No such thing as a free lunch

You don’t have to be a rocket scientist to work out that if you are offered anything for nothing these days there has to be a catch. You know it, I know it, everybody knows it – you just don’t get anything for nothing, period.

And so it goes with social networking. Lured like lemmings to the cliff edge we all embraced Facebook in its simplest form as a great way to communicate with friends and family, keep up to date with our circle of friends and even extend that circle to our friend’s circles, and so on. What a romantic notion that something that would radically change our lives and take up so much of our spare time would always be free.

Whilst Mr Zuckerberg may have started with the same altruistic notion, the moment his ‘baby’ grew up and had to morph into a public corporation with all the pressures of sustainability, making money and distributing profits to shareholders, the whole game changed. The objective now is to use every possible opportunity to confront all those freeloading ‘faces’ with advertisements, offers and add-ons that have to paid for in order to fill the Facebook coffers.

To be fair, this is not a dilemma unique to Facebook. Almost every other ‘free’ online social scene-setter aims to get numbers up first by being free, then attracting investment against those numbers to allow even more expansion. Once it achieves enough momentum, and a viable number of subscribers, the founders and early investors push for an IPO or exit by sale and the whole thing emerges, hopefully, as a moneymaker.

However, unlike the successful case studies taught in business school, not all can make the transition successfully, and like their ‘dotcom bust’ predecessors, many will disappear without a trace. Tumblr, the six-year-old blog network that months ago began letting advertisers pay for prominent placement, expects to make its first annual profit this year after extending the feature to smartphones. Tumblr even tells advertisers to come up with campaigns that will spread through the network like its other content.

Teenagers are a good measure of what’s “cool.” Observing which apps they use and how they interact with technology can help the rest of us spot budding trends and lately it seems teens have grown tired of Facebook. MSN says that recent trend reports indicate that teens and tweens are now ‘kinda bored’ with Mark Zuckerberg’s social network, flocking instead to fresher services like the photo-sharing and filtering service Instagram and Snapchat.

Part of the appeal is that parents are less clued-in to these newer tools, so they can be enjoyed more furtively. Facebook actually warned investors of its declining cool factor recently, noting, “Some of our users have reduced their engagement with Facebook in favor of increased engagement with other products and services such as Instagram.” But before you start seeing the writing on the wall for Zuckerberg, don’t forget: Facebook owns Instagram, too.

Not long ago, many Instagram users were locked out of their accounts with a demand that they produce some government-issued documentation to prove their identity. Many on the forum said they thought the notice was a phishing ploy to get personal information. This comes after Facebook had infuriated users ofInstagram by changing its terms of service to allow it to sell peoples’ uploaded photos or related data. The change led to an outpouring of anger online — although the move echoes similar moves made by other services, such as Twitpic in 2011, which are allied to fast-moving micro-blogging services such as Twitter. Even Twitter is looking at becoming more commercial with ad placements.

But getting back to the point, if things take their natural course we may soon see sites like Facebook, Twitter and Instagram offering an ad-free option – presuming you are willing to pay NOT to be annoyed!

First published as The Insider at TM Forum

One Comment

  1. Andrew Doyle says:

    Interesting article Mr Poulos. I saw another article in the press just a few hours ago which stated that FB is considering charging a premium fee for the right to send messages (unsolicited) to ‘non friends’ and the more popular the ‘non friend’ (i.e a celebrity) the higher the fee. I guess that FB have to make as much revenue as possible to improve the PE ratio of their shares.

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