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Reevaluating Facebook’s monetization strategy
[author]Facebook pages are increasingly becoming an invaluable part of companies’ day-to-day marketing activities, but during last year’s Facebook Marketing Conference, Facebook announced to businesses that their page updates were seen by an average of only 16 percent of their fans through the news feed.
This caused quite a shock among companies. They weren’t entirely sure how Facebook’s news feed algorithm, EdgeRank, really worked or how much visibility they were actually getting but they were positive that it was higher than 16 percent.
Also beginning last year, Facebook introduced a way for page administrators to pay to promote posts to a wider audience.
Despite allegations that Facebook is now trying to force page owners to pay for reach by using promoted posts — see the flood of complaints from small business owners — the company has been aggressively fighting such reports. Facebook argues that the reason for the limit is not a shakedown but to avoid spam and make sure that Facebook’s news feed provides people with more of the content that they want to receive rather than content supplied by certain spammy brand pages.
So pages are now competing for a smaller share of users’ news feeds, and in order to gain significant exposure, they needed to invest money into promoting themselves. This all translates into spending a substantial budget on advertising.
Now it’s completely understandable that as a public company Facebook needs to make money for its shareholders, and advertising is the most direct path to revenue. While the company’s stock has rebounded in recent weeks, limiting the exposure of pages to such a low percentage of their members is, to my mind, a mistake.
Retention of fans has been a key part of Facebook’s appeal
Let’s think for a moment: Why are brands and marketers on Facebook to begin with? Yes, there are over a billion people on Facebook and it’s an amazing platform to reach the masses. Yet at the same time, TV is still one of the most popular media platforms in the world, and while Facebook is the most visited site on the Web, other sites still get a lot of traffic, too. Google advertising is everywhere, and hundreds of millions of newspapers are sold every day. The truth is that Facebook’s value as a marketing tool is due not only to size or penetration but its most valuable asset: retention.
Unlike any other advertising tool, Facebook always gave brands the power to connect with audiences that responded to their advertising efforts, for free, even after the campaign was over. This was truly unique. Once a TV ad campaign is done, it’s done, and the only way to connect to that audience again is to buy more ad time and spend more money. This retention of fans is why Facebook has always been so appealing to marketers: It enabled them to forge a long-term connection with their community and not a quick one-off type of relationship.
Facebook’s other options for increasing revenue
Once Facebook started chewing away at the freemium part of that model, it lost that unique edge over other marketing tools. I’ve heard from a few different companies that they felt “cheated” by the world’s largest social network, as they had worked so hard to grow a substantial, lively community and now Facebook was substantially limiting the number of members they could actually reach with their content.
To me, decreasing the exposure of pages in order to gain more money from advertising seems almost too obvious of a path when Facebook has so many other ways it could monetize. I’ve always expected Facebook to be a pioneer in its tactics and I expect the same in this case. What if Facebook increased page reach and added some other, more creative monetization tactics to the mix?
What are some other ways Facebook could make money?
- Business page fees: Regardless of the exact amount of reach, businesses are gaining a great deal of value from Facebook pages. Facebook could ask for a small subscription fee from businesses to maintain a page on its platform. This will put marketers at ease, since they know that for a set fee, they can reach and connect with most of their audience.
- Increase of friendship limit: I know many people (including myself) who would pay a small monthly fee to be able to connect to more than 5,000 friends. Again, Facebook would be monetizing its user base, but not in a “must have” sort of way but rather in an optional way for receiving a premium feature.
- Phone calls: Just like Skype, Facebook could let users call their friends’ cell phones even when they’re not online for a small fee, using Facebook Messenger’s VoIP functionality.
- Facebook Offers: A few companies have complained about the fact that unlike other online coupon systems, Facebook Offers doesn’t require the customer to do anything other than click them, thus reducing conversion and ultimately revenue. If Facebook restructures its Offers to work more like other online coupons, it can make it a better sales tool and also take a little off the top. Beyond this being an obvious revenue channel, Facebook can also bring in a great deal more ad revenue from advertisers that want to use a more sales-oriented approach.
- Real-time insights: Currently one annoying aspect in managing Facebook pages is that Page Insights take two days to update. For a small fee Facebook could create “Premium Pages” that receive insights in real time — an invaluable tool for any big brand, especially during a campaign (either on or off Facebook).
There are many ways that Facebook could monetize itself without chasing away marketers and brands. It would seem that keeping page reach higher while adding other forms of monetization to the mix would be more in line with Facebook’s values of keeping us all connected to the people and brands that we like and enjoy.
Facebook proclaims on its home page: “Sign up. It’s free and always will be.” However, to continue being a free platform for users, Facebook must find ways to survive. We shouldn’t be angry about the need of this enormous ecosystem to sustain itself. We should be happy to have a platform that enables us to communicate, engage and develop together as a human race more effectively and regularly than ever before. I expect there’s some sort of price to be paid for that. The question is how much are we willing to pay, and for what?