Mark Cuban to Facebook: It’s About the Subscription Economy, Stupid

By Aarthi Rayapura December 4, 2012

Brianby Brian Bell, CMO

 

Mark Cuban isn’t happy with Facebook. In the last week, he’s been interviewed by ReadWrite.com and written an op-ed to The HuffingtonPost detailing his problems with the social media platform. While he’s backed-off his claim that he and his 70 companies will leave Facebook entirely, Cuban’s words echo a growing chorus of Facebook doubters.

 

Cuban argues that Facebook has been losing the trust of its business partners for the last few months. Chevrolet famously pulled out of advertising with Facebook because it couldn’t justify the expense without seeing more conversions to customers. Meanwhile, Twitter, Myspace, and more conventional forms of web advertising have become attractive options for companies like Cuban’s.

 

The reason for the exodus from Facebook is simple: the business relationship is imbalanced, the scales tipped to favor Facebook too much. To brands like Cuban’s, the cost of sponsored posts are prohibitively expensive for brands to reach all of their users. “We simply can’t afford to pay Facebook $2,000 to $3,200 a day, and we can’t afford to do nothing, either. Their shockingly greedy business plan offers us no alternative, and we’re not alone,” explains Cuban in his interview with ReadWrite.com.

 

But Cuban doesn’t think Facebook is hopeless. Cuban argues that the best way for Facebook to succeed is to offer an “upfront fee or a monthly fee where there is certainty of cost [that] would allow brands to focus on bringing in consumers.” Cuban is effectively arguing for Facebook to switch to a subscription service for its brand pages.

 

Businesses have been moving to subscriptions across industries because of the flexibility and scalability that the model provides. Cuban wants the flexibility to reach his customers the way he wants, and to scale that relationship as his brand grows. The benefits for Facebook are obvious as well: Subscriptions lock in a relationship between Facebook and a partner, and the ability to customize that relationship (upselling based on a user base hitting a certain threshold, or a predetermined rate for number of updates) is what Facebook currently lacks.

 

Without the long-term relationship a subscription provides, Facebook is vulnerable to churn. Partners see Facebook setting the terms and are simply walking away– without a penalty. Facebook is not only leaving money on the table, it’s failing to retain and nurture its customer base.

 

Currently, we’re only hearing rumblings from advertising partners and a trickle of customers leaving Facebook– but that trickle could become a flood. If Facebook doesn’t provide a more mutually beneficial relationship to its partners, competitors like Twitter, Myspace, and Linkedin will gladly scoop up the orphaned advertisers. In the future, these other social platforms will likely offer more flexible methods to reach customers, and subscriptions are likely to feature prominently in their offerings.