As [Businessweek editor-in-chief Stephen Adler] pointed out in the interview, most estimates peg Facebook’s revenue at something between $1 and $2 per user annually – assuming $300 million (an unconfirmed figure) from 200 million people – which is quite small for a site with that many regular users, even for a free Web service. Rival social network MySpace, for example, is estimated to take in between $6 and $7 in ad revenues per user.
[Facebook COO Cheryl Sandberg] is optimistic that the sales number will grow as more advertisers dream up fun ways to engage social networkers with their brand, and as advertising begins to roll out to international users. But is she so confident in ad profits piling up that she rules out other forms of revenue, such as charging fees for a premium membership to the site?
ADLER: Does Facebook plan on charging a membership fee? Over three-quarters of its users are going into a panic-induced assumption that this is true, even though there hasn’t been talk of a membership fee from the business press or Facebook itself. So can you calm the panic?SANDBERG: The answer is no, we are not planning on charging a basic fee for our basic services. Once again, that question stems from people thinking we’re growing so quickly we’re running out of money. We’re growing really quickly, but we can finance that growth. We’re not going to charge for our basic services.
Basic services? This term was not part of the question, and we haven’t heard it used by Facebook management in the past. Sandberg is a seasoned executive and a polished speaker – could she have been intentionally leaving a door open for the company to introduce some type of paid membership?
Company spokeswoman Brandee Barker only reiterates that Facebook “is a free service to users and we intend to keep it that way” – herself not eliminating the possibility of an additional paid service. Barker adds that the company may introduce new ways to charge brands for engaging with users, saying, “We certainly don’t want to rule out exploring other types of commercial services at some point.”
Yes they generate revenue – but is it sufficient? Facebook has recently passed 200-million accounts, becoming the fifth largest ‘country’ in the world. Is it enough given their debt load needed to finance infrastructure? Although the press may mock the armchair startup’s obsession with business models, there is legitimate concern as to the financial health and cash-flow of Facebook.
One of their most significant expenses has been photo hosting. FB is second only to Imageswap in numbers of hosted images (I’m certain of this is total images including all sizes; Facebook stores several sizes of each image). They are implementing new technology named “Haystack” to increase efficiencies.
We saw the low-key informed outcries when Facebook “opened up”, over the initial implementation of “the news feed”, and then over the expansive (and later rescinded) Terms-of-Service. We also saw the revolt of the angry villagers with pitchforks and torches over the much-hated redesign (an attempt to counter a perceived threat from Twitter and monopolize on the status update), followed in short order by a swift response and hasty design rollback .
There has also been an exodus of talent, both willing and (possibly) involuntary, with increasing criticism coming from many quarters on many topics (including that of cults). If Facebook rolls out a premium subscription model with the same lack of both strategy and execution displayed during their recent redesign, they will have left the back door open to any number of competitors.