Facebook is having a relatively tough time of late…
The stock is at a four month low today as Sheryl Sandberg, COO of Facebook, is testifying on Capitol Hill about Facebook’s mishandling of user data, manipulation by Russian operatives and other sad consequences of using the social media platform.
More and more people are wondering whether they should delete their social media accounts.
But these problems may be a silver lining for Facebook’s next chapter: Facebook Paid Accounts
3 Reasons Facebook Paid Accounts Are Inevitable
- The Ad Supported Free Business Model is a Race to the Bottom: A large part of Facebook’s problems stem from its “information wants to be free” business model. Beside the fact that Facebook turns you into an asshole, the business model is tough to sustain because of technology. Essentially, from a user perspective, there is no cost to creating incremental users. This creates all sorts of problems because bots and machine learning algorithms can fake users and SPAM accounts until the cows come home. This becomes a computer/machine learning/artificial intelligence arms race which pits Facebook against anyone else trying to spread a message on the platform. As computing power continues to become cheaper and more powerful, thanks to Moore’s Law, and machine learning programs that can teach themselves, there can be no winner. The easiest thing to do is to charge for access to Facebook. In a survey of 4,000 Yahoo Finance readers, 13% of respondents said they would be willing to pay $5 per month for a Facebook account that gave them more control of their personal data. Meanwhile, 87% said they would not pay. If only 10% of Facebook’s 2.23 billion users paid $50 per year for a “Facebook Paid Account” this would drive over $11 billion to Facebook’s bottom line, raising revenue by over 25% from 2017 annual revenue of $40 billion./li>
- Facebook Could Reinvent Itself as a Solution to Identity Verification: Deep fakes, or Facejacking, is increasingly a problem that will need to be dealt with. This stems from what is mentioned above in #1 about the rapid advances in computational power and putting it in the hands of anyone who wants it badly enough. In addition to Facebook’s offering a premium version that had an ad free business model (that didn’t share your personal data with 3rd parties) Facebook could help solve the problem of real identity verification online by collecting more data. Of course Apple could solve this problem with Face ID and more people would probably trust Apple than they would trust Facebook.
- Facebook’s CEO Indicates It’s Happening: During (separate) congressional testimony, Facebook CEO Mark Zuckerberg indicated that a Facebook Premium is on the table. He said that “a version of Facebook will always be free.”
Even though Facebook stock is in a downward trend now, and some people are choosing to delete their social media accounts, don’t count Facebook out.
Many people believe that Facebook’s stock has been oversold.
Indeed, one trader recently made a $7 million bet that Facebook will surge 60% by 2020.
And with billions of users, and a CEO/founder that’s young and aggressive, a premium version of Facebook turn the company around in the public’s eye and simultaneously generate significant revenue for shareholders.