General Motors recently reported that it will pull its advertising from Facebook, citing a low click-through rate among other indications that its advertising there isn't effective. I'm not surprised -- I for one have never clicked on a Facebook ad and in fact don't even notice them. Like most people, I have trained myself to tune them out.
The problem of how to make money off its user base is not unique to Facebook. Some ways that websites make money are as follows, and all of them are problematic:
1. Erecting a pay wall or requiring a paid subscription. Problem: users will just migrate to other sites where they don't have to pay.
2. Piggybacking value-added services such as technical consulting, premium content, etc. Problem: it works only for certain types of businesses; plus even the premium content often has free alternatives, while technical expertise can sometimes be crowdsourced.
3. Advertising. Problem: people like me tune it out, and in any event total adspend, shared among Internet and traditional media, just isn't sufficient to generate significant profits for most companies.
4. Selling products. Problem: it's fine for shopping sites like Amazon, but not every site can build a retail business.
There are some other strategies as well, but so far no obvious monetization strategy has emerged for Facebook. I think that problem is fundamental to the nature of Facebook. Facebook is essentially a gift-based site. Few if any of its users are motivated by money when they post their photos, status updates, links, and so forth. They produce content and then give it away. While Facebook might make some ad revenue by diverting people from their purpose for logging in, that revenue is limited because if Facebook becomes to obtrusive with its ads, people will eventually stop using it.
With this in mind, I have a modest proposal for Facebook. I will even be so presumptuous to say that it is a solution to all of its problems. Basically, Facebook should fully embrace its gift essence and take a bold step into new territory by announcing that henceforth, it will be a gift-supported website. It could make an announcement like this:
Facebook's value lies in you, its 900 million users. You are what make Facebook what it is. Therefore, we are laying out a new goal: to remove all advertising from Facebook and make it a 100% donation-supported site, dedicated to serving its members, not extracting money from them. We envision Facebook pages with more artwork and personalization where advertisements are today.
We are starting this transition right now. We leave it up to you, the user, to donate what feels right to support an ad-free Facebook. $10 a year, $5 a year, even $1 a year might be the right level of support, depending on your means and the value you get from this site.
In addition, we would like to transition Facebook to a democratic model of governance. We are therefore retracting our planned Initial Public Offering and instituting a new one, open only to Facebook members, with a limit of one share per member. One person, one vote. You can also buy shares on behalf of your Facebook friends, so that people with limited means can vote too. Members will elect Facebook's Board of Directors and ultimately determine company policy. Basically, we Facebook's owners are going to turn the company over to you.
Facebook has come under increasing criticism for its attempts to create a "walled garden" in the Internet, as well as for its potential (or in the case of Wikileaks) actual censorship power. Putting its governance in the hands of its users would allay some of these concerns. It would also create a fierce brand loyalty and ensure that it truly serves its users.
Of course, for the present owners of Facebook this idea would mean a loss of control that might be a little bit scary. Indeed, this would be a very bold move that would shake the IT world. Ultimately, though, I think it is in their best interests too -- much better than clinging to a business model that is fundamentally at odds with the nature of the medium. The monetization problem will not go away. Facebook could go down in history as a pioneer of a new (and very ancient) business model -- the model of the gift. The present owners won't do too badly financially either with an unorthodox IPO (the details of which can be worked out to maximize or minimize their enrichment.)
The monetization problem for social media hints at a deeper and more general phenomenon: deflation. Difficulty in monetization is just one facet of a falling return on capital investment and, even more fundamentally, the end of the era of economic growth. A shift toward steady-state or degrowth economics is approaching. Part of that transition is a conversion of money-mediated relationships into gift relationships, as is happening on the Internet when so much content and information is provided voluntarily by numerous, distributed, unremunerated peers. Since our current monetary and economic system only works in the presence of growth, the transition we face will necessarily involve profound systemic change. Wise businesses will anticipate those changes by aligning their business models with gift economics. As artists, musicians, content providers, and software companies are discovering, increasingly, we cannot compel our customers to pay. We can instead rely on their feelings of gratitude and fairness; we can rely on their desire to pay, their desire to give something in return for what they have received.
