A couple of months ago, we summarized a report indicating that even though people are spending increasingly long amounts of time on Facebook, ad clicks are not increasing, much to Facebook’s chagrin. There are many potential reasons for this discrepancy between time spent on the site and the lack of advertising success, but one thing seems certain – people on Facebook don’t pay much attention to ads, even though the ads can be targeted based on demographics and keywords.
Given all of that, we found it interesting that Slate reported on a new social media platform called app.net last week. The main difference between this new platform and those that have come before is that app.net would charge $50/year where all other sites are free to use. However, app.net, unlike Twitter and Facebook, would not depend on advertisements or “promoted stories” to make their income. The environment would be ad-free.
Not A New Model Except for Social Media
Most major media channels have experienced a change like this. Consider radio, which now offers ad-free listening via Sirius-XM. Television combatted the advertising models with premium channels like HBO and Showtime. The concept of offering an ad-free platform in exchange for charging something extra is not revolutionary in and of itself. For the world of social media, however, this is a pretty new idea. Sites like Twitter, Google Plus, and Facebook have never charged users. LinkedIn offers a premium version of its site that people can pay for, but the site is still useful even if you don’t use the premium version.
Of course, Twitter and Facebook, like many online and social media companies, have arrived at the realization that when you offer site usage for free, it can become extremely difficult to monetize it. Reuters reported last Thursday that Facebook is continuing to experience a share price that is now about half of their opening IPO price because the company cannot come up with a plan to increase revenue. Forbes reported back in January that Twitter, despite a massive amount of users, hasn’t been able to generate much revenue either. With social media participants balking at ideas like promoted stories (updates that appear prominently in a stream because they are paid positions) in a Facebook news feed, it’s difficult to imagine how Facebook and Twitter will ever be able to generate the revenue they seem predestined to make.
The Problem For Marketers
This is all interesting if you are a person who uses Facebook or other social media platforms to keep in touch with family and friends. If you use social media as a marketer, however, this is an important story to follow. If Social Media is moving towards a “pay to play” model, which would eliminate advertisements and promoted stories, would the marketer’s ability to use the channel as a marketing tool disappear? Companies have also begun to realize that simply talking to people, while it can increase your network, is not enough to generate sales or even leads most of the time. If advertising is banned, would marketing-related updates also be frowned upon? Would social media remain a vital part of a marketer’s tool box or would it shrink in value like the fax machine? While you might enjoy the ad-free model as a platform user, the inability to promote your products or services could represent a major disadvantage for you as a marketer.
What are your thoughts on this issue? Would you ever pay $50 a year to use a social media platform? Are you worried that social media might shrink in importance as a marketing tool?
We’d love to hear your thoughts!
Image Credit: http://www.flickr.com/photos/68751915@N05/6736150457/ via Creative Commons