Don’t Pay Me for Using Facebook

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If there’s a movement to force social networks to pay content creators, let’s kill it now. New York Times columnist Joe Nocera recently outlined a book called “Who Owns the Future”, by Jaron Lanier. In it, Lanier argues that,

“people should get paid whenever their information is used. …creators of content — whether a blog post or a Facebook photograph — would receive micropayments whenever that content was used. A digital economy that appears to give things away for free — in return for being able to invade the privacy of its customers for commercial gain — isn’t free at all”

In practice, a company like Instagram would pay you a few cents for a photo of that latest sushi dish you tried; WordPress, maybe a nickel for your most recent rant about the continuing escalation of violence in schools.

I haven’t read Lanier’s book, but the premise is interesting. What would a digital economy look like in social networks were required to pay content creators?

I don’t think it would exist much at all.

Walt and Skyler actually made all their money by posting pretentious Instagram pics of fancy food.

Why? Nearly every major social network has thrived by investing in product, user experience, and growth first, and worrying about monetization much later. Forcing payments into the mix early on would only keep new social networks out and reinforce the position of incumbents.

Let’s start by looking at why new social networks operate this way:

First, scale has to come first. A social network with doesn’t really add much value until it can help its users connect with others in a meaningful way. This only happens when millions of people are using a service.

Secondly, asking users to pay for access, especially early on, is unrealistic. Early adopters aren’t going to open their wallets to try out the latest way to share photos with a few other early adopters. A pay wall would dramatically stifle growth, putting a huge damper on reaching scale.

Third, social networks don’t offer ad products or other monetization channels early on, because they need to focus their energies on a great product that will scale quickly.

Because of this, social networks almost always operate on a limited- or zero-revenue business plan for years. As a result, nascent social networks don’t even have revenue available to give to content creators, even if they wanted to.

Now, imagine that a system that required such payments. In order for a new, disruptive, social network to thrive, it would have two options: (1) use its precious startup capital to begin paying content creators from day one; or (2) force itself to adopt a monetization strategy well before the product was fully evolved. In either situation, the startup would find itself at a severe disadvantage in competing against big dogs like Facebook, Twitter, Google, and the like.

Ok, you’re thinking, but what if social networks weren’t required to pay content creators until they started bringing in revenue? That would still create some major issues:

First, investors and entrepreneurs will see these payments effectively as a tax on future earnings. This makes the prospect of starting or investing in a new social network inherently less attractive, as the opportunity for profit would be hampered to some degree (and probably a substantial one of those payments are going to be worth anything meaningful to content creators).

Secondly, this would actually be worse than a tax, because it would be required even before a company reached profitability. (I cannot imagine that such a system would be calculated on the basis of a company’s profitability, since young companies often eschew accounting profits to reinvest in the business).

Third, this would open up the opportunity for profitable, scaled incumbents to simply pay slightly more than social network upstarts. This would give content creators one less reason to contribute to a new social network, as they could earn more money elsewhere. Again, this would only lessen a startup’s likelihood of success.

In short, the environment for creating a new social network would be less favorable, and we’d see fewer and less interesting startups in this space as a result.

Mr. Lanier’s view might be more palatable if there were no new social networks, and our society was only concerned about “Big Brother” level companies like Google and Microsoft extracting wealth from ordinary folks without offering enough in return to society. If such a system is ever going to work, we’ll need to find a way to keep encouraging new companies to disrupt the space and add value in unique ways.