Fred Wilson: It's 'Absurd' To Expect Users To Pay For Facebook, Twitter

Venture capitalist Fred Wilson of Union Square Ventures, known for its investments in startups such as Twitter, Foursquare, and Kickstarter, among others, took a strong stand on the ways Internet companies could monetize their platforms--and couldn't.

During a panel at the Guardian's Activate conference in New York, Wilson argued that most online companies could support themselves entirely on advertising and that it would be unthinkable for social media companies to ask their users to pay.

For services like Facebook and Twitter where the user "provides all the value," it's "absurd to expect users to pay. They're the ones creating value," said Wilson. "To ask them to pay is the most ridiculous assertion ever."

He noted that he asked his son, an avid Facebook user, whether he'd still use the social networking site if it started charging. Wilson said his son answered he'd be "gone in a minute."

When it comes to monetizing websites that offer content and services for free, Wilson touted the potential for ads to sustain their business.

"I reject the assertion that it can't all be done with advertising," Wilson said, adding that the television and radio industry were all "free" and ad-supported, a remark that was contested by others on the panel, who pointed out that cable subscribers pay for access to TV channels.

Wilson also highlighted Google co-founders Larry Page and Sergey Brin as exemplars for how entrepreneurs should work to safeguard company culture in the face of IPOs. Ahead of Google's IPO, Page and Brin notoriously wrote a letter to potential investors warning them that Google "is not a conventional company" and "we do not intend to become one." As Steven Levy wrote in In The Plex, Page and Brin were asked by the SEC to "revise or delete" statements in their "Owner's Manual" about their intent to have a "greater positive impact on the world," and "[make] the world a better place," and more. The Googlers refused.

"That's the right attitude," explained Wilson, noting that companies often lose the distinctive culture that helps them to be successful once they've gone public. "That's the only way to run a public company."

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Comments

[brendolonius]

08:03 AM on 05/03/2011

Remember Myspace? People said it would never die. Now it's dead. This would be Facebook's step in that direction, IMO. Why do they need money anyway? They make plenty selling our information.

[Waterphoneman]

02:08 PM on 05/02/2011

There will be a mass exodus if Facebook requires payment and I will be one of them.

[PenguinLinux]

10:55 AM on 05/02/2011

Facebook isn't free. Yes, you don't pay with money to use it, but you pay with something infinitely more valuable - your information which is sold, re-sold, and distributed to many companies.

[onionboy]

05:10 PM on 05/02/2011

You are so right. In fact, I've never understood the appeal. You pay with so much information, yet receive absolutely nothing in return...at least not from Facebook itself. Content is provided by the users.

[Sundialsvc4]

07:40 AM on 05/02/2011

Oh, you subscribe to a magazine, don't you? You even have to subscribe to the online New York Times now, in the same way that you gotta plunk down a couple bucks for that wad of paper that you briefly look over along with your three-dollar cup of coffee.

However, I think that all of these online services shot themselves in the foot by launching their highly publicized service for nothing, and when they "floated a rumor" of charging money, the hat was blasted into smithereens when it got one inch above the surface of the trench.

[awa611]

09:13 PM on 05/01/2011

Facebook will charge and people will flee. And another website will pop up and take their place. Companies that think screwingover their users is acceptable are only making way for another company's success.

[trumbull desi]

11:20 AM on 05/01/2011

I like and use Facebook. The ads annoy me but I like it's usefulness in keeping up with family and friends.

That said, they will never get one thin dime from me. Not one.

[hypnotoad72]

09:55 AM on 05/01/2011

Given they currently sell users' data and put out ads, etc, will they stop doing that in return?

[middleoftheroad]

09:52 AM on 05/01/2011

They MAY be able to charge like $1.00 a month. Something so small where people see obvious value but don't feel like the company is screwing them. Easier said than done to have ALL your friends move over to one other social networking site because it's free. They also MAY be able to charge LARGE companies a fee to have a facebook page. By large I mean major media companies etc.

[becky bradshaw]

07:03 PM on 05/01/2011

Charging even 1 cent would cause them to ask for a credit card. They would collapse in a week. It is very important that they are ubiquitous. If half your friends are no longer present in the environment, the value is lost.

[sporttrac]

09:03 AM on 05/01/2011

I still dont like the idea you have to pay such a high premium for cable. I believe now that they brought it up, it should be look into. :)))

[Leadsled]

11:39 PM on 05/01/2011

im thinking that since i pay for internet anyway, why not just get a roku and do netflix streaming tv/the hulu upgrade service and stop paying for cable proper? I'm considering it.

[sporttrac]

09:16 AM on 05/02/2011

I have netflix account,I will look into that also. Thank You, errin

[Lordcron]

07:06 AM on 05/01/2011

It would be the end of any social network to attempt to make people pay for them. Why? Because it's to much competition. The moment facebook charged me a penny I'd stop using it and move to a service that's completely free.

[GEM-592]

03:42 AM on 05/01/2011

already can't give it away to me.

[Mammamia]

02:59 AM on 05/01/2011

I doubt that Facebook will ever ask their users to pay...they know that this is suicide.

[Skeetshooter]

02:01 AM on 05/01/2011

I offer my wit and witlessness to Huff Post for free, but if they wanted money from me for the privilege of providing them with content, I'd suggest they go fish public fountains with their pooper scooper. Stay classy, Ariana!

[Jill Kennedy]

01:16 AM on 05/01/2011

It's true it would be absurd to ask users to pay - but if they don't, Facebook will be on the road to becoming worthless. They can't do it - but if they don't, they're out of business. That's a conundrum.

http://mankabros.com/blogs/onmedea/2010/07/01/facebook-is-worthless/

[sporttrac]

09:05 AM on 05/01/2011

if they are out of business, they are not very good at running one. Facebook has all those games that people buy credits for etc. It is already a money making machine. If they are not able to afford, there is something else wrong in the pudding.

[hypnotoad72]

10:09 AM on 05/01/2011

Perhaps they're not very good... or perhaps competition lowered prices and started a price war.  Of course, that's back from the olden days when work was directly paid with money.

Of course, when services are "free" then they have to find covert methods to make money - e.g. putting up ads, selling people's data (like the "mailing lists" that helped spread junk mail and kept the USPS going as well), using what people upload to help sell themselves, etc... and to the last time I checked, people didn't like it when they got junk mail, seeing ads all the time, or find their pictures used without their permission, despite unwittingly giving it:  http://www.facebook.com/terms.php (emphasis added)

you grant us a non-exclusive, transferable, sub-licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook ("IP License"). This IP License ends when you delete your IP content or your account unless your content has been shared with others, and they have not deleted it.

That's partly how they make their money, so why people say "Facebook is free, yeah yeah yeah..."  Um, no no no it's not... :)

Unfortunately, one ends up being too dependent on hoping a sufficiently large consumer base hangs around to attract all the advertisers and other elements...

In short, any business can be ran to the definition of "perfect", but still fail due to factors outside its control. The so-called "great recession" destroyed a number of businesses.  The companies couldn't make enough because they had to 'compete'.  How can you compete when larger competition drives down costs in the industry you work in?  You just can't stay afloat.  It's that simple.  I suppose my point is, if you look beyond the ledge of "they're not good at running a business" to the whole of the system, you'd see the spiral abyss that nobody will be able to survive.  Not even those who created the spiral.

[PatrynXX]

10:48 PM on 04/30/2011

Foopets did just that. went from a Free service taking care of a free pet and now it's $5 a month or $50 a year. I may go to the BBB on that one. just gotta gather myself up for it.

[becky bradshaw]

07:07 PM on 05/01/2011

Foopets or Poopets?