Forbes Columnist Jayson DeMers says that there are other ways for social media platforms to make money, and Facebook is only one example, but the general trend is permanent freeness. Could social media stay free to use… forever?
Since social media first emerged, it’s been, for the most part, completely free to use. New users can create accounts for free and engage however they’d like with no charge, and even businesses and organizations can get in on the action. Nobody in 2004 would have guessed that “The Facebook” would have exploded to have more than a billion users worldwide.
Now that it does, it seems crazy to think that all user accounts—including business and organization accounts—are completely free to hold and manage as you see fit.
Why Social Media Was Ever Free
First, let’s remember why social media was free in the first place. The power of a social media platform, regardless of what it’s selling or how it’s selling it, depends entirely on the strength of its user base. Without a significant volume of users to support the platform, it’s going to inevitably die; people want to join networks with the most people, or there’s less opportunity for interaction. If it cost even a dollar to sign up, it would be nearly impossible to generate any momentum.
Once hooked, introducing some kind of fee would potentially cause a significant drop in use. Imagine if one day, Facebook decided to start charging businesses $25 a month to make organic posts and continue to exist; you can bet thousands of small businesses would suddenly exit, and Facebook’s user base would shrink.
The threat of competition also keeps social media platforms collectively maintaining a free model. If Facebook started to charge money, users would flock to Twitter, Snapchat, Instagram, LinkedIn, or one of dozens of other platforms to fulfill their needs. As long as one company provides free socialization, all other social media platforms pretty much have to follow suit.
Profitability in a Free Model
How can social media apps and platforms remain profitable if everyone is using their technology for free?
You likely know the answer to this already. Most social media profit comes from advertising. Even though most features are free, extra boosts and advertising space are sold for a fee that varies based on the quality and frequency of the ad. Because of this, every new user that an app collects adds to the total potential value of the app, even if they aren’t paying; businesses pay extra to reach extra people, and they only care about the platforms with the biggest user bases. In this way, users aren’t taking advantage of the app for free, apps are taking advantage of users for free—more on that momentarily.
Pushes for Advertising
It’s no coincidence that Facebook’s Chief Operating Officer is an advertising guru—not a software engineer. Social media platforms know that the real money is in advertising, and businesses need to keep paying for advertising if the app is going to continue growing. This presents a dilemma of balance; apps need to keep businesses happy with enough free features to appeal to any business owner, but also push for businesses to advertise more.
This is why many platforms have begun throttling what’s known as “organic reach.” The number of people a basic, free post can reach has been steadily declining for a number of years, with advertising increasingly becoming the only way for businesses to effectively scale while using the app.
It’s likely that Facebook and similar platforms will continue escalating this push, but never so much that it results in companies dropping off the platform entirely. Instead, at that point, advertising costs will likely rise—especially as their platforms become more sophisticated and their user bases become even larger.
Hidden Costs for Users
It’s worth noting that while users aren’t paying any tangible, monetary costs to use the platform, they are paying in other ways. When you use a social media platform, you’re essentially forking over all your personal information—and on a silver platter. Facebook hypothetically knows more about the world population than Google or any governmental organization; it knows your age, location, birthday, likes, dislikes, networks of friends, and major life events. It even knows when you’re happy or sad.
Your personal data is valuable, just like currency, and using a social app is a contract that passes that currency forward. Plus, every time you use a social app, you’re confronted with ads—whether you notice them or not. Even glimpsing these ads is a distraction, and could be considered a form of payment. After all, every time you see an ad on Facebook, Facebook is making money.
Social Media Dependence
Facebook needs businesses and users to stay happy. Otherwise, its ads would have no value, or there would be nobody left to pay for ads. In this way, social apps are almost required to keep things free, and at the same time, users get “hooked” enough on the platform that small non-payments—like user data submission and ad watching—become almost unnoticeable.
The Bottom Line
Social media will never stop changing, but it’s likely that it will remain free pretty much forever—at least for the most part. The better way to look at it is this: we’re already paying for social media, each and every time we log on our platform of choice, and social apps are reaping the benefits.