General Motors recently reported that it will pull its advertising from Facebook, citing a low click-through rate among other indications that its advertising there isn't effective. I'm not surprised -- I for one have never clicked on a Facebook ad and in fact don't even notice them. Like most people, I have trained myself to tune them out.
The problem of how to make money off its user base is not unique to Facebook. Some ways that websites make money are as follows, and all of them are problematic:
1. Erecting a pay wall or requiring a paid subscription. Problem: users will just migrate to other sites where they don't have to pay.
2. Piggybacking value-added services such as technical consulting, premium content, etc. Problem: it works only for certain types of businesses; plus even the premium content often has free alternatives, while technical expertise can sometimes be crowdsourced.
3. Advertising. Problem: people like me tune it out, and in any event total adspend, shared among Internet and traditional media, just isn't sufficient to generate significant profits for most companies.
4. Selling products. Problem: it's fine for shopping sites like Amazon, but not every site can build a retail business.
There are some other strategies as well, but so far no obvious monetization strategy has emerged for Facebook. I think that problem is fundamental to the nature of Facebook. Facebook is essentially a gift-based site. Few if any of its users are motivated by money when they post their photos, status updates, links, and so forth. They produce content and then give it away. While Facebook might make some ad revenue by diverting people from their purpose for logging in, that revenue is limited because if Facebook becomes to obtrusive with its ads, people will eventually stop using it.
With this in mind, I have a modest proposal for Facebook. I will even be so presumptuous to say that it is a solution to all of its problems. Basically, Facebook should fully embrace its gift essence and take a bold step into new territory by announcing that henceforth, it will be a gift-supported website. It could make an announcement like this:
Facebook's value lies in you, its 900 million users. You are what make Facebook what it is. Therefore, we are laying out a new goal: to remove all advertising from Facebook and make it a 100% donation-supported site, dedicated to serving its members, not extracting money from them. We envision Facebook pages with more artwork and personalization where advertisements are today.
We are starting this transition right now. We leave it up to you, the user, to donate what feels right to support an ad-free Facebook. $10 a year, $5 a year, even $1 a year might be the right level of support, depending on your means and the value you get from this site.
In addition, we would like to transition Facebook to a democratic model of governance. We are therefore retracting our planned Initial Public Offering and instituting a new one, open only to Facebook members, with a limit of one share per member. One person, one vote. You can also buy shares on behalf of your Facebook friends, so that people with limited means can vote too. Members will elect Facebook's Board of Directors and ultimately determine company policy. Basically, we Facebook's owners are going to turn the company over to you.
Facebook has come under increasing criticism for its attempts to create a "walled garden" in the Internet, as well as for its potential (or in the case of Wikileaks) actual censorship power. Putting its governance in the hands of its users would allay some of these concerns. It would also create a fierce brand loyalty and ensure that it truly serves its users.
Of course, for the present owners of Facebook this idea would mean a loss of control that might be a little bit scary. Indeed, this would be a very bold move that would shake the IT world. Ultimately, though, I think it is in their best interests too -- much better than clinging to a business model that is fundamentally at odds with the nature of the medium. The monetization problem will not go away. Facebook could go down in history as a pioneer of a new (and very ancient) business model -- the model of the gift. The present owners won't do too badly financially either with an unorthodox IPO (the details of which can be worked out to maximize or minimize their enrichment.)
The monetization problem for social media hints at a deeper and more general phenomenon: deflation. Difficulty in monetization is just one facet of a falling return on capital investment and, even more fundamentally, the end of the era of economic growth. A shift toward steady-state or degrowth economics is approaching. Part of that transition is a conversion of money-mediated relationships into gift relationships, as is happening on the Internet when so much content and information is provided voluntarily by numerous, distributed, unremunerated peers. Since our current monetary and economic system only works in the presence of growth, the transition we face will necessarily involve profound systemic change. Wise businesses will anticipate those changes by aligning their business models with gift economics. As artists, musicians, content providers, and software companies are discovering, increasingly, we cannot compel our customers to pay. We can instead rely on their feelings of gratitude and fairness; we can rely on their desire to pay, their desire to give something in return for what they have received.
I am not proposing this idea to Facebook as some quixotic exercise in altruism. I am making a serious business proposal. And I'm offering it free of charge! If, however, the good folks at Facebook would like to express their gratitude for my idea, donations will be cheerfully accepted.
