How Does Facebook Make Money?

This is an interesting article on Facebook and all the lawsuits that the founder is facing.  Apparently, a few classmates of his at Harvard believe that he stole the idea from them and they want to be compensated for it.

The case against Zuckerberg, the facebook founder was supposedly settled for $65 million dollars, but his former classmates are still not happy with that sum of money are continuing on with yet another suit (this time they’re arguing that the amount was based on a low valuation of how much facebook was actually worth).

Most of my friends are certified facebook addicts and I’ve asked each of them if they ever click on the ad’s when they are on that site and all of them have said no.  They don’t even notice them.  However, companies are paying facebook a few million to have their ad’s appear on that site and I suppose that’s where facebooks revenues are coming from (but if people don’t start clicking on those ad’s, won’t those companies go elsewhere?).

The above link lists facebooks revenues as follows:

2007 Revenues: $150 million

2008 Revenues: $300 to $350 million (projected) – I don’t believe they actually made this much in ’08

2007 Headcount (aka “employee’s): 450

2008 Headcount: 1,000 (projected)

2008 Capital Expenditures: $200 million (i.e., servers) – What?!!

2008 EBITDA (earnings before interest, taxes, depreciation & amortization): $50 million

2008 Cash Flow: negative 150 million (essentially, they lost money)

So, it sounds like they’re not even breaking even.  They’re operating in negative territory, but yet, someone has valued the company at about $15 billion dollars.  Why?

I think they’re going to start charging people for some “premium” services. Would you pay?

You have to sell something directly, like Amazon.com; What does facebook actually sell? (directly?)

***Another interesting story from Dubai.  Many expatriates who worked there for years, but are now being laid off, can’t afford to pay off their debts, so they are literally driving away (even leaving their car keys in the ignition at the airport).

In Dubai, if you don’t pay your debts, you can wind up in jail (it’s those funny islamic laws).

Heck…if I lived Dubai, I’d be on a plane outta there in a New York minute.  No way I’m ending up in the big house for civil ebts.

I think this is going to start becoming more frequent — people just running away to places where they can chill out from hounding creditors.

9 comments for “How Does Facebook Make Money?

  1. money Online
    January 16, 2014 at 9:35 pm

    Fastidious answer back in return of this difficulty with solid arguments and describing the whole thing on the topic of that.

  2. jim
    October 11, 2010 at 10:49 am

    My belief is that the largest part of Facebook’s money, and that of other social sites, comes from the sale of information…YOUR information.

  3. Anonymous
    July 16, 2009 at 7:40 am

    I have always wondered how facebook makes money. Kenya Enterprenuer, how do you make money form this website of yours? Is it just from the adverts? It is an interesting read.

  4. Virtual real estate
    March 16, 2009 at 4:50 pm

    $200 million? I dont believe in this thing

  5. kenyanentrepreneur
    February 26, 2009 at 4:29 pm

    I sometimes think that if the founder of facebook had not taken any VC money, he might have been better off because he would still have been able to make millions of dollars from the ad’s that his traffic was generating. He would not have been a billionaire, but he would have been very comfortable.

    I still don’t believe that their servers are costing them $200 million dollars a year? that’s a bit much. The cost of server space has been going down considerably.

    When google first started, they didn’t know how to monetize their company until someone told them to start charging people to post their ad’s on the site. So, all those ad’s you see on the right of google, are really it’s only source of revenue, but because so many people use google and because anyone can pay to have an ad up and running, google is able to bring in hundreds of millions of dollars by charging people DIRECTLY.

    I heard craigslist makes about $20 million dollars a month and the founder refused to take VC money. They make money by charging $25 dollars for job listings in 6 of the largest u.s. markets, $75 dollars for listings in San Francisco and there’s a $10 dollar fee brokered apartment listings in new york. I believe the company still only has 10 employee’s and their job is mainly to ensure that the servers are always running properly.

    Ebay used to be free when it first started, but they too decided to introduce fee’s as a way to monetize their business and so far, it’s worked for them. 100 million people use that site to shop and the sellers are charged directly.

    I guess you have to sell something directly and if Zuckerberg was content with being a mere millionaire, he could have done it by charging companies for direct ad’s and just keeping it simple (like craigslist).

    You can make money off ad’s: this site (http://whateverlife.com/) is owned by a 17 year old kid and she’s making about 80K a month just from ad’s, but she also gets millions of hits.

  6. noni
    February 26, 2009 at 7:17 am

    by the way most of the web 2.0 companies didn’t have any strategies, the were just like ‘WOW! we are getting lots of traffic, how can we make money of this? Or maybe we should sell our site to google and make good money?

  7. noni
    February 26, 2009 at 7:15 am

    I think its the strategy of building a site without a clear strategy of monetizing it up front. The initial strategy is to get traffic. If the site becomes too popular getting gazillions of hits and humongous traffic, you try to look for funding to expand the servers to cater for the traffic which costs a lot of money then later on you start trying to figure out how to monetize the site. Apparently wanting to retain the same user experience, the strategy of monetizing the site is not often straightforward and returns may to be enough to cover the over head costs.

  8. PKW
    February 26, 2009 at 3:07 am

    Been wondering the same, and, what about when another hyped up social networking site comes up, in a similar style to what Facebook did to MySpace?

  9. Coldtusker
    February 25, 2009 at 6:31 pm

    No idea but another dotcom type bust?

    Except for Google (& a few others)… does anyone else make money on ads?

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