Monetizing Facebook's Users Could Be Quickly Accomplished

| About: Facebook (FB)

Facebook (NASDAQ:FB) claims to have more than 800 million monthly users. The postulate seems to be that imposing a subscription fee would spell destruction for Facebook, driving away an enormous number of users. I agree.

Getting that degree of "critical mass" is catching lighting in a bottle. If Facebook should blow it now, they will never get it back. Look at For all intents and purposes, that is a company that "could have been a contender." In my opinion, they were Facebook before Facebook was Facebook. They were early in the social networking game but they chose another route, a subscription route.

They gave anyone a chance to "sample the goods" but only a few would pay them to participate. Without the ability to actually participate, the service became an annoyance. Classmates had the critical mass until other options came around that didn't require a monthly fee. Now they languish in obscurity. Many including myself have an old account at Classmates but will never likely return.

Sure, they have a diminutive number of people who will pay them for a subscription - but most of those people are probably still paying AOL for dial up service. If they had seen the big picture and not charged for the subscription, they would have probably been the company that went public for tens of billions of dollars.

If you want to know what would happen if Facebook went to a subscription fee only model, look no further than My answer for Facebook is to stop getting cute tinkering with the style of the program, like they did with the new "timeline." I myself was perturbed when suddenly that feature was forced upon me and I have yet to hear a comment from anyone who was not disenchanted by it. Facebook became the standard because people already like the product. Making changes for changes sake is a plain foolish gamble. It makes as much sense as "new Coke." That is not the same thing as offering new services. Offering Microsoft's Skype feature is fine because it doesn't change the format of the main product. If users want to utilize Skype, Netflix or Google's YouTube in their Facebook experience, they can do so - but if not, no harm done.

What Facebook needs to focus on is making a change that would actually monetize the 800-900 million users who are already happy with the format that made them #1. I think consumers are generally reasonable. Except for perhaps some anarchists and "Occupy Wall Street" types, most consumers respect the fact that businesses need to make some revenue to continue offering products and services.

Facebook can monetize every one of them by giving their members two choices:

1. Watch a 30 second commercial that opens automatically each time they log into their account (similar to what happens on many YouTube videos that are "monetized").


2. Pay an annual membership fee that would be commercial free.

The key is that all services should be available to paying and non-paying members. Watching one 30 second commercial each time they log in is not so onerous on the user as to trigger a revolt and most of their members would probably be OK with that.

The people who hate commercials can pay a reasonable annual membership fee. The fee in such a strategy would be their choice.

As I already elaborated in my April analysis on Facebook, I have never clicked on a Facebook ad while given a choice because I am not there to find a product or service. By contrast, I have often clicked on Google ads because they came up while I was actually looking for something besides pictures of my Mom's new kitchen or my cousin's trip to Talladega.

However, if I was required to watch a 30 second movie trailer or a Target commercial the moment I log into my account, I wouldn't be upset. The difference is that I wouldn't, out of a sense of charity, watch a commercial while I am keeping up with my friends and family checking their posts on the home page.

In that case, Facebook would have the ability to actually sell ads that are just as accurately targeted as a Google ad originated by a key word search. That is because like Google, they know so much about me. That is fair as long as they are not selling my personal info to those advertisers.

If they really have 800 million users a month, at even .25 cents a commercial, that alone equals $200 million in ad revenue per month. I'm no expert in advertising so I do not know how much more they could charge but I'm sure they could earn even more on "click throughs" (extra money charged when the viewer clicks on to the advertisers website) and possible revenue sharing. All of that would be in addition to the ads they currently have running on the user's Homepage.

This I believe is a viable and simple solution to the nagging question of how Facebook could "monetize" their 800 million+ monthly users and it could be implemented within weeks.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.