Mark Zuckerberg knows that the pressure is on. It's rare that a company's IPO is watched as closely as Facebook's has been in 2012, and the news hasn't all been rosy. After debuting on May 18 at $38 a share, the social media giant's share value has dipped dramatically to less than half of its initial value.
Zuckerberg knows that Facebook needs to prove its ability to create new income streams, a reality that wasn't made any easier by General Motors' very public withdrawal from their $10 million advertising contract with the company, citing the ads' lack of effectiveness.
With nearly one billion users, Facebook needs to figure out how to monetize its base. To that end, they may be poised to take a hint from a much smaller peer in the online sharing network, Tumblr.
Since the blog platform's inception in 2007, Tumblr founder David Karp has remained steadfastly opposed to incorporating ads into users' personal blogs on the site. Even with nearly 50 million users, however, it had few revenue sources apart from selling customized templates to bloggers.
In February, Tumblr added a “Highlight this post
” button to each blog, giving users the option of paying $1 to make their post “stickier,” meaning that it remains higher on followers' feeds and stands out with a special message chosen by the user. I asked a friend to try this out on their Tumblr blog (I even footed the dollar). Whereas they were accustomed to receiving two or three likes per post, their highlighted entry garnered 14 in a few days' time. That's still not much, but percentage-wise it's a huge step in the direction of heightened visibility.
Facebook is already following suit, launching a beta program in New Zealand that gives various users the option of sticking their status update up on their friends' and followers' walls higher and longer. The trial ranged from 40 cents to $2 per post (NZ dollars), testing the waters for what users will pay.
That idea seems harmless enough. If you're having a big party or want to recognize your sister's birthday, it may be worth a buck to make sure all of your friends see your post. But Facebook must realize that it's not their everyday non-commercial user that's going to take the most advantage of this.
Spam City or Game Changer?
Paying for heightened attention isn't completely new on Facebook. In January 2011, Facebook began allowing businesses to pay for “Sponsored Stories,” a feature that helps ensure a company's updates make it to the eyes of users that have already Liked the company. Similarly, paid posts would still only reach people that have chosen to get that business's page or users' content.
Still, a stack of marketing posts topping every user's wall could end up flipping the idea of inbound marketing (also called permission marketing) on its head. Just because a consumer approves a business to send them messages doesn't mean that they want to be inundated with them.
This puts Facebook in a difficult bind. Unlike Tumblr, the sheer critical mass of users doesn't mean that the average Facebook account holder is fiercely loyal to the platform - they use Facebook because everyone else does. All those users (and shareholders), however, necessitate new income streams, and what has already worked for Tumblr is probably looking like a pretty good option to Zuckerberg and his crew.
Still, it's not unthinkable to see paid posts being something of a Facebook killer, or at least the first critical blow. If the average Facebook users' wall becomes a string of marketing-based posts, won't people begin to turn to the next new thing, from Path.com to the ever-growing Google+?
Remember, Facebook, Tumblr and even Google grew before ever monetizing. People jump on web-businesses in their infancy because they are free to use and not commercialized. Figuring out how to make money comes later for the creators. Unfortunately, it's the toughest part.
Would you pay to post on Tumblr or Facebook? Do you think you'd stop using them as much if other people did?