Facebook (NASDAQ:FB) is under immense pressure to justify its gigantic market value. You have to understand that Facebook is worth more than many of the biggest names in the corporate world. In fact, it’s worth more than Ebay and Starbucks—not bad for a company that hasn’t been around all that long. Not surprisingly, it is under shareholder pressure to live up to the hype. At the very least, its income should continue to grow and there has to be significant improvements in revenues on a quarterly basis.
Not surprisingly, Facebook has been squeezing as much profit from the available space displayed to its users. Its announcement this past year that it’s going to be cutting down on the amount of ads Facebook Page operators can show on the time lines of their members is not an accident. This is essentially a money grab on the part of Facebook. In fact, this is an about-face for Facebook because previously, in so many words, it has assured Facebook Page publishers in the past that it won’t unduly restrict the publication of their commercial messages.
What’s driving all this is that there is a tug of war between the amount of free traffic publishers can get from Facebook and Facebook ads. Facebook gets paid when people take out Facebook ads. Facebook doesn’t get paid when people get free traffic from Facebook. The pressure is on Facebook to dry up the free traffic sections of Facebook so it can get more cash to satisfy its shareholders. Here are just three of the most obvious areas Facebook can squeeze more profits from.
Facebook groups are very popular among Facebook marketers because regardless of what niche you’re interested in, there is sure to be a Facebook group dedicated to that niche. This is a very targeted way to get free traffic from Facebook. People who are interested in these niches would join these groups, and they would get updates from the groups. Pretty straightforward. Facebook can easily set up the ad displays from the updates sent by Facebook groups to minimize unpaid ads and prioritize paid ads.
Direct commercial partnership with members
When you change your Facebook cover, post photos, or updates, some of your friends would see that update. This can be a tremendous revenue generating opportunity for Facebook. Instead of you randomly changing your cover to whatever picture you’re interested in; Facebook might enter into partnership with you where you can choose to show sponsored covers and you get paid per view of the cover. Facebook can also partner with users regarding sharing affiliate messages or paid content. Facebook users can get paid just for engaging their friends on Facebook.
Instead of just showing videos that don’t make anybody any money, Facebook can give users an opportunity to earn a commission from Facebook when they share web-based seminars or promotional videos with their network of friends and acquaintances.
Facebook is no stranger to user complaints. If Facebook were to pursue aggressively the revenue ideas outlined above, you can be sure that there will be some pushback. The primary issue here of course is privacy. For these initiatives to take off truly, there has to be some privacy flexibility for better targeting. Moreover, by pushing the envelope so much in commercializing as much space and interaction on Facebook as possible, this can lead to an overly commercialized experience. This is precisely the complaint ex-Facebook members have as to why they leave or why they join rival networks.
Still, considering the fact that Facebook really has no substantial competitor remaining in its space, Facebook should at least explore these possibilities. At the very least, it should run small pilot programs to test out their viability. A lot of revenues can be generated if these initiatives were implemented correctly. That would be music to the ears of Facebook shareholders.