I disagree with this. Social networks have value because of the people, not the product itself. The social networking aspect (ie, finding friends and communicating with them) has to be free.
The key is to create products that leverage this network but have their own distinct value. Then, charge for those.
I agree with your assessment of the value, but disagree with your conjecture of the solution. It'll take too long to create products that leverage the network and are profitable.
A better short term solution is to sell the data on the user base to mailing houses and other companies that are looking to find more information on their customers. Example target customers are political campaigns, nonprofits, associations, and magazines looking for new subscribers. This is an old fashioned business that has been around for years. It's proven, it works.
FB is headed this way with Connect, but Connect is too muddied, unproven, and relies too much on cooperation with 3rd parties.
A second set of customers, which in retrospect may be what you are referring to, are universities. The alumni network websites of schools are inactive wastelands. Facebook should be marketing walled garden solutions to Universities. Why build your own network from scratch (or expensive off-the-shelf vendor software) when you can just subscribe to a service from Facebook that will instantly give a University access to a huge percentage of their self-identified alumn...
It's radical because almost nobody would want to pay with so many free networks around, and most of the people are foreigners and couldn't afford to anyway.
$1 is more for someone living in Argentina than in the US, and less for someone living in Europe. That seems bad -- you want to get people to pay what they're willing, and no less (price discrimination). Europeans would pay more, Argentines less, in USD.
Now, say you charge local prices. What's to stop someone from the US changing their network to Zimbabwe or whatever?
Once you start charging you start distorting how your users behave. Since Facebook rests on network effects any small change in user behavior has a huge impact across the network.
I think getting users to pay Facebook directly makes sense, but they have to be careful about it.
I'd probably just make it premium for people with 100 friends or more. $10/month or something. Won't affect most casual users, but will affect the more hardcore users who are so addicted they'll pay
I bet most of them wouldn't. For one, what is Facebook going to do about the ones who already have 200 friends but don't pay? Force them to un-friend 100?
For another, what percentage of people actually have that many? It seems high to me because I'm one of them, but probably there are, in their user numbers, masses of people who have a handful or none at all.
I know I personally would just find the best free social net. I only use Facebook for playing a couple games anyway.
Maybe 500. 100 is pretty easily attained, especially for younger users in college or high school. I'd guess 90% of my friends have 100 friends and I'm 27.
I'd say 200 friends, with people paying a dollar for each hundred after that. Cheap, and it still would make Scoble rant. (Perhaps I'm a bit biased in my motives.)
The key is to create products that leverage this network but have their own distinct value. Then, charge for those.