Facebook’s IPO filing yesterday comes after a highly successful 2011 — $3.7 billion in revenue, $1 billion in profit according to recent reports. Yet, as the world eagerly awaits the opportunity to invest in the social networking giant, it’s worth asking, where does Facebook go after the FB ticker starts trading?
After all, Mark Zuckerberg has put off going public as long as possible because of the demands it puts on companies. Wall Street and investors will want to see one thing: growth, growth, growth. And at some point, Facebook’s ability to generate the numbers with a primarily advertising model will slow. What then?
Well, with 850 million active users, Facebook might want to consider asking users to pay. That’s right, a paywall option. Sacrilege, right? But if Zuckerberg and Co. do it right, they could please Wall Street and keep users happy. For example – if only 5% of their 850 million monthly users upgraded at $5 per month for premium services, they would add another $2.5 billion in annual revenue.
While paywalls are still somewhat maligned in the tech world, recent reports paint a more optimistic picture. Mashable deemed the paywall the most prominent trend of the past year. The article, Six Game Changing Digital Journalism Events of 2011, declared, “if 2010 was the year of the paywall, 2011 was the year the paywall worked.” And that just might be an understatement.
Exhibit A: The New York Times. The esteemed newspaper implemented a paywall early last year, much to the dismay of critics, who predicted the move would result in nothing short of a dismal failure. Instead, the site attracted 324,000 paid digital subscriptions and 1.2 million users with full site access in the past year. And other papers across the country have followed suit; The Minneapolis Tribune made $800,000 in digital circulation for 2011. For newspapers, in this day and age, that’s an incredible gain. And it’s one Facebook should be taking note of, now that there’s substantial public interest in the site’s financial performance.
As apps, add-ons, and subscription sites continue to populate the zeitgeist, it seems people are less averse to paying for quality content. Whether it’s Netflix, which, despite having faced its share of difficulties this year, ended 2011 with 21.4 million subscriptions; Hulu, which officially reached 1 million subscribers for its Hulu Plus paid service this year; or music-sharing site Spotify, which showed substantial gain in “premium subscriptions” that offer added amenities to users who pay $10 a month, people are paying, if there’s compelling reason to. Over at MyLife.com, I’ve seen this first hand: We’re now approaching 1 million paying active membership subscriptions by social and search services that matter to people.
This is where Facebook has the potential to create a Facebook “elite” status. As an avid and long-standing Facebook fan, I would happily spend a small amount of money each month to get an even more optimized user experience. And I suspect I’m not the only one. Critics whack the social site for ad overload, slow feature rollouts, and a lack of customizable options. A partial paywall could easily pacify such complaints, while allowing the site to bring in even more revenue for new investors. Don’t like Facebook ads? Simply opt to pay a monthly fee to keep your newsfeed ad-free. In addition, the site could make subscribers “early adopters” by rolling out new features, like the newest Timeline, to those who pay before the non-paying public. Facebook could even offer Tumblr-style profile layouts, at cost, for those looking for a more customizable user experience. At its core, Facebook would remain Facebook, but for the site’s many devoted fans and soon-to-be investors, a partial paywall could be the final, lucrative touch.
Jeff Tinsley is the founder and CEO of MyLife.com, a social service for connecting your social networks and email services all in one place. Other content related to this post can be found at SocialWebDaily.com.