Rumors that Facebook (FB) would launch a paid version of its service have engulfed the company since its inception. And CEO Mark Zuckerberg has shut down these claims on many an occasion.
During a hearing before the Senate Judiciary and Commerce Committees on Tuesday, Republican Utah Senator Orrin Hatch asked Zuckerberg how he could sustain a business model where users don’t pay for the service.
“Sir, we run ads,” said Zuckerberg, to which Senator Hatch replied, “I see.”
Zuckerberg emphasized that there will always be a “version that is free.”
“We want to offer a free service that everyone can afford. That’s the only way we can reach billions of people.” (Facebook has 2 billion users and raked in $39.9 billion in ad revenue last year).
Florida Democrat Bill Nelson and South Dakota Republican John Thune also grilled Zuckerberg on Facebook’s business model, which essentially treats users like the product because of such targeted and personalized advertising.
“For this model to persist, both sides of the bargain need to know what’s involved. I’m not convinced Facebook’s users have the information they need to make decisions,” said Thune. Zuckerberg vehemently insisted that he remains focused on offering a free Facebook accessible to anyone around the world.
Over the years, Facebook users may remember receiving scam messages (typically in all-caps) that threatened that a free Facebook would disappear. (See the screen grab below from Mashable.) While this has not yet come to fruition, the scandal plaguing Facebook may nudge the executives to think about diversifying their revenue stream (98% comes from advertising, up from 84% in 2012).
While Zuckerberg has repeatedly denied the launch of a paid model, COO Sheryl Sandberg did not shut down the possibility.
“Could you come up with a tool that said, ‘I do not want Facebook to use my personal profile data to target me for advertising? Could you have an opt-out button?” Today Show anchor Savannah Guthrie asked Sandberg last week.
“We have different forms of opt-out,” Sandberg replied. “We don’t have an opt out at the highest level. That would be a paid product.”
Dating apps like Tinder and streaming services like Spotify have successfully rolled out tiered-pricing models, which offers a free, limited (or ad-filled) version. Perhaps Facebook will follow suit. Even if an ad-free model were to exist, users may not be inclined to sign up — even for a paltry fee.
Yahoo Finance asked respondents in an exclusive poll of more than 4,000 respondents whether they would pay $5 a month for a Facebook account if it meant nobody could access their data. Only 13% said yes, with 87% saying no.
Zuckerberg faces the House Energy and Commerce Committee on Wednesday at 10 a.m. ET.
Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.
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