The Business of… Facebook
As Facebook shoots past the 500 million member mark, Kipp tells you everything you ever wanted to know about the social networking site, but forgot to ask.
July 25, 2010 4:06 by Samuel Potter
Sure, it’s popular. Sure, it’s powerful. But if there’s one thing it isn’t it’s a money-making machine. Yet.
Facebook has faced the same problems as all social networks – when you provide a service for free, how do you earn money? The first answer that springs to mind is advertising. Global ad spend online has grown significantly over the last two years, and is set to increase dramatically over the next four years if PriceWaterhouseCoopers is right. Facebook grabs the lion’s share of this advertising purely because it has the most eyeballs. But given the volume of spend we’re talking about (in the order of tens of billions of dollars, rather than the hundreds of billions spent on TV and in newspapers), it’s still a relatively low income for an audience of 500 million.
The natural solution to this will be the growth of online advertising over the coming years. But another solution will be the increasing versatility of e-commerce. Facebook is working with retailers and online payment platforms to ensure companies can retail online, and that consumers can buy. For the most part, Facebook has so far not taken a cut of these transactions, but that is surely set to change. Even if does not, being a place where people buy and sell can only help the site sell more advertising.