Facebook Will Never Turn a Profit On Ads Alone
The declining value of social network ads, particularly on Facebook are in strong opposition to the level of engagement these sites generate. Facebook users spent 527 minutes on the site in the second quarter of this year, MySpace users spent 677 minutes.
The launch of targeted ads by way of Beacon was a failure, but if Facebook opened up a reasonably priced subscription service tomorrow, I would pay for it and so would many other uses.
One of the distinctions that needs to be made regarding personal information sharing, really a better term for the vast majority of what is today termed UGC is that the information being shared is only valuable to a small number of family and friends. In this sense, it’s not content in the sense of mass media and shouldn’t be described or distributed as such.
This is what I mean when I say UGC is dead. There is no market for it except to a user’s personal network and because it’s personal, a user is more likely to pay for a subscription in exchange for a secure, private environment in which to share their personal information with friends.
Unless the person is uniquely desirable for advertisers to reach (think someone really rich like Bill Gates) you’re not going to be able to get a high CPM for that small network without excessively intrusive targeting.
If it’s Bill Gates you may get a million dollar CPM because there are a substantial number of luxury brands that would like to reach him, but the few in his demographic would far rather pay to protect their privacy.
And he’s not alone. A substantial number of existing social network site users already prefer to pay a nominal fee for premium services, preferred privacy settings and the assurance that their private information will not be shared with advertisers.
While social networks are still in a period of heavy competition and can’t avoid alienating users by charging everyone right away, they could certainly begin charging those who place a value on the privacy of the information they share and premium features that are offered.