Faced with continued investor skepticism over its long-term business model, Facebook has quietly started testing a new way of generating additional revenue - charging money to delete old photos.The new settings, which are currently in beta, ask users to pay $5.00 to delete any photo more than 1 year old from their own Facebook profiles, and up to $20.00 to delete photos of themselves on other people's profiles.
Analysts say that Facebook could generate huge revenues from the new photo settings because many users are desperate to hide embarrassing pictures of themselves from family and potential employers.
Topher Anderson, an technology equities analyst at Citigroup says the new charges could single-handedly help Facebook's sagging stock price recover to its IPO level of $40 a share.
"This new photo fee is a stroke of genius," claims Anderson, "We estimate that over 50 million users will use the feature, spending on average $35 a year to delete the most embarrassing pics. The annual boost to Facebook's top line will be well over $1 billion."
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A new dialog box will ask users for their credit card information.
UBS investment banker Stephen Todd agrees that the photo fee will add revenue, and also notes that it won't add significantly to Facebook's cost structure.
"They don't have to hire new engineers," Todd explains, "They don't have to develop new features. All they have to do is change one small setting and watch the money roll in. Its pure profit."
Online privacy groups have predictably expressed outrage over the plans, but their objections are expected to be ignored. There is also some concern that the changes could prompt a user backlash, but Todd dismisses that idea outright.
"The brilliance of this charge is that it leverages Facebook's high switching costs and lack of competition," he says, "I mean come on. What are people gonna do about it? Move to Myspace?"
Facebook defends the new charge as a vital component of its new revenue model. One top executive explains that since the IPO and subsequent stock slide, the company now has a new set of priorities:
"We have to monetize where the value is. And there's a lot of value in hiding the mistakes of your past. It would be a violation of our shareholders' trust if we didn't try to squeeze revenue from our users any way we can."
"And if you don't want your grandfather thinking you're a sloppy, drunken slut, then maybe you shouldn't post pictures of yourself deep-throating a beer tap or passed out in a football player's crotch in the first place."
The new photo settings are expected to be introduced to all Facebook users sometime in March.
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