VentureBeat - Latest Comments in 2008 growth puts Facebook in better position to make money

Re: 2008 growth puts Facebook in better position to make money

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Re: 2008 growth puts Facebook in better position to make money

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Re: 2008 growth puts Facebook in better position to make money

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Re: 2008 growth puts Facebook in better position to make money

JC — Thu, 08 Jan 2009 20:25:36 -0000

Let's see. Facebook is adding a lot of users. Handling a lot of load in terms of messaging, notifications, photos, videos, and so on. Basically, it is SPENDING A LOT OF MONEY.

Returns? Not so much. It is a pretty shallow platform which can engage high schoolers who really don't have much purchasing power.

How will it make money? Gone are the days when you sold the company based on number of users (remember geocities or globe.com?). Real revenues will be hard to come by, especially to cover these humongous costs.

Good luck to Facebook anyways.

Re: 2008 growth puts Facebook in better position to make money

uga — Fri, 19 Dec 2008 06:45:33 -0000

Advertising might be a very hard bet for facebook.
However, before google launched adwords, internet was full of doubts about google's future.

I know there are tons of internet advisors for facebook each time some article about advertisment problems on facebook appears, but.. i'll venture to make one advice - think out of the box. take a look in smaller markets, where some local social networks have gain their way and are very profitable (and not only from advertisement). there are some in Europe for sure. and there are some not-that-bad-ideas there.

Re: 2008 growth puts Facebook in better position to make money

Drama 2.0 — Thu, 18 Dec 2008 21:42:22 -0000

Eric: wow, I'm now officially a "doomsayer." Thanks.

A few points:

1. Active users and user engagement != revenue. When you find a bank that will allow me to cash active users, pageviews, application installs, etc., let me know.

2. Advertisers have been experimenting on Facebook and other social media websites for years now and the results are the same. There are none. Perhaps you missed the New York Times discussion of this recently, which I responded to at:

http://www.drama20show.com/...

3. You say that marketers will have no choice but to experiment with Facebook yet you also note the fact that experimental budgets are being cut. You do the math on this. Experimental budgets have never made a medium; shrinking experimental ones won't either, logically. Facebook has to get beyond experimental budgets to thrive. Experiments don't last forever.

4. There's a reason that eMarketer continues to cut its estimates for social networking ad spend: advertisers keep cutting their spend. I'll let you figure out why.

5. International growth is as much a liability as it is an asset. Every Facebook user has the same associated costs in terms of resource usage but because most advertisers don't value international traffic very highly, revenue-per-international-user is almost certainly far lower. Therefore more international users = larger spread between revenues and costs. I'm sure you can figure out what will do to Facebook's income and cashflow statements.

Perhaps the best way to address the argument you make is the story of a middle manager who goes to his boss and says, "We're losing money on every product we sell. What are we going to do?" His boss responds, "Don't worry, we'll make it up in volume."

Brilliant logic.

I think the recent reports that Facebook is still shopping around for more cash and is seeing its shares sold privately at a significantly reduced valuation speak for themselves.