Sunday, February 8, 2009

5 Ideas for Facebook to make money - Part I

As an avid Facebook user, and following the recent trend to make lists, I thought it would be fun to come up with some ideas to help Facebook make money in 2009. Their user-base is seeing rapid growth again, but they are still struggling to monetize all that user data. For the sake of time, I thought I'd condense this list down to 5 things.

Many of these ideas are based on the growing number of 30-40 somethings that are joining. These folks use it as a distraction from their existing lives, or as a way to keep in touch with old friends, or to remember happier times.

Idea #1 - Charge for usage. $9.99/year. Millions of people pay that much for a month of NetFlix, or a day's worth of Starbucks. There's $1.6B in revenue (at 160M users).

Plenty of people will say that violates the spirit of what allowed Facebook to grow, which was the Freemium business model that gained popularity in 2005-2008, with the rise of many Web 2.0 companies. Fair enough, but how many of those companies are going to survive the latest economy crisis? And by survive, I'm really talking about being a long-term business entity, not selling out to Google, Yahoo, Microsoft or some other large internet company. Let's think in terms of truly building a business, not an exit strategy.

At some point, Facebook needs to be able to ask their users (directly or hypothetically), "if we were gone tomorrow, would you miss the service?" If the answer is "No", then charging a usage fee is dead. If the answer is "Yes", then you have a very viable starting point to explore a fee.

I have some ideas about how they would create the inflection point for making the change from Freemium / Ad-Supported to Fee-Supported, but I'll hold off on those for another post. I think 2009 is going to be an interesting year to see how some of these models survive and also how create they get with revenue models.

[NOTE - As I mentioned before, it's good to put large numbers in perspective.  Facebooks existing user base (160M) is equivalent to 52% of the US population; is equivalent to 73% of US broadband users; is equivalent to 10% of worldwide broadband users.  Needless to say, there is a lot of growth potential for Facebook worldwide.]