I saw Daniel Lyon's editorial in Newsweek this morning and simply had to reply.
It's Time to Pony Up - Daniel Lyons
Back in the last downturn, in 2001, Jason Katz realized he was in trouble. His fledgling Web site, Paltalk, was trying to make money by giving away a free service and selling advertising. But suddenly advertising was drying up. So Katz—whose site operated chat rooms in which you could not only send text messages but also talk, the way you would on a phone—did something radical: he started charging people to use a premium version of his software, which offered some extra features. Guess what? Since 2004 he's been making a profit, and he's come to believe that, contrary to the conventional wisdom, people really are willing to pay for online services. "I think some companies are scared that they will cede users to the competition if they deign to ask someone to pay for a subscription to something—but that is obviously a mistake," Katz says.
Lyons is arguing that for internet-driven companies to survive, they will have to charge for their services. As major social media sites money-making schemes have proven profoundly unsuccessful, the hordes of users who depend on these services to make some sort of sense out of their lives will happily pay up to use them. As he notes, "If the service is so useful, surely people would pay." Further: " The really passionate members are kids in their teens and 20s. They spend hours every day on Facebook, and would be lost without it. You think they won't pay five bucks a month?"
Lyon's idea may sound both innocuous and delightfully capitalist, but he shouldn't be anywhere near so confident that people will pay. (Further, I've never heard a thing about this Paltalk service he's touting). As an un-elected representative of my Facebook-humping generation, I'm unconvinced. People my age have spent their entire lives seeking the newest and shiniest Free Thing, and social media sites are simply the latest expression of such. Lyons is making the fatal assumption of assuming that we are in any way loyal. We, the young twinkies of the Internet, are not.
Fact is, if Facebook or Twitter began charging to use their services, I am certain that some enterprising little punk would simply create a cunning (or improved) duplicate of same. Coding a Facebook or Twitter copy isn't that hard, and a mass exodus won't be that hard to orchestrate either - note how pretty much all of Myspace's casual users migrated with a quickness to Facebook a couple years ago. Face it, Mr. Lyons, I don't think we will pay five bucks a month. We'll just go elsewhere.
Facebook's owners get it. Facebook's head of marketing, Elliot Schrage, has said as much: ""Facebook is a free service, and we have no plans to change that."
There's a lot at stake: a pay schematic for a monster like Facebook would totally destroy what makes it so valuable: its monolithic penetration (teehe) into almost every market everywhere. Minus that incredible power to attract everyone, it loses a ton of its appeal, it's ability to bridge the entire world in poking and drunk-photo-posting unity. Without total access, Facebook is nothing special. The same goes for Twitter. Do you really think those Iranian protestors or those Mumbaiker civilians would have ponied up to use Twitter? The incredible capabilities of Twitter as a real-time journalism service would be completely lost.
That's true - but it still makes money.
Can social networking sites really make money? Yes - Myspace offers a model of how making a buck off humanities exhibitionist streak could be achieved. I have confidence that Facebook will also figure out how to use its zeitgeist in the pursuit of capitalism, without losing the universality that makes it so special in the first place. Turning to a pay schematic is not , the answer - no matter how apparent it may seem to Daniel Lyons.
