Posts Tagged ‘free’

FB hoax – the online mall and why Facebook will never charge you

In Marketing, Online on September 25, 2011 at 1:10 pm

A Facebook friend posted a status update saying due to recent changes FB were going to start charging (more here).

I didn’t need to google it to know it was a hoax because charging for access goes fundamentally against Facebook’s money-making proposition both now and in the future. They’ve just gone past 800m active users on the back of being free, and whilst this has its own value in terms of advertising and online games, that’s just the start of it.

Facebook’s ambition is to become the first World Mall – an online shopping and leisure destination for everyone.

Think of the USPs of shopping malls:

  • All the shops you need in one place
  • Leisure destinations like Cinema and Restaurants to make it a social experience to be enjoyed in groups
  • Easy access (free car parking, bus & raill links) & comfortable surroundings (air con, benches, plants etc…)
Of those 3, it is the third which is most powerful, as this is what differentiates a mall significantly from the High Street.  This is what makes many malls a weekly destination for families and friends – it’s easy and free. You don’t even necessarily go to buy some stuff, but while you’re there…
Now consider what would happen to those decisions if your local mall charged you £3 each to get in, or £7 per car to park.  This might still be cheaper than a trip to town, but the thought of paying to access would mean you would only go when you had the express intent of doing a decent sized shop, or spending a long time there.  Footfall would decline, and so would income in the shops, and it probably wouldn’t offset the amount being taken in in charges.
This is exactly how Facebook operates. By being free, and offering some basic functionality of use to subscribers, FB ensures people come back again and again and again, and in doing so, their opportunity to to sell to you increases.
Currently FB makes its money from the targeted pay-per-click ads down the right side of your profile, and from monetised online games such as gambling or those games where you buy a cow for your farm or something.  However, FB are relatively few stages away from being a one-stop shopping and leisure destination – an online mall.
In fact, I reckon they are only 3 or so tie-ins away from achieving this. Consider the following Facebook additions:

Paypal tie in (for ease of online payment – not sure their own currency ever took off other than for game obsessives)
Spotify & Flixster tie in – rights issues are the big stumbling block, but having HD movie streaming from Flixster with live FB comment box (or Skype connection) would allow people to essentially go to the cinema together on Facebook. Spotify is struggling to cover its costs with advertising alone, but if it was FB’s primary way to listen to & buy music, it would soon start making money.
Tesco Online via FB – in the UK, if FB got Tesco Direct plugged in to FB, that alone would drive all other retail brands onto FB (just looked and Tesco only have 300k followers on FB – this is appallingly bad considering their customer base).

People still like to meet people, and clothes shopping particularly requires physical interaction, and is a very social experience, but FB is so near to being able to offer a similar experience that the shopping malls – especially the smaller regional ones – should really start to worry.  Just as malls killed off the High Street, maybe online will kill off the mall?