Is Facebook Going to Start Charging Users Fees?

Today on CNBC's Strategy Session contributing editor Gary Kaminsky was talking about Facebook and Goldman Sachs $500 million dollar investment in Facebook. Kaminsky said that Facebook has 500 million users and if they started charging them fees they would make a ton of money even if they lost half their users.

Would Facebook ever really try to start charging users fees including a monthly fee?

I've never heard anyone talk about fees and Facebook before but Kaminsky is a money guy and if he is talking like that then probably some of the people from Goldman Sachs making the $500 million dollar Facebook investment are also thinking along those lines. But would charging user fees on Facebook ever really work?

Kaminsky said he has never used Facebook but his kids do all the time. So he is thinking like an outsider and just looking at numbers.

If Facebook ever started charging fees they would probably lose a lot more than 50% of their users. A big part of the lure of Facebook is that it's free other than monthly Internet fees and the cost of a computer or device to get online.

People just go on to Facebook to look around and see what other people are doing and are up to. It doesn't cost a dime to see what your friends, co-workers, classmates, siblings, cousins and relatives are up to. Start charging people for that and watch how fast they stop doing it and or migrate to another free site.

According to latest reports Facebook had revenues of $2 billion dollars in 2010 and earnings of $400 million dollars. That sounds impressive until you divide the numbers by the number of users.

Facebook Revenue Per User

$4.00 (500 million users divided by $2 billion dollars in revenue)

Facebook Earnings Per User

$.80 (500 million users divided by $400 million dollars in earnings)

So Facebook is only taking in an average of $4.00 per user in sales and only making about $.80 per user in earnings.

Those are not great numbers and are the reason someone like Kaminsky would think about charging users fees including monthly user fees on Facebook. But the Internet is such a fast free-flowing information place that charging user fees would likely drive away most users.

It would certainly cause new competitors to arise who would try and offer the same thing Facebook does for free.

Facebook has a ton of users and in order to make more money needs to figure out a way to monetize its heavy traffic but charging user fees is hopefully not one of those ways.

Sources:

CNBC

A Goldman Unit is Said to Have Rejected Facebook