Tuesday, 30 July 2013 09:49
The social media company could earn $12bn per year by offering users the option of signing up for an ads-free experience.
Biz Stone, co-founder of Twitter, has suggested Facebook Inc (NASDAQ:FB) could earn at least $12bn per year by offering users the option of signing up for an ads-free experience at a cost of $10 per month, i.e. Facebook could potentially earn three times more revenues from such a service than it reaped from advertising last year ($4.3bn).
Stone based this on a minimum of 10 per cent of Facebook’s 1.1 billion user base 'buying in' to the option. But would users really be willing to pay for this and if so, how much would they consider to be reasonable?
Research by digital marketing agency Greenlight shows that 15 per cent of users would be prepared to pay Facebook to see no ads with a majority of 8 per cent indicating they would be willing to spend $5 right up to $10 and even over, per month.
In March, Facebook unveiled the redesign of its News Feed and Andreas Pouros, COO at Greenlight, noted then that Facebook had taken the success of advertising in peoples’ newsfeeds on mobile and based its News Feed redesign on mirroring that format (or close to it) on all devices, which, in his view would help to boost revenues, results of which will be revealed, when Facebook reports its quarterly earnings later today.
He also commented then that Facebook may need to pace itself a little less aggressively when it comes to cashing in on its advertising sweet spot. Alongside showing that 15 per cent of users would pay Facebook to see no ads at all, Greenlight’s survey also showed that close to 70 per cent say they 'never' or 'rarely' click on advertisements or sponsored listings in Facebook, indicative that consumer apathy is very real.
Pouros also noted that the challenge faced by Facebook is 'reinventing' advertising so people don't feel they are being bombarded by ads. With the very recent addition of a video service to its photo-sharing app Instagram, video ads could perhaps be the next step, and some are in fact already betting on it.
Newer news items:
Older news items: