As IPO Nears, Facebook Paywall Seen as Unlikely
Thursday, February 2nd, 2012As Facebook heads toward its IPO destiny on Wall Street, speculation grows over whether the world’s leading social network can and will continue to offer its service for free.
The company has long boasted that it’s “free and always will be,” even featuring that phrase on its sign-up page.
Meeting Expectations
But will that change when investors start demanding even bigger returns than Facebook can provide from their current application partnerships and ad sales, which generated a $1 billion profit last year?
“Typically, investors put new pressures on a company that the company is not ready for,” said technology analyst Jeff Kagan. “Investors always mean there are too many captains on the bridge. Do you focus on the customer, on the competitors, on the workers or on the investors? This is where many companies get it wrong and end up in trouble.”
Even a $1 fee per month from what Facebook says are 850 million users would bring in more than $10 billion a year, offsetting operating expenses to maximize profit from traditional revenue streams. How many people addicted to sharing status updates and other information with their network of friends would bail rather than pay that nominal fee?
Alternatively, Facebook could set up a premium service, similar to Microsoft’s Xbox Live membership that offers enhanced features over the free membership. Many newspapers now offer additional services and content behind a paywall.
Rumors Swirl
Paid Facebook accounts would run contrary to the path of Internet trailblazer America Online, which started out with a range of account levels based on time spent online and is now free.
Perhaps because the progression seems so natural, rumors have long persisted that paid use is right around the corner. A viral hoax spread via status updates last fall said the new Timeline changes coming to user profiles would usher in membership fees.
There…
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