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Facebook to start charging users?

Facebook’s Mark Zuckerberg faced US senators overnight to answer questions they had about the recent data breach relating to Cambridge Analytica. A personality quiz was able to take the data of not just the quiz participants but also their Facebook friends.

A number of the questions related to whether Facebook is a monopoly and if it has too much power – of course Mark Zuckerberg denied this. However, he was contrite and acknowledged that mistakes had been made and that Facebook didn’t do enough early on to fix the issues.

Another interesting development was that Robert Mueller, the special counsel investigating alleged Russian meddling in the 2016 election, had interviewed Facebook staff.

To me, one of the most interesting developments was that Mark Zuckerberg acknowledged that Facebook could charge users in the future instead of seeing advertisements.

Mark Zuckerberg said that there will always be a free version of Facebook. But, that does open the possibility of there being a paid version of Facebook. This could be similar to how YouTube has the YouTube Red service which is a paid service which allows users to avoid seeing ads.

The question would be how much would that service cost? According to calculations done in the media, Facebook’s revenue divided by the number of users equates to about US$19 per user. Would you pay US$19 per year to use Facebook? The problem is that nothing is truly ‘free’, if the user isn’t paying then they’re the product being sold to advertisers.

Foolish takeaway

The market liked what it heard from the Facebook testimony. The Facebook share price finished 4.5% higher to US$165, although it is still a lot lower than its high of US$193 in February. It remains to be seen if this will actually have a long-term impact on Facebook’s user base, I’m sure many people will continue using Facebook regardless of the privacy issues.

It goes to show how even the biggest companies in the world can face problems, this top stock could be a better investment than Facebook at today’s prices.

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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Facebook. The Motley Fool Australia has recommended Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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