At a Glance
- Cofounder, Chairman and CEO,
Facebook
- Age: 28
- Source of Wealth: Facebook, self-made
- Residence: Palo Alto, CA
- Country of Citizenship: United States
- Education: Drop Out, Harvard University
- Marital Status: Married
Forbes Lists
For better or worse, this will go down as the year that
Facebook really put a dollar sign in front of its users.
Facebook has been under immense pressure from investors to come up
with ways to monetize, which has led to a fundamental shift in how it
operates. When the company first filed to go public in February, CEO
Mark Zuckerberg stated very clearly that profit is not his or the
company's first priority. "Simply put: we don’t build services to make
money; we make money to build better services," he wrote in the
public filing. Eight months and plenty of bad stock trading days later,
Zuckerberg revealed in an
earnings call that every team at Facebook is now responsible for coming up with a revenue strategy for their product.
In the past year, we've seen Facebook try out a range of tactics to
make money from its users, whether it's inserting more advertising into
the
News Feed or the recently announced option that lets people you
don't know message your inbox for $1. Some of these efforts, like the
messaging option, have been met with heavy criticism from users while
others have largely been accepted as par for the course.
What matters now to Facebook from an investor standpoint is how much
it can increase the money it makes from each user. Facebook generated
about $1.25 per user on average in the third quarter, up from about
$1.19 in the same quarter last year.
To put that another way, right now you're worth about $5 a year to
Facebook and the company would really like to see that number go up.
To put that another way, right now you're
worth about $5 a year to Facebook and the company would really like to
see that number go up.
For that reason, don't hold your breath for Facebook to stop trying
out new ways to make money off you in the
new year. Brian Wieser, senior
research analyst at Pivotal Research Group, says that some features
introduced this year like Sponsored Stories for mobile will likely stick
around, while the company continues to test out others to see what
works and what doesn't.
"I think you should expect just an ongoing testing and learning from
an ad sales perspective about what balances near-term revenue growth
with durability," Wieser said. With that in mind, here's a look back at
all the ways Facebook tried to make money from you this year, as well as
a glimpse at what they might do next year.
Putting Sponsored Stories in Your News Feed
Image courtesy of Facebook
Facebook launched Sponsored Stories in the beginning of 2011, in an
early effort to monetize activity on the desktop website by turning
users into quasi-brand promoters. This year, Facebook took that effort a
step farther by
placing these promotions in the user's News Feed,
where they are more visible and presumably generate a higher
click-through rate. This has been a big money maker for the site,
bringing in more than $1 million a day, but it has also proven to be a
bit of a headache. Users filed a
class-action lawsuit against the company earlier this year, objecting to the having their names and pictures used in the ads.
Mobile Ads in Facebook's App
Image courtesy of Facebook
From the perspective of investors, nothing was more important for Facebook than proving it could
monetize on mobile.
It did just that starting in the middle of this year by introducing
Sponsored Stories, app install ads and Offers into the mobile feeds of
its users. In the third quarter -- just a few months after Facebook
launched these mobile ads -- it generated $139 million from mobile ads,
or 14% of its total ad revenue.
Facebook now makes $3 million a day inserting promotional content
into your mobile News Feed and, as Zuckerberg noted during a conference
call with analysts, "We're just getting started."
Mobile Ads in Third-Party Apps
Image courtesy of Flickr, Jason A. Howie
Even after you leave Facebook, the company can still find ways to make money off you. In September, Facebook began testing
placing mobile ads in third-party applications.
The ad exchange allowed certain websites and apps to use Facebook
information to better target users with ads promoting a website or
providing a link to download an app. Facebook recently put this ad
product on hold, but that doesn't mean it's going away for good. As a
Facebook rep told
Mashable, "We have learned a lot from this test that will be useful in the future."
Promoted Posts
Image courtesy of Facebook
As the social network gets more crowded with posts from users and
advertisers, some of your updates may get lost in the clutter. So
Facebook decided to give users a new option in October to ensure that
their posts are seen by more people. For the low, low price of just $7,
Facebook allows users to "promote" their posts in their friends
News
Feeds. As
Mashable's Matt Silverman wrote at the time, Facebook is now applying the "freemium" model for its service.
Image courtesy of Facebook
After trying and failing to operate a gift shop two years ago,
Facebook decided to give the gifts idea another shot. In September, the
company launched
Facebook Gifts,
helped by its acquisition of the gift-giving app Karma earlier in the
year, in an effort to create another revenue stream. As mentioned,
Facebook currently makes just $5 on average per user per year. If every
user makes just one small purchase through Gifts, that amount will
skyrocket in the coming year. That's why you've likely seen more than a
few prompts on the site to buy someone a gift for a particular occasion.
Paid Messages
Image courtesy of Facebook
Facebook decided to squeeze in one more money-making attempt before
the end of the year, announcing this week that it is testing a new
option that lets users pay $1 to ensure that a message is delivered to
someone's inbox, even if it's not someone he or she is connected to on
the network. Until now, messages are only delivered to your Facebook
inbox if it is sent by someone you are friends with, or who you share
mutual connections with. Otherwise, the message goes to a subsection of
your inbox called Other, which essentially serves as a spam folder.
Facebook is billing the option as an effort to crack down on spam by
seeing if imposing a financial cost on users stops them from messaging
people they don't know. But it seems just as likely that this could lead
to an influx of spam from marketers and others who may be eager to get
access to your Facebook inbox. While the plan is subject to change, a
Facebook rep told
Mashable that as of right now, a user could
pay a one-time fee of $1 to message your inbox an unlimited number of
times until you decide to mark it as spam.
Video Ads in the News Feed
The next big attempt from Facebook to make money may be placing video ads in News Feed.
Advertising Age
recently reported hearing from "several industry executives" that
Facebook is planning to let advertisers place 15-second ads in users'
News Feeds on desktop and mobile by April, 2013. Worse still, the ads
will reportedly be on autoplay, meaning they will start playing once you
open up the page, whether you want them to or not.
Welcome to the new era of Facebook.
keep up with the newest technologies and contemplate about how these will be used in the future. On this blog I'll share my thoughts about the future of technology, based on the
high Tech RoadShow Blog inventions of today.
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(ethanzuckerman.com)
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