Brilliant. Time to OCCUPY Facebook!
I would give money to Facebook on a regular basis IF such a model was honestly and transparently endeavored. A really great idea.
Me too!
Me three! 🙂
Check out macro7.com, it is exactly that.
I LOVE YOU CHARLES!!!!
you are so awesome Charles Eisentstein!
Great way to get everyone to go to Google+
I like it. Now. How to govern. This would be a perfect model for what they are working on with Holocracy. (http://www.holacracy.org/about-holacracy)
In fact, with an effective governance strategy, this new facebook could help fix how we govern towns, states, hell, the entire country.
then again, I am an idealist.
You’re not idealist enough. Why ‘the entire country’? Why not the entire world?
awesome!! Good mentioning the holocracy! Glad to see these concepts are out there, inspiring people’s thinking!
“Never look a gift horse in the mouth”
The net tells us that:
The phrase appears in print in English in 1546, as “don’t look a given horse in the mouth”, in John Heywood’s A dialogue conteinyng the nomber in effect of all the prouerbes in the Englishe tongue, where he gives it as:
“No man ought to looke a geuen hors in the mouth.”
Come on Facebook: show some good old fashioned gratitiude to your users, and remember that a geuen hors in the mouth is worth two in the bush.
Nice 🙂
You couldn’t have made a more appropriate suggestion. I got so angry last night listening to our politicians continue to talk about growth to get us out of the current difficulties when it has been pointed out years ago that continued growth is not a way out see ‘Beyond the Limits’ Donella Meadows, Dennis Meadows and Jorgen Randers 1992!!! They know all this, but as we are ruled, in politics and business, by individuals with psycopathic tendancies, reliance lies heavily on the outside world to change things.
MArck Zuckerberg has to read that.
Woo Hoo!! I’m in! How much will my share cost?
or they could suck it up, realize they’re providing a “free” service and not everyone is going to react like a coked-out lab rat when presented with a clickable picture, and accept that they’re not going to make a dollar per page view and their business model really isn’t worth $100 billion in the market.
but i suppose that would involve having some common sense and a human streak, and discarding all the magical thinking and arrogance
Like many, I had always been curious how Facebook planned to monetize its traffic. Now FB has 900 million users, so any form of advertising should have marginal success (If you put a store in the streets on SoHo, you are going to get a few customers); but the business model for FB, or lack thereof appears inherently flawed. Advertisers/FB seem to neglect that the tenets of social psychology apply when ‘marketing’ in a social environment. The fact that it is digitized should have no bearing. The reason their business model is not sustainable is the same reason you don’t see bars, restaurants and parties flooded with multi-level marketing guys giving you their pitch; or [intelligent] business men and women running around a networking event asking people – “what can you do for me?” (although both have happened)! Simply put, self-serving behavior does not build social capital. It diminishes it. Clearly, the folks at one of the most powerful companies in the World would see this, right? Why do social marketers continue to wallow in these self-defeating practices?
Consider a company like GroupOn. GroupOn amassed users by offering its$10 refer a friend model. Ok. Fair enough. If I decide to share a GroupOn post on FB to inspire my friends to sign-up – what, then, is my motivation for doing so? Do I genuinely feel that all my friends would receive some nugget of personal happiness by signing up for a service like GroupOn or do I just want the ten buckaroos? If it is the former, why then would GroupOn need to offer the $10? And, if the ladder, does this self-serving motivation build any social capital between me/my friends, me/groupon or my friends/groupon? Let’s take a look. Me/my friends: I’m immediately put-off when I sign-up for GroupOn and see that you got ten bucks for my sign-up. You used me to serve yourself and as Charles would say, ‘more for me is less for you.’ In that case, maybe I’ll take a stab now at referring some friends and get ‘mine.’ Me/Groupon: “Thanks for the 10 bucks GroupOn, I’m gonna hop over to LivingSocial now and see if they offer $11. If they do…welp, see ya later (Lloyd Christmas voice).” My friends/GroupOn: “GroupOn has got some nice offers, but I’m gonna check out LivingSocial and a few others and see where I can take more money.”
