This week, Facebook released its first earnings report as a public company.
It generated more than $1 billion last quarter, up 32-percent, but reported a net loss of $157-million. More on how the social media giant is trying to make money to get out of the red.
If you're one of Facebook's 900 million users -- and chances are, you might be -- you're worth $1.21 to the company. That's how much they made per user last quarter. Let's take a look at how the company's actually making money."
See that digital cow on the Farmville game? Facebook makes a $1.20 every time you buy one. And that bullet-proof vest on Mafia Wars -- and your survival knife? Facebook gets a slice of those sales, too - $1.20 for your virtual protection.
All of them are sold by Zynga, but Facebook gets a 30 percent cut of each sale.
They're part of facebook's payments business, which accounts for 18% of the company's revenue. The nickels and dimes add up. Facebook collected $186 million last quarter. But the main way Facebook makes money is from the ads you see on the site.
"We spend several million dollars every month, frankly on Facebook ads." Design website Fab.com says it had nearly 200,000 users before they even launched, and two-thirds came from Facebook. "On any given day, 25% of the visits to Fab are coming from Facebook," explains Jason Goldberg,
Fab.com's CEO.
Some are not as sold on the success of paid Facebook ads.
"The marketers we talk to tell us they're just not happy with the performance they're getting from Facebook." says Nate Elliot, analyst for Forrester Research.
Businesses like the company pages where they can advertise their brand for free, but the social network made its $872 million in ad revenue last quarter from paid ads. "When you click on those ads, that's how Facebook makes money. Facebook, quite frankly, doesn't care from a revenue perspective what happens after you get to that branded page."
GM has a branded Facebook page iwth 396,000 likes. "Unfortunately it's just about the only thing many marketers look at - how many likes do we have? We think it's an overly simplistic metric and one that doesn't really tell you whether you're having success," Elliott notes.
But those likes may not translate to profits. Two months ago, GM pulled all their paid advertising on Facebook. And, that's not the only concern.
"What really scares Facebook? Your smartphone. The company launched mobile ads four months ago and they're still not making a lot of money off of them."
"We're starting to see a lot of real money flow into mobile advertising but there's still a lot of potential to be unlocked there."
Analysts expect Facebook's sales to top a billion dollars this quarter. For that number to keep growing, Facebook has to figure out how to make money off this...and not just this.
(Laurie Segall for CNN)
It generated more than $1 billion last quarter, up 32-percent, but reported a net loss of $157-million. More on how the social media giant is trying to make money to get out of the red.
If you're one of Facebook's 900 million users -- and chances are, you might be -- you're worth $1.21 to the company. That's how much they made per user last quarter. Let's take a look at how the company's actually making money."
See that digital cow on the Farmville game? Facebook makes a $1.20 every time you buy one. And that bullet-proof vest on Mafia Wars -- and your survival knife? Facebook gets a slice of those sales, too - $1.20 for your virtual protection.
All of them are sold by Zynga, but Facebook gets a 30 percent cut of each sale.
They're part of facebook's payments business, which accounts for 18% of the company's revenue. The nickels and dimes add up. Facebook collected $186 million last quarter. But the main way Facebook makes money is from the ads you see on the site.
"We spend several million dollars every month, frankly on Facebook ads." Design website Fab.com says it had nearly 200,000 users before they even launched, and two-thirds came from Facebook. "On any given day, 25% of the visits to Fab are coming from Facebook," explains Jason Goldberg,
Fab.com's CEO.
Some are not as sold on the success of paid Facebook ads.
"The marketers we talk to tell us they're just not happy with the performance they're getting from Facebook." says Nate Elliot, analyst for Forrester Research.
Businesses like the company pages where they can advertise their brand for free, but the social network made its $872 million in ad revenue last quarter from paid ads. "When you click on those ads, that's how Facebook makes money. Facebook, quite frankly, doesn't care from a revenue perspective what happens after you get to that branded page."
GM has a branded Facebook page iwth 396,000 likes. "Unfortunately it's just about the only thing many marketers look at - how many likes do we have? We think it's an overly simplistic metric and one that doesn't really tell you whether you're having success," Elliott notes.
But those likes may not translate to profits. Two months ago, GM pulled all their paid advertising on Facebook. And, that's not the only concern.
"What really scares Facebook? Your smartphone. The company launched mobile ads four months ago and they're still not making a lot of money off of them."
"We're starting to see a lot of real money flow into mobile advertising but there's still a lot of potential to be unlocked there."
Analysts expect Facebook's sales to top a billion dollars this quarter. For that number to keep growing, Facebook has to figure out how to make money off this...and not just this.
(Laurie Segall for CNN)
