A pretty spot on analysis by Mike Arrington at TechCrunch about the new verified application process as a… Protection Racket.
I also don’t have a problem with this. In fact, I would generally applaud a company for finding a fair way to generate a significant revenue stream.
Except this doesn’t strike me as wise. Name one open platform that has charged a fee for inclusion, and seen this somehow improve the platform. Can’t? OK, maybe Facebook can be the first one to make it work for them.
The only company I can remember charging for inclusion, in a previously open and free product, is Yahoo Directory. Eventually, the Directory became a stale product that was somewhat costly to maintain. It made a whole lot of sense to charge $299/year for inclusion, both for Yahoo and the price was right for the vast majority of sustainable businesses. So far with Yahoo, we know what going down that road does for you.
The step basically admits that your model is becoming stale. You’ve run out of monetization options. Maybe it’s a wise admission (profit extraction), but I would have liked to have seen Facebook exhaust further monetization options first: complete its promised payment system (as Mr. Arrington mentions) or some virtual currency system.
Marc Andreessen said for Ning that a long tail of inactive accounts is valuable. The same applies here. I indeed believe strongly that revenue must be king, especially now. And, yes, quality of applications wil go up – $375 is not a huge amount of money. However, for a company with grand ambitions and broader promise than most any other, I just don’t think this is the right move at the right time.
Only time will tell, I suppose, but we may look back at this moment as an interesting inflection point.
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