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Because many people would not spend 2.50 a month for Facebook, and their value prop of “all your friends are here” would collapse for many users.

And then you have adverse selection putting downward pressure on the revenue per free user.



Your argument would be stronger if you used the same one that you used in your initial post.

As you previously stated, revenue is not distributed evenly. For sake of argument, the actual numbers for 5 users could be: 120, 30, 0, 0, 0 . The ad-free subscriber would not pay the average profit, they would need to pay the average profit of a paid subscriber. If we assume only the whales would pay for an ad-free experience, they would need to pay $10/month and not $2.50.




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