You will see this same motivation in GroupOn’s business model. Businesses offer up to a 90% discount which communicates “I need your business Mr. Consumer….Deep down, I’m sure I care about you, but right now, I just need your money.” It appears that this type of message motivates dis-loyal buying behavior and is not profitable. Consumers see the price, not the brand. As a result, GroupOn is facing some scrutiny in terms of the sustainability of their model.
This behavior cannot be blamed on the consumer because of the law of reciprocity. As the retailers come from a motivation that is self-serving, as will the consumers. The motivation behind the message will always be reflected back in subsequent consumer action. How much longer are these businesses going to blindly proliferate the problem?
On the contrary, imagine local businesses having a ‘donor day’ where a product or service may be offered for free for a short time period; welcoming donations. If we can put ourselves there, what, then, would be the motivation? Love? Gratitude? Would you feel that the business cared for your needs? Would you be more willing to authentically share your experience with your friends? Or, leave a fair donation for the business? It seems to create alignment and positive word of mouth.
Thank you for the ideas, Charles. It gives an incredibly strong platform for businesses to test new concepts. Looking forward to contributing to the shift.
Very plausible idea! How will we get 600 million people to keep up on the things to vote about? I have a hard time keeping up with my 375 friends. Who will collect dues and not ‘steal’ money? We’ll be in a new land of complex ‘listener supported’ government. I’d participate but…. wow what a lot of work to get it to a functional place…. That is if the ego of the ‘owner’ can give it up to the people. Power to the people who have good intentions for the whole!!!
There is a site already in development: Diaspora. @joindiaspora
I love the idea. I think delving into the numbers of what a gift economy for a social network like facebook might be able to generate is the next step to pitching this idea to zuckerberg. how much could Facebook expect in donations (using perhaps wikipedia as an example). Could there be a way for facebook members to gift the folks at facebook HQ with wealth and quality of life that surpasses what they can buy with the billions they will make with the public offering? I think so. Wealth is truly a function of health, lifestyle and social capital…so we could gift them a pretty amazing life in exchange for our freedom from being consumers in their machine…what say you all to that?
I like the idea, and a fan site for a series of books I like works on donations–but then not much is required to simply pay for server space.
I fear the Tragedy of the Commons as Adam Smith would say. Not convinced it would work because Americans at least (and that includes me) are greedy and lazy. For proof of the greed look at the stock market and lotteries, for proof of the lazy look at voter turnout in elections. <<>>
Greed and laziness are symptoms of ill health rather than descriptions of the essence of human existence. As Eisenstein points out in his books and other writings, the root cause of our ill health lies in the stories we tell ourselves and one another about the ‘self’ and the world. Changes in our worldview will produce changes in our behavior.
Sounds clear enough to become reality. Now let’s pray and work to make it happen.
Brilliant! I’d give $100/year to FB and Google each, just as I do for other gift services like Wikipedia.
I like it. And I like that you bring awareness to the users that FB is based on the gift economy. This is an intelligent way to introduce Sacred Economics to the masses. Bravo!
Not follwing the premise of this article. Facebook isnt having any ‘problem making money off its user base’. They made $1B profit last year.
20% of all pictures taken this year will be posted to facebook. http://www.reddit.com/r/todayilearned/comments/urg2i/til_that_about_20_percent_of_all_photos_taken/
Facebook imagines they are providing us with a product, but we are devoting much more time and energy to facebook than their developers do.
Youtube has recognized this. If you post videos that get enough attention, you can get a portion of the advertising revenue. It’s a tiny step in the right direction.
As with everything you say/write, I resonate completely.
In fact, even though I’m just reading this essay for the first time, I’ve actually implemented the advice you give them above at Wishadoo.org.
I certainly have no desire to compete with Facebook. While Wishadoo! has many tools which serve to connect those who desire to create more compassionate, cooperative communities, it is — at heart — a social network, but one with focused intent. As a lifelong social entrepreneur and advocate of both worker- and member-owned co-ops, I intend to structure it as that: an authentic member-owned co-op, with the idea being just as you describe above…one share, one vote, and the ability to “gift” shares to others. (Link below to infographic about Wishadoo.)
It’s been a long road in getting Wishadoo! ready to offer to the world, but I’m finally there. Reading this confirms that I’m on the right path.
I can’t adequately express how much appreciate I have for your work, Charles. You are a most exquisite gift.
With tremendous gratitude and wishes for your continued success!
