20 for a “bunny suit” Fortnight skin and how he, the adult, slowly came to understand that the skin didn’t even do anything; it just ever-so-slightly changed how the game looked (which I already knew, but his exasperation was amusing). We were like, huh. Kids today. Anyway, for reasons I don’t totally understand, in my experience this dad’s bunny-suit exasperation is how most people feel about paying for software of any kind. It’s not just frugality but indignation at the very idea that they be asked to pay for software.

jpttsn 6y ago
What does a real world bunny suit do that a Fortnite bunny suit doesn't?
- hairofadog 6y ago
  TERRIFY CHILDREN
- germinalphrase 6y ago
  For one, you own it - so you can sell it when it’s no longer amusing.
  - conistonwater 6y ago
    Do you mean to say there is a market for used bunny suits? I think 'jpttsn might have a point specifically with respect to useless nonsense products.
    - germinalphrase 6y ago
      Whether or not anyone wants to purchase is a separate concern from the fact of ownership. Edit: there are approx. 1000 used bunny suits for sale on EBay, so...
      - sbierwagen 6y ago

berkeleyjunk 6y ago

Facebook made approximately $30 (USD) per user in advertising revenue last year. I think the bigger issue (IMHO) is that the people who are prepared to pay to not be profiled are the people who are the most valuable to advertise to. i.e. they are worth way more than $30 in revenue per year.

thatguy0900 6y ago
On the other hand, the people willing to pay to not be profiled are probably already using adblockers and piholes everywhere they can, no?
- Nextgrid 6y ago
  Facebook is relatively immune to ad blockers as most Facebook, WhatsApp & Instagram usage is mobile (and why Instagram's web version is very bare-bones and lacks critical functionality).
  - thatguy0900 6y ago
    That's fair. I'm still using Firefox mobile with adblocking, so I didn't consider that.

godzillabrennus 6y ago

Facebook grosses about $22/user/year from their platform. If all users paid $2/month they’d be fine. Problem is, not many people would shell out $2/month to socialize online.

FalconSensei 6y ago
Also, let's say I'm willing to pay $2 to use facebook and socialize with my friends. If 2 or 3 close(-ish) friends drop off because of that, facebook would no longer be worth $2, so I would also drop off