I am not proposing this idea to Facebook as some quixotic exercise in altruism. I am making a serious business proposal. And I'm offering it free of charge! If, however, the good folks at Facebook would like to express their gratitude for my idea, donations will be cheerfully accepted.
Social media as a public utility is a theory which argues that social networking sites (such as Facebook, LinkedIn, Google+, Google Search and Twitter, etc.) are essential public services that should be regulated by the government, in a manner similar to the way electrical and phone utilities are typically government-regulated. Applying utility-status regulation to social media websites has been a debated topic within Internet policy since 1992.
Social media is defined as "a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of User Generated Content."  Furthermore, the New Zealand Government of Internal Affairs describes it as "a set of online technologies, sites and practices which are used to share opinions, experiences and perspectives. Fundamentally it is about conversation. In contrast with traditional media, the nature of social media is to be highly interactive."  Moreover, the term social media is described as online tools that let people interact and communicate with each other. This has become a standard word for online cultural exchange and a dominant way for individuals to engage on the internet. By using social media individuals become more closely and strongly connected than ever before.
The traditional definition of the term public utility is "an infrastructural necessity for the general public where the supply conditions are such that the public may not be provided with a reasonable service at reasonable prices because of monopoly in the area."  Conventional public utilities include water, natural gas, and electricity. In order to secure the interests of the public, utilities are regulated. Public utilities can also be seen as natural monopolies implying that the highest degree of efficiency is accomplished under one operator in the marketplace. Public Utility regulation has been largely criticized because people believe it produces undesirable and indirect effects. However, others argue that truly effective government regulation is valuable.Social media as a public utility is a crucial debate because utilities get regulated, so marking social media websites as utilities would require government regulation of various social media websites and platforms such as Facebook, Google, and Twitter.
Applying the term public utility to social media implies that social media websites are public necessities, and, consequently, should be regulated by the government. While social media is not as essential for survival as traditional public utilities such as electricity, water, and natural gas, many people believe it has become vital for living in an interconnected world and without it, living a successful life would be difficult. Therefore, many people believe that social media has reached utility status and should be treated as a public utility. However, others believe that this is not true because social media is constantly revolutionizing and giving such platforms "utility status" would result in government regulation, which would consequently hinder innovation. Over the past decade many have debated and questioned whether or not "Internet service providers should be considered essential facilities or natural monopolies and regulated as public utilities." 
A monopoly is defined as "a firm that is the only seller of a product or service having no close substitutes."  A natural monopoly is when the entire demand within a relevant market can be satisfied at lowest cost by one firm rather than by two or more, and if such a market contains more than one firm then the firms will "quickly shake down to one through mergers or failures, or production will continue to consume more resources than necessary." In a monopoly competition is said to be short-lived, and in a natural monopoly it is said to produce inefficient results."  Public utility companies can be regulated to prevent them from gaining monopolistic control. In November 2011 AT&T's proposal for merging with T-Mobile was rejected because it would have "diminished competition,"  and have led to the company having monopolistic power within the telephone industry. Such regulation is permitted because the telephone industry is a public utility. Similarly, Microsoft has also been prevented from taking various business actions that could result in the company gaining monopolistic power. If social media were a public utility then regulations of Google and Facebook would similarly dictate what they could and could not do.
Advocates of this theory believe that social media websites already act like public utilities, and therefore regulation is needed. Additionally, advocates argue that in the 21st century, using such websites are as necessary for communication as using traditional public utilities such as water, electricity, and natural gas are for other everyday uses. Specifically, advocates note that Google search should be treated as a public utility and needs to be regulated because it dominates the search engine market and no website can afford to ignore it. Furthermore, advocates claim that a social media website such as Google "is a common carrier and should be regulated as such (Newman 2011)." 
On the individual level, advocates of social media as a public utility believe that Internet presence using social media websites is imperative in order to adequately take part in the 21st century as an individual, and consequently, these sites are public utilities and need to be regulated.
