Each Friday, Points North gives a senior media figure a platform to air their views on a topical or relevant issue.
This week it’s Steve Downes, digital and social media strategist. Facebook is beginning to squeeze brands for more money – and it’s inevitable, he says, that us users are next.
Facebook sold its soul in May 2012, when the network had its first public sale of its shares.
Right now Mark Zuckerberg owns around 20% of Facebook. The rest is owned by investors. So he is now an employee of the shareholders. His only duty is to protect their interests, and their main interest is to see the value of their stake increase every year.
The only way for it to achieve that is for Facebook to increase its profits EVERY year. So Facebook is now on a never-ending quest to find new types of revenues.
Currently brands and advertisers are the target for the squeeze to gain more revenue. Facebook has ended the ‘free ride’ for brands who, up to recently, have been able to build huge communities then communicate with them for lots of different marketing or customer service reasons.
Brands have spent huge resources developing and engaging with their communities. Facebook has cut off this ‘free’ line of communication. Organic reach is now very hard to achieve and not at all reliable. Latest reports show that a brand’s posts are now seen by less than 2% of its community and a mere 0.07% interact with a brand’s posts.
But Facebook fans remain a huge and desirable market for brands and now they will have to pay to reach them. They will and Facebook will see its revenues rise.
But even in the relatively near term, this will not be enough. Revenues will conform to the classical sales curve, rising then reaching a plateau. Then what? Remember, shareholders are endlessly demanding, profits have to grow EVERY year. Where will these increases come from?
There is only one possible source of endlessly increasing revenue of the scale needed – you, the user. And the other 1.35 billion active users like you.
But how will they make money from you? They will never renege on their founding pledge of never charging anyone to join Facebook, but they never pledged to distribute all your posts to all your friends for free. Or allow you to attach a link or other content. Or not to offer you premium services.
If Facebook can decide to limit the reach of the postings to a Brand’s Facebook community it can do exactly the same to its users. One of the justifications Facebook uses for its brand page changes is that not every ‘fan’ wants to see every post. Some posts are targeted at only part of the community and some, frankly, are simply spam-type posts clogging up their news feeds.
Couldn’t exactly the same be said about our posts to our friends? I’m sure Facebook could make a very good case for it. The result would be that, just like brands, you would have to pay if you want more of your friends to see your posts than Facebook decides.
Or it could simply be volume-related. With some justification, Facebook could say it never envisaged the friend numbers of some users or the sheer volume of posts by the more prolific amongst us and could charge the ‘excessive user’.
But initially, more likely are ‘Premium Services’. Facebook has a win/win here. As paid-for content increases, as it inevitably will with the recent brand page changes, so will the demand for less interruption. Enter a paid-for ad-free environment.
Another route could be to charge for adding content to your posts – pictures, videos, links etc. These could be wrapped up with some value-added functions to make it more palatable – editing, augmentation, etc.
Facebook will be much more ingenuous than me in coming up with revenue-generating techniques, but they will. The individual costs will start small – with a user base of 1.35 billion each individual transaction needn’t be very high. Some of these charges will not be accepted but, inevitably, some will stick and become part of the routine of using Facebook.
The challenge for Facebook will be in finding and not going beyond the ‘pain point’. This is when the cost becomes uncomfortable enough for you to consider moving all your friends and content to a free channel – Google+ is waiting with open arms…
Steve Downes is a digital and social media strategist