Yes, most likely it IS a dream. But since Facebook is about to release an earnings report this month on the 23rd, I believe it will be the peak of their revenue climb with this pay to play shift and that by the end of the year we will begin to see a dramatic decline in revenue and page activity if they stay the course.
But in a perfect world, I would love to see a $12.1 Billion revenue announcement that consisted of a new monthly page fee. Why? It would mean that they came to their senses and realized that the current pay to play model they have implemented is not sustainable as a business model and page owners, managers and brands are fleeing the Facebook platform for greener pastures. It would also mean that they have further had a reality check and finally understood social media marketing, their users and customers in a real way.
I previously wrote a piece before Facebook enacted the Pay to Play business model that included what I believed to be a better solution to their then EdgeRank Newsfeed algorithm, stock price plummeting and revenue model challenges.
Since then Facebook deployed what has come to be known as their “Pay to Play” requirement, that I believe is a completely unsustainable revenue model and one that delivers zero benefit to users, marketers or Facebook itself over the long run. This is backed up by a recent eMarketer report showing organic reach declining at an increasing rate. Diminishing returns the platform can and will deliver to brands, marketers and page owners. I decided to do some deeper research and have put together basic financials that compare what Facebook is currently doing as compared to what I propose, and the compelling differences between the two.
But before I get into that, let’s take a peek at some of Facebook’s 2013 Public Business Highlights:
Revenue for the full year 2013 was $7.87 billion, an increase of 55% year-over-year.
Income from operations for the full year 2013 was $2.80 billion. (advertising revenues)
Net income for the full year 2013 was $1.50 billion.
Free cash flow for the full year of 2013 was $2.85 billion.
Facebook currently has 54.2 Million active pages.
Facebook has 25 million small business pages.
Removing Pay To Play and Replacing It With Monthly Fees:
I went ahead and ran some numbers using my plan and compared the results with what Facebook is currently doing. This plan is predicated on Facebook displaying all page posts to newsfeeds, similar to friend posts. If they abandoned their unsustainable Pay to Play model and instead adopted my page monthly fee model, the revenue improvement to Facebook is massive and the benefits to page owners, marketers and end users is even bigger! By the numbers:
- I am factoring a little more than half of pages would participate and pay the monthly fee, remaining an active page on Facebook.
- Small business pages would pay a small $30/mo fee, other smaller pages a $20/mo fee, non-profit and charities only $10/mo and larger big brand pages an average of $200 per month.
- Ad revenue would still be a factor for Facebook and actually become even more valuable since you know you would be able to reach new likes that you add to your page with this new model. I pegged the ad revenue much lower to take into account the changes to the model though.
- New 2014 annual revenue jumps from $2.8 billion to $12.1 billion under my plan – a $9.3 billion improvement over 2013!
Benefits of the Monthly Page Fee Model:
Newsfeeds would be competitively driven Facebook users would control what content they want with the power of their like/unlike
Focus would shift to creating and sharing great content and that would drive the newsfeed
The playing field for SMB’s would be leveled against Big Brands wouldn’t have a substantial advantage because of their huge budgets Efficiency/Result value would shift to time spent creating content rather than managing ad systems
So many more benefits, but you get the idea
The BIG Winners:
Users – They see content from pages they liked and wanted content from to begin with. Users would power the Facebook page success model, rather than big brands and/or budgets.
Marketers – Can access the likes they already invested heavily to obtain. The nominal monthly fee makes it a very viable marketing platform again.
Facebook – Duh. HUGE revenue win for Facebook and a lot of good will earned for listening to its users and developing an alternative that benefits everyone. (there’s a first for everything) Everyone wins! Tell me what your thoughts are on this alternative monthly fee model for Facebook Pages? What do you like, dislike or wish Facebook would do?
a P.S. for those that enjoy those.
Here Are Just A Few Problems with the current Pay To Play Model:
Not sustainable – In another post I did some time back I discussed “By restricting the previous value of pages to marketers of all sizes, Facebook is setting the stage for a collapse of the Facebook page model and pushing both users and marketers to other platforms…” When you require people to reach the audience they have already spent a ton of time and effort to establish, and many paid Facebook for ads to do this, then you change the game and require them now to also pay to reach them, nothing but diminishing returns will occur. If Paying for page reach via ads is the only method available, the expertise and time requirements to make that successful in a diminishing return environment pushes many right out of the market.
Users are the losers – They are not seeing the content from pages they liked and want content from.
Money, NOT content drives pages success
Not a level playing field – Most small and medium businesses can’t compete with big brands for eyeballs on the platform effectively.
Diminishing Returns – The current model will continue to decline in results, rather than improve return and value to business stakeholders. It’s pretty simple to determine the long-term outcome of something with diminishing returns.