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Facebook Testing Highlights; Turning Users Into Paying Customers

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As Facebook (NASDAQ: FB) prepares to go public this Friday, it is already moving to show potential investors new monetization opportunities. Facebook Highlights is an initiative the Palo Alto, California-based social network is testing in selected geographies, whereby regular users pay so that their social updates get preferential treatment across all of their friends' news feeds.

At the Facebook Marketing Conference in February, the company revealed that average user stories reach, on average, just 12 percent of their friend's news feed. That is because Facebook's distribution algorithm populates news feeds based on user-indicated preferences or priorities.

Facebook Highlights aims to change that. For a fee as low as $1, a user-generated update makes it on all friends' feeds, thus sidestepping the usual burden of merit.

The company's Communications and Policy manager Mia Garlick confirmed for DigitalTrends the program, which currently is being pilot-tested in New Zealand. ““We're constantly testing new features across the site. This particular test is simply to gauge people's interest in this method of sharing with their friends.” Garlick said.

The change potential represents much more opportunity than potential downside for the social network.

On the plus side, Facebook has just pivoted to the next level of its monetization options. Although it has already shown it has had no issues generating impressive revenues from advertisers, the Highlights program opens up a whole new revenue stream in the individual user market. If Apple's App Store has taught Facebook anything, it is that it does not take much for people to fork over 99 cents. In a Facebook user's case, that one dollar may buy increased awareness for a garage sale, a grand opening or whatever their cause du jour may be.

Concern exist that users may perceive these items as “polluting” the Social Network's successful features, as DigitalTrends puts it. Users have come to rely on their news feed as a key feature that keeps them abreast of the latest developments in their friendship networks. Such concerns, however, may prove to be unfounded once the feature hits the mainstream. Chances are that highlights will be seamlessly incorporated. Also, individuals may be more open to “ads” from people they know (on some close degree of separation, at least). Last but not least, drastic Facebook changes have threatened, but rarely caused, any material user exodus.

In the meantime, this development may have served to excite a whole bunch of research analysts attending the company's roadshow last week. FB shares will price sometime on Thursday and trade publicly for the first time sometime before noon on Friday.

Posted-In: Earnings News Rumors IPOs Events Pre-Market Outlook Movers Tech Best of Benzinga


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