Would you pay $10 for no Facebook ads?
Facebook is due to report its Q2 results today and no doubt eyes will be fixed on how revenues earned from advertising - mobile in particular, have fared.
As the build up to the announcement increases, some industry analysts have claimed the social media giant could earn at least US$12bn per year by offering users the option of signing up for an ads-free experience at a cost of $10 per month.
In other words, Facebook could potentially earn three times more revenues from such a service than it reaped from advertising last year ($4.3bn), basing the figures on a minimum of 10% of site's 1.1 billion user base ‘buying in’ to the option.
But would users really be willing to pay for this and if so, how much would they consider to be reasonable?
Speculating on exactly this at the turn of the year, UK-based digital marketing agency, Greenlight polled 500 people globally to gauge just how much they would be prepared to pay not to see ads when using Facebook.
The data from Greenlight’s “Search & Social Survey (2012-2013)”, showed 15% of users would be prepared to pay Facebook to see no ads with the majority, 8%, indicating they would be willing to spend $5 right up to $10 and even over, per month.
"Facebook may need to pace itself a little less aggressively when it comes to cashing in on its advertising sweet spot," says Andreas Pouros, COO, Greenlight.
"Alongside showing that 15% of users would pay Facebook to see no ads at all, Greenlight’s survey also showed that close to 70% say they ‘never’ or ‘rarely’ click on advertisements or sponsored listings in Facebook, indicative that consumer apathy is very real.
After unveiling the redesign of its News Feed in March, Pouros says the company has taken the success of advertising in peoples’ newsfeeds on mobile and based its News Feed redesign on mirroring that format (or close to it) on all devices.
In his view this move will help to boost revenues, results of which will be revealed when Facebook reports its quarterly earnings later today.
"Whilst the move was shrewd, in that the redesigned News Feed mirrored that on mobile where it has proved successful from an advertising perspective, the conflict between user experience and driving more ad dollars loomed large," Pouros says.
"It did with AltaVista historically, who were then unseated in the search engine wars with a new upstart (Google), with a cleaner interface and better user experience
Pouros also claims that the challenge faced by Facebook is 'reinventing' advertising so people don't feel they are being bombarded by ads.
"With the very recent addition of a video service to its photo-sharing app Instagram, video ads could perhaps be the next step, and some are in fact already betting on it," he predicts.
All in all, early reports out today indicate analysts are optimistic about Facebook’s results.
JP Morgan expects Facebook’s advertising revenue to rise 40% on the previous quarter to reach $1.39bn, with mobile accounting for a third ($446mn) of it, whilst those derived from desktop advertising are projected to fall 4% on the previous year as ad dollars continue to shift to mobile devices.
Others have been cautionary, Cantor Fitzgerald for example, pointing to a weaker ad market in Europe, which it says could hurt Facebook’s international revenue.