Mark Wyner’s journal

Find me at Bunker

I like to talk endlessly about anything related to the design and development of websites and mobile apps, technology, and the creative industry, which may tickle your fancy.

Monday, September 10, 2012

How the Free Social-Networking Model is Imploding and What We Can Do About It

We have been enjoying “free” social networking for some time now. Millions of people are using Twitter, Facebook, Tumblr, Wordpress, etc., and it doesn’t cost us anything. Monetarily. Of course we pay with ad bombardment and the marketing of ourselves. As PC World states:

If the product is free, you are the product.

On Facebook’s first day of trading Forbes calculated the value of the personal data of each of its 900 million users to be roughly $91.00. And Twitter is rethinking just how open they have been with data sharing because of the monetary value it holds for them. So they’re taking actions to create a walled garden which, as web publisher Dustin Curtis notes, will have a heavy impact—especially on the very developers who have helped them flourish:

The solution Twitter has taken involves barricading the walled garden, keeping the valuable tweet data inside Twitter, and removing all incentives for people to move to other, similar platforms.

The problem with this solution is that Twitter was built on the backs of the very developers it is now blocking. It now expects those developers to continue supporting Twitter by syndicating content into its platform, but it no longer wants to provide any value to developers in return.

The Atlantic is predicting that all of this means “the Social Media Revolution Is About to Get a Little Less Awesome.” And I believe they’re right.

But here’s a thought. Instead of working to build profitable business models around free social networks, how about we pay to use them? If Facebook charged its 900 million users an extremely modest subscription fee of $5/year they would generate $4.5 billion annually.

So how does that stack up against their current revenue? Well, according to LA Times, the S-1 that Facebook filed this past February reports their annual revenue at $3.7 billion. By my calculations, my $5/year model gifts Facebook an additional $800 million. And it also provides users with personal privacy and no ads. Bump that annual fee to $10 (still very modest) and the profit becomes $1.6 billion.

And what about Twitter? Venture Beat reported that Twitter was cruising into about $140 million in revenue for 2011. With a conservative 50 million daily users (removing fake/spam accounts from total figures) at $5/year, Twitter could pull in $250 million annually. That’s nearly a $100 million leap in profit from their reported 2011 revenue. At my $10 fee that becomes $200 million.

So let’s recap:

  • Incredibly-modest $5–10 annual subscription fees
  • No ads
  • Privacy
  • Better experiences for everyone

Okay, how do we get this rolling?