Social media platforms, broadly defined comes of two forms, “free” and for-pay… And never the twain shall meet. Or is that so ?
New social media outfits pop up left and right. Lately some have tried other revenue models. caught my attention the other day. Like Facebook they try to fake-start exclusivity by being by-invitation only to start with. That will end soon enough. Apparently they are without advertising. “you are not the product” is their slogan. From the premise that those who pay are the customer, those who don’t are the product. Assuming that cash is the only form of payment. Some and indeed a great many people, are quite content to pay with their (digital)life.
It will be interesting to see how Ello progresses. I wish them every good fortune, but I suspect that business /greed will get the better of them. Once there is information about users that can be monetized, it will eventually.
Getting back to the original question. How much does a social media platform like Facebook cost? Adding a suitable profit margin and we have the price facing the users. A dollar (US) a month?. Two dollars? Five ?
The problem can be broken down. There are storage costs, network costs , the cost of computing power, developments costs. (and profits, of course)
The first three are falling by the day. The developments costs should scale nicely too – more users, lower development costs per user. I am assuming current the level of customer care and support will remain the same, and estimate zero costs here. These do not add up to a definite estimate on price, but suggest that whatever it is at the moment, it will be lower in future. Economies of scale can be misleading in social media. Here there is no special value of having absolutely everyone on the same platform, only enough, i.e those you want to be “social” with. Or more particularly use the platform to be in touch with. Linkedin is a special case where there is a premium on getting in touch with the people you DON’T already know. That being said, bigger is better.
And it leads to my next point, switching costs. Building up a profile takes time and effort. Moving to another platform will in general mean starting afresh. Not quite with a blank slate as most allow you to import contact lists from various other application, like Gmail and Yahoo Mail, and using those lists to find others of your contacts already on the platform. Which in the case of a new platform is unlikely to be very many. Then there is any other data you have provided to the platform: pictures, writings etc. The data export features are unlikely to be very helpfull. But some may find the loss of self-provided data to be the very reason to switch platfom and starting fresh; It is not a bug but a feature.
Never the less, switching costs increases the platform owners pricing power; And data portability reduces it. Which means that all social media platform have an interest in keeping the costs of leaving high and the costs of joining low. The winner-takes-all aspect of social media is well known. There is no price for second place. Yet new “platforms” keep emerging. It appears that however much one platform seems to be in the lead a new one can still emerge. Facebook supplanted MySpace but still felt compelled to buy WhatsApp. Now there is SnapChat. Many people are betting a great deal of money of what is going to be the next big thing. Few doubt that there will be one.
All of which suggest that while people have signifigant investments in which ever social media applications they happen to be using, they can and will move. This places an upper bound on what the user will pay (in cash or in privacy). If the terms are too exorbitant the users will move on that mauch more quickly.