No offense, but it is my opinion that most of the posters here really do not understand facebook.
I believe they have not even put a serious effort at making a profit, instead focusing on user experience and building what will prove to be a extremely valuable platform.
I'm sure most of you are not aware that facebook ads are currently being monetized at around an average of $0.10 per thousand impressions. Compare this to Google Adsense at $1 to 2 / CPM, or prime time TV advertising at $20/CPM. Many say they have never clicked on a facebook ad, but the same people will tell you they are not influenced by TV advertising either. In any case most of these ads are brand building exercises: CVS doesn't advertise in order for you to click on the ad to buy toothpaste from CVS.com.
The reason why the rate of monetization is so low is primarily because we are dealing with a very non-instrusive display ad at the corner of the screen. They have historically prioritized user experience in order to build the user base. Now that they have every one signed up, they can start milking the cow. I should add that with simple, non-instrusive banner ads, facebook is generating 3.7 billion in revenue at a near 50% operating margin.
Most internet properties that rely on display advertising are far more aggressive, although FB has a far greater ability to montize than most business models. For instance, if Facebook were to start posting ads in news feed, this type of advertising will demand far greater rates. Really their potential for monetization is rediculous. Imagine if you are a local pet store and you want to advertise to everyone in your zip code who liked pets. Facebook allows you to advertise directly to this niche in a way that was impossible with traditional media. Imagine if your pet store has too much dog food in stock and you want to send a promotional coupon to everyone within a 10 mile radius. Facebook mobile will be able to be able to detect your location with GPS, realize that you liked dogs, and deliver you the coupon. Say Harley Davidson wants to advertise. If anyone in your friend list liked Harley, shared a link about Harleys, FB could charge harley to show an Ad everyone next to this item in the news feed. These are just a few examples of high value methods of monetization which greatly outstrips their current 1/100 of a penny they get per impression with display advertising. For comparison, YELP charges several dollars every time someone clicks on an advertising restaurant.
Finally I'd like to ad, that yes, there is a finite amount of advertising dollars. But the likes of Facebook will be stealing share from primarily old media. Advertisors go where the eyeballs are, and advertising dollars are still underindexed to internet advertising in general, while being vastly underindexed to social advertising.
I believe they have not even put a serious effort at making a profit, instead focusing on user experience and building what will prove to be a extremely valuable platform.
I'm sure most of you are not aware that facebook ads are currently being monetized at around an average of $0.10 per thousand impressions. Compare this to Google Adsense at $1 to 2 / CPM, or prime time TV advertising at $20/CPM. Many say they have never clicked on a facebook ad, but the same people will tell you they are not influenced by TV advertising either. In any case most of these ads are brand building exercises: CVS doesn't advertise in order for you to click on the ad to buy toothpaste from CVS.com.
The reason why the rate of monetization is so low is primarily because we are dealing with a very non-instrusive display ad at the corner of the screen. They have historically prioritized user experience in order to build the user base. Now that they have every one signed up, they can start milking the cow. I should add that with simple, non-instrusive banner ads, facebook is generating 3.7 billion in revenue at a near 50% operating margin.
Most internet properties that rely on display advertising are far more aggressive, although FB has a far greater ability to montize than most business models. For instance, if Facebook were to start posting ads in news feed, this type of advertising will demand far greater rates. Really their potential for monetization is rediculous. Imagine if you are a local pet store and you want to advertise to everyone in your zip code who liked pets. Facebook allows you to advertise directly to this niche in a way that was impossible with traditional media. Imagine if your pet store has too much dog food in stock and you want to send a promotional coupon to everyone within a 10 mile radius. Facebook mobile will be able to be able to detect your location with GPS, realize that you liked dogs, and deliver you the coupon. Say Harley Davidson wants to advertise. If anyone in your friend list liked Harley, shared a link about Harleys, FB could charge harley to show an Ad everyone next to this item in the news feed. These are just a few examples of high value methods of monetization which greatly outstrips their current 1/100 of a penny they get per impression with display advertising. For comparison, YELP charges several dollars every time someone clicks on an advertising restaurant.
Finally I'd like to ad, that yes, there is a finite amount of advertising dollars. But the likes of Facebook will be stealing share from primarily old media. Advertisors go where the eyeballs are, and advertising dollars are still underindexed to internet advertising in general, while being vastly underindexed to social advertising.
... stock performance is what makes us money.. FB definitively has the best position to make money.. i have alot of experience in doing business with FB as i have had an advertising account for an online business for a while now... i do believe they are going to have to find a good way to exploit all the user data without diluting the interface to extrapolate earnings and make money for us potential stock speculators.. what the previous posters were talking about was what the inside syndicate is doing "stock lock up" Valuations are a slippery subject... i do think that there will be something that happens.. i'm going to express my position in options.