Facebook (FB)’s Next Revenue Idea Shines a Spotlight on Patent Problems

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Facebook Inc (NASDAQ:FB) is looking for new revenue streams. Users may soon be able to pay a subscription fee to make the social networking site’s annoying ads go away. That trade-off would be worth good money to many current users, who feel Facebook’s service value eroding more with every unwanted sales pitch.

Facebook Inc. (FB)But I’m not here to dive deep into the implications for Facebook Inc (NASDAQ:FB)’s future revenues in this move. Let’s just say that I expect monthly fees to go down like Brussels sprouts with a side of rotten fish. Internet radio maven Pandora Media Inc (NYSE:P) offers a reasonable proxy for Facebook’s ad removal fees, having offered a very similar option for years. Subscription fees accounted for just 11% of Pandora’s revenue in the last quarter and continue to grow slower than ad sales. Expect the subscription-hating trend to continue when Pandora reports earnings again tonight.

No, I’m here to show you how Facebook Inc (NASDAQ:FB)’s brand-new business idea underscores the shortcomings of our current patent system.

How so?
You see, the idea came to light in a patent application, filed in 2011 but made publicly available a few weeks ago. It paints the ad-free upgrade in extremely broad strokes: “In particular embodiments, the user may select one or more social networking objects to replace advertisements or other elements that are normally displayed to visitors of the user’s profile page that are otherwise controlled by the social networking system. … In particular embodiments, the user is billed on a recurring basis for profile personalization.”

But like I said, Pandora has been doing exactly this for ages, and it’s not like Pandora invented the idea to begin with. In a wider sense, premium cable channels like HBO or Starz serve the same purpose: More content, fewer distractions, no advertising. Sirius XM Radio Inc (NASDAQ:SIRI) offers the same ad-free value proposition in the radio space, as long as you’re willing to pay for the privilege.

And now Facebook Inc (NASDAQ:FB) wants to patent the idea of paying more for a more personalized, less distracting service. The application is silly on the face of it, but the Patent Office is likely to grant it anyhow. You know, like they handed Apple Inc. (NASDAQ:AAPL) a design patent for rectangular tablets with rounded corners — a crazy grant that Cupertino nevertheless has wielded with some success in courts around the globe.

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