Dena Patrick
Founder, Wishadoo.org
http://www.wishadoo.org/blog/114/just-imagine-an-infographic-about-wishadoo/
Charles, I love your work and I’m amazed you are not aware that FB makes plenty of money by selling the personal data of its users; as the estimable Douglas Rushkoff points out here, ‘You are Facebook’s product, not customer’:
http://www.wired.co.uk/news/archive/2011-09/21/doug-rushkoff-hello-etsy
This data is not necessarily used to target ads on FB itself – it is incredibly detailed demographic information which can be used to target people more and more specifically, precisely what advertisers have dreamed of since the early days of Bernays and Anna Freud.
This is why they will not be taking up your very kind offer, I’m sure: they don’t need to.
Check out Penny Arcade, they are doing exactly this –
http://www.kickstarter.com/projects/pennyarcade/penny-arcade-sells-out
Much smaller audience than Facebook, but they’ve raised over 450k in this way.
Advertising is a nuisance. A couple times something caught my eye and I went in to their deceptive trap where they got my phone number & e-address before I could find out the exhorbitant cost and then tried to back out. Therefore, I would like Facebook to drain the life blood out of these sleazy advertisers before making the compassionate change.
I remember when we were citizens..not consumers. I would step up to the plate and donate to support Facebook as you are envisioning.
Unless you are well over 100 years old you have no memory of being anything other than a consumer.
Lovely Lovely Light and Lovely.
Charles, I certainly hope you read the comments sections on your posts; I’m sure keeping up with them is daunting. I’m posting this here for everyone to see, and will try to send you a message regarding this link:
https://joindiaspora.com/stream
While Mr. Zucherberg apparently failed to see the brilliance of your observation, others have taken up the cause of opensource social networking. I encourage you to join Diaspora, and help promote this project to everyone you meet on your journey.
Thank you for sharing!
100% with you on that. If facebook were to do this, it could unlock its full potential as the first planetary network of citizens, rather than being the pitiful thing it is now: yet another advertising platform that tries to justify its existence by enticing people to consume more.
Brilliant. I do exactly this with websites that I value now. I am not always in a position to contribute, but when I can, I do. Which reminds me. I owe Charles Eisenstein. I listened to his audio book when I was dead broke. Right now I am not. Heading over. 🙂
Agreed! I, too, proposed that Facebook must let its users pay for it, so that it becomes a fully user-supported site/network/world. I also proposed to Facebook (emailed Zucks, actually) that within Facebook, a people-to-people bank can open. How fascinating would it be to transact within Facebook!
A people-to-people bank. Commodities markets. So on and so forth….
Beautiful! this is already happening with a site that really has taken a stand of gathering people towards injustice in the world: avaaz.org
they exist on this notion of my (and millions of others… ) DESIRE to give something back. I have donated several times since i really FEEL and can SEE that they make a difference in the world. And they are also offering me a possibility to take part in that change! By offering me the action of signing petitions, writing e-mails to world leaders AND funding their job!
I love it! And I love to give, and I love to receive!
It is just so simple.
What exactly is being suggested here? Make Facebook a donation site like Wikipedia? Distributed ownership? This is supposed to be a sustainable alternative to the current FB model?
Essentially your proposal is that FB rake donations. Works great for Wikipedia as they constantly teeter on a financial tightrope. Sounds like a great ,stable enviornment for the people employed by FB, “Christ I hope enough people donate this month, those darn kids aren’t going to feed themselves.”
This piece expends a great deal of effort to say nothing except the cuddly-feely nonsense that people like to hear.
Facebook already makes a ton of money by selling statistics. Your statistics. Sure, go ahead and gift them some more. I’m not saying this wouldn’t make them more money (it’s plausible). I’m saying you shouldn’t be encouraging supporting billion-dollar companies with donations.
The article is meant to be semi-facetious. I am not saying to donate to Facebook-as-it-exists-today. I am proposing an entirely different “business model.”
Seems to me, that would only make sense had a gift economy already been established. In any case, the proposed policy only makes sense if the user would gain smth significant. Such as, “Stop selling my data to corporations and states.” This would be replacing their main income, which I doubt comes from the side-adds. As it is, it will either make them more money at the expense of the user, or less, in which case it won’t be adopted. In any case, your main point seems to be: “Add an option for voluntary payment. Sprinkle with typical promo. Watch the money flow.” I can’t argue with that. It’s really nothing new.