Time for Facebook to move to a subscription model

The social-networking site needs to get into serious monetization. That means subscriptions, not a micropayment platform no longer tied to the dollar.

Facebook moved further into virtual-good sales on Monday, with a micropayment platform that's no longer tied to the dollar, but rather points that can be purchased and earned.

This is a common enough scenario in virtual worlds and online games such as MapleStory, but the gamelike metaphor that this brings to social networking may introduce confusion and annoyance to the users who have made Facebook such a powerful force.

With more than 120 million users, perhaps a better move would be to start offering subscriptions. Personally, I would pay to NOT get certain invitations or for the simple function of not being forced to use the craptacular Facebook e-mail, especially considering that Facebook already has my address.

Slate's Farhad Manjoo lays out some logic behind a subscription model:

100 million people use Facebook regularly . Judging from some of the folks in my social network, a sizable minority of Facebook users have hundreds of "friends" and check into the site multiple times a day--call them superactive users.

Let's imagine that Facebook became a tiered service. A free plan would limit you to 200 friends, one status update per day, or some other nondraconian combination of restrictions. But for $5 a month, the limits would be lifted.

Certainly, many users would balk; tens of thousands would join Facebook groups to protest the new pay model. Let's assume that 95 percent of users will refuse to pay a dime. That still leaves 5 percent, or 5 million people, to pay $60 a year. That's $300 million in the bank.

I am a fan of virtual goods . I like the direct analogy of dollars equaling goods, even if they are not physical. I also think that they can provide a great revenue stream, when offered in the right environs.

Facebook definitely is the right place, but this new system doesn't make total sense. A micropayment system obscures the amount paid for the virtual good, and the true value becomes unknowable and therefore diminished.

For example, consider a dating site where someone can gift you a red rose for $10 or a daisy for $1. There is a clearly established value (and message where you communicate how much they are worth to you). Contrast that with a virtual gift that you earned from completing a puzzle. The gift may be the same, but the value is diminished, and the recipient may not be as thrilled.

It's hard to believe that with all that traffic, Facebook still hasn't figured out more revenue mechanisms. And the ecosystem seems to be faltering a bit as the company usurps applications and doesn't deliver on things like a payment platform, on which others can generate revenue and Facebook takes a cut.

A subscription offering wouldn't necessarily hurt traffic, and it would undoubtedly increase revenue. If we learned anything from the dot-com crash, it was that eyeballs don't equal dollars. Facebook needs to capitalize now, before it becomes a true utility with a diminished value.

About the author

Dave Rosenberg has more than 15 years of technology and marketing experience that spans from Bell Labs to startup IPOs to open-source and cloud software companies. He is CEO and founder of Nodeable, co-founder of MuleSoft, and managing director for Hardy Way. He is an adviser to DataStax, IT Database, and Puppet Labs.

 

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