Monetization: Facebook Revenue and Business Model

ByLaurel Papworth

2009 July – Facebook to make $550 million this year. Various revenue streams and business models of Facebook and MySpace including virtual gifts.

Social media monetization is a funny thing – most people don’t understand that where there are people, there is money. It is highly improbable that the day will come when millions of people together will not mean money. Why? Because money = value systems. We use money – or some form of currency – to show what we value. Here’s speculation by The Business Insider on Facebook’s revenue streams:

Earlier this week (July 2nd 2009) we spoke to several sources who each have some insight into Facebook’s financials (none of them know precisely). Taking the sources’ input together, we’d estimate the company’s expected 2009 revenue this way:

  • $125 million from brand ads
  • $150 million from Facebook’s ad deal with Microsoft
  • $75 million from virtual goods
  • $200 million from self-service ads.

Total: $550 Million.

The trick is figuring out what bits are valued and how much, and by whom, and in what way. That’s the thing…

facebook_gift

In this case, the virtual goods (Facebook birthday cake for $1 anyone?) and the self-service ads (Facebooks answer to Google’s Adsense, or Adwords or whatever it’s called) are surprisingly high, no? I mean, compared to the traditional deals…

marketing FB MYS monety

Nick Roshon asks why Facebook revenue is so low compared to MySpace. I venture to guess that MySpace Google ad deal is included in their $2.17 per member per year – that’s a nice chunk of change. MySpace also run event management – such as product launches and album launches for major labels, so they have additional revenue streams. Also MySpace is a more mature organisation… though cutting back their staff (450 international staff to 100)  is going to severely limit growth.

19 Comments

  12. Interesting, I read this right after a post by Good Ol Seth Godin on the cost of CPM…Doc Searls keeps saying all advertising will go away…I don’t know about it being extinct but what I do know is that the model does not really work maybe the digital ghost concept that John Battelle keeps talking about will follow us and learn about us making everything cross platform…hmm good idea we should build it. ha
    .-= Kevin Leversee´s last blog ..Small World Math, Michael Jackson and Tragedy of the Commons =-.

  13. I have always thought that Facebook was holding back on traditional display ad revenue because they didn’t want to ‘piss off’ their users, like I think MySpace has with prominant ads throughout the site. If you ask Facebook users about the ads on the site many of them will say “ads? what ads.” Ask a MySpace user the same question and your answer will be very different.

    I once read somewhere that not pissing off the users with such prominant ads was important for Zuckerburg. I commend him for this but with the beacon advertising model falling over before it had even lifted off and no other advertising model seriously following suit I would be concerned that the next generation social network (I would forget about Twitter as being a serious competitor) that competes with Facebook might take their audience away advertising revenue with them.

    Perhaps money isnt the most important thing for Zuckerburg, but that might not be the case for Facebook’s major backers?

    1. Advertising is not a strong player in social media monetization. MySpace makes $2.17 per year per member mostly from ads. CyWorld doens’t have any advertising and makes around $17 per member. Habbo is similar. And both have around the same number of members as MySpace.

      Beacon is still there – don’t listen to the small echo chamber that tried to have it stopped. Go to Settings->Privacy->settings and make sure you are set on what you want…

  15. why people spend real money to buy virtual goods, like gifts in Facebook?or land, clothing in Second Life

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