In case you didn’t know, Facebook announced earlier this month that it will debut its stock publicly this year in an effort to raise $5 billion dollar and make many of those who already own private shares many times richer. While the few current shareholders will likely make money out of this social media success, the companies, the new media artists and the individuals that post, browse and stalk on Facebook get zero. Don’t they deserve to tap into the potential riches?
In an interview with NPR’s “All Things Considered,” theorist, entrepreneur and author Jaron Lanier believes that Facebook’s potential to make more money by going public should be extended to the everyday people who use the social media network. He argues that since the user produces the content for Facebook to make its money, it would be in the company’s “self-interest to find a way to increase the wealth of its users.”
So how much does Facebook make out of advertising revenue? According to its IPO filing, in 2011, the company earned nearly $3.2 billion in advertising revenue. That’s about $3.79 per user if you consider the 845 million. While the money per user ratio may be small, it’s not surprising why theorists like Lanier (and a good number of people) would want to cash in on Facebook success without paying down for stocks when it debuts later this year.
In some instances, Lanier’s points could be justified—the more traffic a brand attracts through its posts that Facebook uses to collect information for advertising purposes, the more monetary incentive the company should give that brand to keep it going. Then again, those who use Facebook are joining for free, therefore others can chime in and say little monetary incentive is justified.
Although pundits like Lanier want Facebook to share the potential wealth from its soon-to-be-issued IPO, others like Georgetown University professor Sandeep Dahiya think that paying for posts isn’t good business for Facebook. He said to NPR,
“I do not think Facebook users create value for a broad audience. It is like a telephone company paying its subscribers for talking on the phone.”
In addition such an idea has not been implemented before.
It would be interesting to see if Facebook takes Lanier’s ideas seriously, but chances are that sharing the wealth with non-stock holders is unlikely to happen. However, we can all imagine that it would be nice to pocket a little bit from posting stuff constantly.
It’s an inversion of the principle of trade. A producer should develop a product for years to attain the privilege of paying it’s users for consuming the product.
This is an extension of the principle promoted by our elected officials:
“There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you.
But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory.
Now look. You built a factory and it turned into something terrific or a great idea — God bless! Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”
Elizabeth Warren, the Special Advisor for the Consumer Financial Protection Bureau
Sorry but Lanier’s broad statement on behalf of “everyday users” makes him sound like a clown trying to make a buck off of someone else’s success. The fact that the service is widely used for free by everyday users and Rockstars to share stories, products and services is already a great return for the user. And with those numbers, unless facebook can find a way to multiply those numbers with select users (think youtube and it’s partnerships), it won’t be feasible. Offering an incentive better than a high demand service only works if there’s a similar opposing service in similar demand, or if the business model were vastly different. There’s simply no scaled returns for facebook to do this as is.
Perhaps if facebook were to approach it’s top “Pages” with a partnership program from the start, the idea may work. Otherwise approaching those top “Pages” now as facebook is today would only hurt their revenues. It’s not like popular “Pages” are suffering or not using the service correctly in the first place.
If anything, this brings into question the big elephant in the room as to how and where will facebook go from here to innovate its services to generate more revenue. But if you have a good idea of that, you might as well head on over to the secondary market and grab some shares–just be weary of another Groupon (GRPN) scenario and buying into the hype.
I completely agree. We need to understand that Facebook is offering a FREE medium to promote our content. In the end, Facebook owes its users (and companies) NOTHING. They already has given us a great gift by providing such an awesome service for nothing.