Can Facebook turn traffic into profits?

Facebook turns five


One challenge Facebook is yet to overcome is how to make money.

US software giant Microsoft bought a 1.6 percent stake in Facebook in 2007 for 240 million dollars, valuing the social network on paper at 15 billion dollars.

But Facebook, unlike other Web giants such as Amazon, eBay, Google and Yahoo!, is yet to prove how it is going to translate traffic into cash.

"There's no significant visible source of revenue other than investors," said Silicon Valley analyst Rob Enderle of the Enderle Group.

"There's a lot of potential there but they're still kind of living in this dotcom mindset where a business plan doesn't make a difference," he said. "And as we saw with the dotcoms, that has a very unfortunate end to it."

"Google was able to figure out fairly quickly how to monetize what they were doing and they became a giant and that's the potential for Facebook but they've got to cross that chasm," Enderle said.

Going public with an IPO, or initial public offering, would not appear to be an option for Facebook right now.

"Doing a public offering when you have no revenue? Good luck with that -- particularly in this market," said Enderle.

Advertising could be a money-spinner but "the ad model doesn't seem like it works all that well for Facebook -- though it could," said Enderle. "You know an awful lot about people, and so you would think they could do targeted ads."

Comment: I think it is a really cool service. I didn't even know that they weren't making money. Wonder if Facebook will be around 5 years from now?

1 comment:

  1. I just joined them yesterday. Talk about being behind the times.


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