Contrary to popular belief (again), Facebook (FB) is not charging a fee to keep your profile and other online information “private,” nor will Facebook institute a monthly access charge to the social media site.
The Facebook fee rumor that’s been circulating over the past day or so is just a hoax, and a tired one at that.
Facebook has confirmed — again — that access to its platform is and will be free in perpetuity.
And yet, like every other time the Facebook fee rumor has been put into a higher gear, it prompts a philosophical question: Could Facebook charge a subscription fee? Should it?
The Facebook Subscription Fee Notice Is a Hoax
The message in question sounds (sort of) legitimate, instructing Facebook users to cut and paste some legalese onto their profile page informing the social media company:
“I do not give Facebook or any entities associated with Facebook permission to use my pictures, information, or posts, both past and future. By this statement, I give notice to Facebook it is strictly forbidden to disclose, copy, distribute, or take any other action against me based on this profile and/or its contents.”
That notice to be cut and pasted generally follows a message that a monthly fee of $5.99 would be charged in order to maintain a user’s privacy wishes.
There are two key problems with the rumor and the prescribed user response (aside from the fact that it’s just a hoax). For one, Facebook has no effective means of billing and collecting a monthly Facebook fee. Second, Facebook users don’t get to call the legal shots. If you’re using Facebook — a site owned and operated by, you know, Facebook Inc. — you’ve already agreed to their terms and conditions. The only legal remedy to terms and conditions you don’t like is to stop using Facebook.
The silver lining: While Facebook is nosy to the point of being intrusive, it’s truly not interested in your deepest, darkest secrets. It simply wants to market to you.
Could There Ever Be a Facebook Fee?
With all of that being said, one can’t help but wonder if a Facebook subscription fee would ever fly if Mark Zuckerberg ever wanted to shake up the revenue model a bit.
It’s not likely.
Though the Huffington Post article introducing the poll is now more than three-years old, the poll itself is still active and keeping a tally on votes. And, as it turns out, 81% of people would never pay any sort of Facebook fee at all.
It’s an imperfect poll, admittedly, in that it may have counted votes from individuals who aren’t Facebook users to begin with. Moreover, consumers are notorious for saying one thing and doing another. Just for the sake of argument, assuming the HuffPo poll is anywhere close to being on target, Facebook is far better served — fiscally — by keeping the site free, knowing most users will never generate any real revenue for the company.
Just to paint the picture with numbers, over the past four quarters, Facebook has generated $14.64 billion worth of revenue with with an average of 1.41 billion active users. That translates into revenue of about $10.40 per user per year.
A Facebook subscription fee of $5.99 per month times twelve months per year times 1.41 billion users, conversely, translates into revenue of a little more than $100 billion; but remember, 80% of the population said it would never pay any kind of Facebook fee. Assuming that’s true, that would whittle the user base down to only about 280 million active users, which in turn would have whittled that trailing-twelve-month revenue to only about $20 billion.
It’s still a bigger figure than the $14.6 billion in revenue of the ad-driven model in place, but that’s still nowhere near a wide enough margin to risk alienating your entire user base.
Bottom Line for FB Stock
Those are just back-of-the-envelope calculations, of course, and should be taken with a grain of salt. But, even if they’re merely in the ballpark, the point still stands.
That is, owners of FB stock are ultimately better served in the long run without a Facebook fee crimping memberships.
Good thing it was just another hoax.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.