Advocates of social media as a public utility argue that social media services dominate the Internet and are mainly owned by three or four companies that have unparalleled power to shape user interaction, and because of this power such businesses need to be regulated as public utilities. Zeynep Tufekci, University of North Caroline Chapel Hill, claims that services on the Internet such as Google, Ebay, Facebook, Amazon.com, are all natural monopolies. She argues that these services "benefit greatly from network externalities[,] which means that the more people on the service, the more useful it is for everyone," and thus makes it hard to replace the market leader.
Advocates of social media as a public utility believe that the government should impose restrictions on social media websites, such as Google, that are designed to benefit its rivals. Due to the recent substantial growth of social media websites such as Google, advocates claim that such a website "might need search neutrality regulation modeled after net neutrality regulation and that a Federal Search Commission might be needed to enforce such a regime."  Danah Boyd expresses a future issue which the government may have to deal with in her research: Facebook is becoming an international social media website, specifically prevalent in Canada and Europe which are "two regions that love to regulate their utilities."  Furthermore, recent books by New America Foundation Senior Fellow Rebecca MacKinnon and law professor Lori Andrews advise society to start considering Facebook and Google as nation-states or the "sovereigns of cyberspace."  Overall, advocates of social media as a public utility believe that due to the immense popularity and necessity of social media websites, it is imperative that the Government imposes regulations in the same manner they do for electricity, water, and natural gas.
Opponents of this theory argue that social media websites should not be treated as public utilities. because these platforms are changing every year, and because they are not essential services for survival as common public utilities are, such as water, natural gas, and electricity. Furthermore, opponents fear that imposing "utility" status on a social network site, and forcing regulation might lock such a site in as a real monopoly, which consequently, will stop innovation, and counteract competition. Opponents point out that because social media is constantly evolving, innovation and competition are necessary for its growth. But that argument does not take into consideration that a middle path regulation could be, for example, to free the code so that they would use open source software, which promotes participation, collaboration, innovation, learning, transparency, confidence and cost reduction. Reasons that have made Linux, as well as many other open source programs, systems and services (like Apache web server, Wikipedia, etc.), the most popular systems on the Internet. Linux has become the mostly used operating system on the most powerful computers and the preferred operating system for most system administrators around the world. Besides, protocol standards or connectivity between social networks (to guarantee cross-posting, for example) could be made compulsory so that one company cannot place barriers to communication among citizens in order reinforce their monopoly.
On an individual level, opponents argue that treating social media websites as regulated public utilities "would harm consumer welfare because public utility regulation has traditionally been the archenemy of innovation and competition."  The Director of the Public Utility Research Center at University of Florida, Mark Jamison, points out that "our economies effectively shut down without traditional public utilities such as electricity, water, and natural gas because utilities occupy unique positions and provide public services (Glaeser 1927)"  Opponents to social media as a public utility claim that our economy would not shut down without social media websites. Additionally, Mark Jamison brings up a situation in 2009 which illustrates how consumers can easily find alternatives to social media sites such as Google search. "For about an hour on the morning of January 31, 2009, Google search results contained a noticeable error. During that period of time a large number of customers switched their search activity to Yahoo! and probably to other search engines (Google 2009; Vascellaro 2009)."  Such an incident shows that while social media sites are extremely popular, they are "not essential to our social and economic functions in the way that electricity and water are." 
Additionally, opponents argue that social media websites are relatively new, and that new ones continue to displace the old ones. Individuals are rapidly discovering new alternatives for social media websites. For example, opponents point out that MySpace was the market leader long before Facebook became active, and was expected to have continued success. However, once the platform Facebook was created, users jumped to this new social media website, and within a short period of time MySpace lost the majority of its users, was forced to cut costs, and therefore may disappear in the near future. Opponents argue that due to such discoveries, social media is not a public utility because a utility is considered an "essential facility" that has no good alternatives.
