The biggest hoo-haa going on now is about how Facebook bought over Whatsapp for US$19 BILLION. Everyone is talking about the worth of Whatsapp, but I am thinking along the lines how Facebook had 19 Billion dollars to burn!
I use Facebook everyday, it has become an essential part of my life, my interactions and my reality. But I don’t pay a single cent for all that services that Facebook offer in my life. So where do they get all their money from?
In the first quarter of 2012, advertising made up 82 percent of the site’s revenue. Well, with 1.15 billion active monthly users, I would pay to advertise on Facebook too! I think more than anything, it is the scale and reach that makes the Facebook so valuable.
They have a few types of advertisements:
- Self-service Ads that appear on the side
- Engagement Ads which require users to do something like vote or the likes.
- In-stream ads/Promoted posts that appear as users scroll down newsfeed
- Sponsored Stories
What make it even more attractive to advertisers is that these ads are customized to appear to specific audience, based on their actions tracked by Facebook. This means that you are advertising to people who already have an interest and has a higher probability to purchase. It is a very efficient and effective way to target specific audiences.
According to Neilsen, The average U.S. user spends seven hours and 45 minutes on Facebook a month. I cannot find the official statistics for Singaporeans, but I dont think we are that far away. What do you think all these people are doing? Games!
and how can we forget….
So how does Facebook earn from games?
- Collection of fees from game developers to put up their games
- In-game advertisements
- A 30 percent commission when players on Facebook buy digital goods e.g. extra lives
Before 2012, Facebook games were pretty much Zynga, now they have up-and-coming game developers like King and Pretty Simple, they are all set to go! Facebook earned $213 million in revenue from payments last year and that number will continue to grow.
Here is an interesting infographic of Facebook makes their money, to put things into perspective….
Well, I can’t do anything about Facebook continuing to earn money or not, as long as it stays around for us to continue using it! As a consumer, I care about the service that it offers. Thus, I’m super happy to hear this from the CEO himself! Now… if only all companies can be like that….
Simply put: we don’t build services to make money. We make money to build better services. – Mark Zuckerberg, Facebook CEO
Here is a video about Social Networking… some of the facts are really pretty amazing!