Roger McNamee is a managing director at Elevation Partners and was an early investor in Google and Facebook.
The indictments brought by special counsel Robert S. Mueller III against 13 individuals and three organizations accused of interfering with the U.S. election offer perhaps the most powerful evidence yet that Facebook and its Instagram subsidiary are harming public health and democracy. The best option for the company — and for democracy — is for Facebook to change its business model from one based on advertising to a subscription service.
Facebook has insisted that it bears no responsibility for the consequences of its design choices, despite voluminous evidence that bad actors are exploiting the platform’s design to harm innocent people and undermine democracy around the world. If there was any doubt about this before the indictment, there can be none now.
The document outlines how Russia’s Internet Research Agency used Facebook and Instagram as its preferred platforms to gather American followers, spread misinformation and organize events — all with the goal of sowing discord, influencing voters and electing Donald Trump. Facebook and Instagram are mentioned 41 times.
Facebook’s advertising business model is hugely profitable, but the incentives are perverse. Using a variety of psychological techniques derived from propaganda and the design of gambling systems, Facebook grabs and holds user attention better than any advertising platform before it. Intensive surveillance enables customization for each of its 2.1 billion users. Algorithms maximize engagement by appealing to emotions such as fear and anger. Facebook groups intensify preexisting beliefs, increasing polarization.
And thanks to the ubiquity of smartphones, more than a billion of Facebook’s users log on to the site every day — a habit no one had 14 years ago. As a result, many have come to identify with ideas that are manifestly not true. It is no exaggeration to say that Facebook’s business model may qualify as parasitic.
Despite a firestorm of criticism, Facebook refuses to make material changes to its business practices. It has also refused to provide substantive data about Russian interference to congressional committees, despite several requests. As a result, we can expect interference in the upcoming midterm elections. Anyone can follow the Russian playbook; many are likely to do so.
None of this is necessary. Facebook could adopt a business model that does not depend on surveillance, addiction and manipulation: subscriptions. Facebook is uniquely positioned to craft the online equivalent of cable television, combining basic services with a nearly unlimited number of premium offerings that could include news, television and even movies. Facebook could be the Comcast of Cord Cutters.
I suspect that the vast majority of users believe that Facebook’s news feed is not as good as it used to be. The advertising load has risen dramatically in recent years, displacing many messages from family and close friends. Addicted customers continue to use Facebook, but they aren’t as happy.
Facebook has disclosed that it generated $82.44 of advertising revenue per user in the United States and Canada over the past year. To match this revenue with a subscription business model, Facebook would need to charge $6.87 per month. In comparison, Netflix offers three streaming plans, at $8, $11 and $14 per month. Consumers spend more time per month on Netflix today than Facebook, but that may reflect product design, rather than value. With a subscription-oriented approach, Facebook could easily overtake Netflix in usage, as well as value.
A subscription model would allow Facebook to improve the user experience dramatically. For example, the basic bundle might include multiple news feeds, such as unfiltered feeds for family, friends and any number of groups, as well as news feeds organized by topic, including news, politics, sports and music. Premium news feeds could include newspapers, magazines, blogs and podcasts, each curated by the publisher. There could also be video news feeds for HBO, Netflix or regional sports networks, as well as audio news feeds for Spotify and Pandora. A cord cutter with a full suite of premium news feeds might spend as much on Facebook per month as a premium cable customer spends today — $100 or more. Facebook would take a piece of the revenue from every premium service.
Facebook could implement a subscription model with no customer acquisition cost because 223 million adults in the United States already use Facebook, roughly equal to cable and satellite television. With the accelerating trend toward cord cutting, Facebook is ideally positioned to win the battle for customers who get their media services over the Internet.
There’s also flexibility in rolling out this business model: For example, Facebook might allow customers to choose between its current model and subscriptions. Customers who remained on the advertising-supported service would still be subject to filter bubbles, addiction and manipulation, but growth in subscriptions would reduce the population of affected people.
Subscription services could be implemented not only in the United States but also in most of the developed world. This wouldn’t just be good for Facebook. It would be good for America and for democracy globally.
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