On a business level, opponents fear that if social media websites become public utilities then providers of these sites will be treated as vital facilities and such a situation "threatens to convert predictions of "natural monopoly" into a self-fulfilling prophecy."  Additionally, opponents to social media as a public utility argue that those who advocate regulation of social media websites such as Google "fail to give adequate weight to the changes that constantly occur in the search business, the ways that rivals benefit from Google’s investments, the negative impacts of forcing Google to reveal its search algorithms, and regulation’s stifling effect on innovation." Additionally, these opponents claim that because such websites and markets are constantly evolving, regulation would consequently be expensive. Specifically, Mark Jamison points out that the regulation of Google would be costly both in terms of the administrative costs and in terms of the delays in innovation that regulation would cause. Opponents to this theory also argue that economic regulation of social media sites could decrease investment, and consequently harm customers and rivals. For example, if a social media site such as Google search were regulated, it could "result in at least partial public disclosure of Google’s search algorithms, which would allow other businesses to behave strategically to improve their search rankings without benefitting consumers."  Furthermore, social media services are constantly evolving, and consequently, despite the massive user base that sites such as Facebook and Google have, opponents believe that the disappearance of these businesses are "only a masterpiece of software away."  Traditional businesses classified as public utilities, such as water and electric companies have a monopoly over their services, making these business irreplaceable, and opponents argue that such is not the case with social media websites.
Opponents to this theory believe that imposing utility status on social media websites would consequently cause government regulation, which could result in an unfair change for both businesses and individuals. For example suggested by such opponents is the fear that these websites would start to charge a fee in adjustment to the new rules imposed by the government. Mark Jamison points out in his research that government-imposed standards for presenting Google search results would halt innovation, "as happened in telecommunications, government oversight was imposed with the intention of protecting telephone companies’ rivals; instead, it delayed technological progress and decreased innovation (Prieger 2002)."  According to Adam Thierer, George Mason University, "social media sites are fundamentally tied up with the production and dissemination of speech and expression, First Amendment values are at stake, warranting heightened constitutional scrutiny of proposals for regulation." Thierer and other opponents to social media as a public utility believe that the providers of social media websites should have the right to decide how their own platforms are configured along with what content is allowed to appear on them, and that the government should not force such restrictions caused by regulation .
Opponents of this theory claim that social media websites are not public utilities because new social media websites continually come into existence and replace the old. Such evolution does not happen with common public utilities like water, electricity, and natural gas. To illustrate this argument, the following lists popular social media services. Many were very popular in the past, and have been displaced by similar websites of the present.
- CompuServe, Prodigy & The WELL: popular social networking online services predating the web.
- America Online: popular online service in the 90’s, which charged a monthly fee and offered many tools including its own browser, search engine, content, chat rooms, and email system.
- GeoCities, Tripod.com & Yahoo! Groups: common websites of the mid-nineties. GeoCities and Tripod offered tools that allowed users to publish web pages that others could discover. Yahoo! offered a free ad-supported alternative to America Online 
- Google: Search engine which beat out Yahoo! by its uncluttered website design and relevant search results 
- Blogger, TypePad, WordPress.com: common blogging websites 
- Flickr, Photobucket, ImageShack: general websites where users can share photos 
- YouTube: video sharing website that was eventually bought out by Google and thus is still prevalent today 
- MySpace: began in 2003 and became the most popular social network site that allowed users to interact, share photos, and videos 
- Facebook: after one year, in 2004, this social media website beat out MySpace by nearly doubling the number of users and is currently the most popular online social network.
- LinkedIn: launched in 2003, business and professional networking site, popular site of today 
- Twitter: launched in 2006, social networking and microblogging service that allows users to post updates that are up to 280 characters long. Currently one of the most popular social networks of today.
Here is a full list of social networking websites
Overall, opponents of social media as a public utility believe that a new platform will be created in the future that will replace the most popular social networks today such as Facebook, Google, LinkedIn, and Twitter. Therefore, they argue that marking these websites as public utilities will stop the creation of future innovative platforms.
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