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Is Facebook A Good Business?
A saw a report today that Facebook leads all internet sites with the number of people who visit and the number of pageviews. The report was published by Googlew and didn't include the Google search engine in the rankings.
With 500 million members worldwide and so many pageviews, soemone might think that Facebook could pretty much just print money on a consistent basis. However, it sounds like they have about $1 - $2 billion in revenue. This is a large number, but fairly small considering their user base and expenses to host so many people, conversations, pictures, and videos.
This makes me wonder. Is Facebook a good business?
Would you start a local business where people could come into your building and hang out (requiring employees, electricity, bathrooms, property insurance, etc...) without ever buying anything? How long would your business last with a business model like that?
It is true that Facebook is starting to make more revenue from advertising, but the ad model doesn't work very well on a site like Facebook. People are on the site to connect with their friends. They are not there researching products or looking to buy things. Companies will pay to put their ads in front of such a large audience, but the ads will not perform well in the social environment.
Facebook has been very dependent on their VC funding. They are starting to turn a profit, but huge revenue will be hard to come by when you are based on giving a bunch of freeloaders a place to hang out with little expected in return.
With 500 million members worldwide and so many pageviews, soemone might think that Facebook could pretty much just print money on a consistent basis. However, it sounds like they have about $1 - $2 billion in revenue. This is a large number, but fairly small considering their user base and expenses to host so many people, conversations, pictures, and videos.
This makes me wonder. Is Facebook a good business?
Would you start a local business where people could come into your building and hang out (requiring employees, electricity, bathrooms, property insurance, etc...) without ever buying anything? How long would your business last with a business model like that?
It is true that Facebook is starting to make more revenue from advertising, but the ad model doesn't work very well on a site like Facebook. People are on the site to connect with their friends. They are not there researching products or looking to buy things. Companies will pay to put their ads in front of such a large audience, but the ads will not perform well in the social environment.
Facebook has been very dependent on their VC funding. They are starting to turn a profit, but huge revenue will be hard to come by when you are based on giving a bunch of freeloaders a place to hang out with little expected in return.
Tags: Facebook, good business
Views: 4
Replies to This Discussion
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Permalink Reply by OICUAM2 on -
I think Facebook is a good business only because it is Facebook. In other words, I wouldn't try to start a business like Facebook because there can only be one or two companies that make it that big. Even though they have 500 million members, they still are having trouble being profitable, but I think they will be o.k. since they have so many people on the site.
It is getting easier to make a site like Facebook. For example this site is made with the Ning platform and has many features like Facebook. This site would probably do really well if there were a lot of people on it because it is in a market where people are searching for knowledge that is valuable. Even with a small number of people, this site could bring in some money because fo the market and relevant ads. It also woul dmake sense to see more affiliate links on this site.
However, since Ning makes it so easyt to create a social network, I have seen people make sites that get a lot of members and then they complain that they aren't making any money. Well, if you make a social network where people just come on to meet other people and share some videos, then you are hosting a party that doesn't have a lot of revenue potential.
Facebook is not focused on a specific market, but they have so many people that someone will be willing to pay to advertise to all of those eyeballs. Also, with that many members, Facebook can roll out more and more apps and new features that might have a revenue model associated with it.
The lesson here is for those of us who are not going to end up being Facebook. We need to start and build sites that have good revenue potential. Don't waste time trying to host a party where nobody is interested in doing some type of business. You will just end up paying for a party and getting very little in return.
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Permalink Reply by James Scott on -
Well said... Facebook is only a good business because they are Facebook.
I like the features of Facebook, but I woul drather start a site around a specific topic.
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