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In his kindly titled
article “Hitting Ben is FREE” Scott, with an eloquence I cannot
hope to match, completely misses the point. If you haven't yet read
it I suggest you do so now(http://www.moneywhatmoney.co.uk/index.php/Scotts-Articles/Hitting-BEN-is-FREE.html ). He starts off with two good points,
firstly that a tax on windows is a silly idea – couldn't agree more
– secondly that if Facebook started charging their users, there is
a very high chance everybody would simply stop using it and find
somewhere else to waste time.
Whilst the story about
William the Orange was entertaining, it is hard to see how it bears
any relevance to the problem of revenues from social networks.
William the Orange imposed a tax on windows purely to get some “money
for nothing,” people having windows or looking out of them cost him
nothing and so the tax had no real basis, economic or otherwise.
Websites are a a little different.
To make the two
situations analogous history will have to be re-written slightly, if
it were the case that all of the windows were provided by our friend
William and every time some-one looked out of one it cost him a shiny
gold sovereign for them to look out, then they become comparable.
You see providing a
site like Facebook is far from free, it's not even cheap, when you've
got over two hundred million users accessing one website it's
expensive, really expensive; tens if not hundreds of millions of
pounds per year, and that's just to provide the technical side. Scott
suggests that if Facebook start charging its users, “some clever
little opensource fiend would rip off the format, cut the crap out
and send it back out into the world just so he/she can be the person
who rebuilt Facebook,” I'd like to know where this clever
fellar finds the huge resources needed to provide his resurrected
Facebook, I wish him luck, I really do.
To sustain itself,
Facebook needs constant income, William didn't. This income has to
come from somewhere, Scott suggests that Facebook provides excellent
advertising opportunities. I'm afraid I once again have to go back to
some 'textbook economics' on this one. Being a 'great advertising
opportunity' only means something if the amount advertisers gain (or
avoid losing) by paying for advertising with a provider warrants
paying said provider a greater sum than it costs said provider to
provide the service on which the adverts are displayed. If Facebook
(or youtube or any other social network site) can find a way to meet
this criteria then good, it remains free, everyone's happy.
The problem is that at
the moment the figures just don't add up, for those of you who want
the exact numbers, this Forbes article is well worth reading
(http://www.forbes.com/2009/04/06/facebook-advertising-rates-technology-internet-facebook.html).
Facebook users simply aren't showing enough interest in the adverts
for potential advertisers to pay the sums needed to sustain Facebook.
I'm more than happy to accept that Facebook and any other social
networking site might find a way to adapt and make the necessary
money from advertising, the point still stands though, if they can't,
why not pay for Facebook?
Scott's absolutely
right, if we had to pay for Facebook or Twitter then the bits of
advertising I do on it wouldn't be free. But no-one's suggesting they
start charging hundreds of pounds, with two hundred million users, if
they charged say five pounds per year, that's £1,000,000,000 – a
billion dollars for those of you with better things to do than count
zeroes. Sure they wouldn't actually get all of that because less
people would use it if you had to pay but it gives you an idea of the
sort of scale involved.
So if they did charge,
would I have made sufficient profits to cover the advertising? Yes.
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