Facebook users can afford to pay
Facebook is the new king of social networking. But the site is stuck with an old business model that prevents it from cashing in on the increasing affluence of its users and the monopoly it has over their attention. Simply put, Facebook should charge.
A recent study by Nielsen Claritas indicates that the top third of lifestyle segments measured by the researcher relative to income were 25% more likely to use Facebook than the bottom third. Meanwhile, less-wealthy segments were 37% more likely to use MySpace.
MySpace popularized the concept of online social networking, and had relative success handing out free accounts and plastering them with ads. But this model does not appear to be sustainable; the unit of News Corp. which contains MySpace lost $363 million in the year ending June 30, and a rotating executive team is evidence that the business is attempting a turnaround. The youth and lack of spending power amongst its users is at least partly to blame for MySpace's decline -- so too is the downturn in online ad spending.
An international love affair with Facebook is also a culprit. Not only has the site -- started in a Harvard dorm room in 2004 -- won over many younger users of MySpace, it's introduced social networking to people in their 20s, 30s, 40s, and older. As the Nielsen Claritas study hints, these users have jobs and bank accounts, and might be willing to shell out a few bucks a month for what is becoming an increasingly valuable communication tool in their lives.
