Facebook

Since Facebook\'s launch in early 2004 it is has continually seen impressive growth. Much of this is probably owing to the fact that the network slowly and strategically expanded its user base, growing from an exclusive group of students with .edu email addresses, to including high school students in September 2005, and finally to expanding registration so that anyone could join in September 2006. According to active user data and search data fro... More >>

Since Facebook\'s launch in early 2004 it is has continually seen impressive growth. Much of this is probably owing to the fact that the network slowly and strategically expanded its user base, growing from an exclusive group of students with .edu email addresses, to including high school students in September 2005, and finally to expanding registration so that anyone could join in September 2006. According to active user data and search data from Google Insights, use of Facebook most certainly picked up after these expansions, but the real tipping point in growth came when the company unveiled its platform for developers of social applications in June 2007. Upon seeing the growth in the user base, Facebook management quickly recognized the growing network effects it could use to woo the developers, and since the creation of the application platform Facebook's active user base has shot up from approximately 20 million to over 50 million in just over a year.<br /> <br /> Nevertheless the burning question of monetization remains. Historically, in fact, some may argue that Facebook cannot really be considered a platform until it starts bringing in revenue. Of course, Google took a few years to figure out monetization too, so it's certainly possible that Facebook's epiphany is coming up soon enough, but it can never be too early to start thinking about how the platform itself can make money and how third parties involved with the platform can make money. Basically, a solid revenue model not only illustrates to the outside world that the platform is working and will be sticking around, but also clarifies where the company will and won't be making money, which is important for the develops who are looking to profit from the platform as well. Take for example Google, which has been extremely profitable with paid search on AdWords, especially because they've enabled others in the channel to profit by allowing independent publishers, website owners, and even bloggers use AdSense. Similarly, vendors and partners for Microsoft have made businesses out of selling their own customized software solutions in addition to the core Microsoft products. <br /> <br /> So where are the revenue opportunities for Facebook (besides advertising)? This may be obvious, but I believe the money really lies in developing functionalities and capabilities that enable users to take even better advantage of their immediate and extended network; basically value adding mechanisms for interacting with both strong and weak ties. Here are both some practical ideas and some pie-in-the-sky suggestions of my own and ones that I've read about recently:<br /> <br /> 1)Online payment: I've actually had this idea for a while, and it seems that it might be on the right track because Twitter recently introduced Twitpay, which enables Twitter users to send and receive payments online. Twitter makes money by charging a small fee for these transactions. While PayPal and Google already offer successful and similar services, users must create a separate account, keep track of a separate password, etc. Creating a payment system on Facebook, which could easily be integrated into its existing network structure, seems like an obvious way to make money and to improve the Marketplace application considerably. Further, they could add capabilities for friends to keep track of who owes who how much (think www.billmonk.com), a particularly useful feature for students, and use the online payment service to help them pay each other back more easily.<br /> <br /> 2)Gift registry: Whether it's a wedding, an anniversary, a baby shower, or a birthday, it's a huge hassle to create an official gift registry at multiple stores and communicate the registry information to all of our friends via so many different tools. Facebook already knows your network and provides a simple way for you to contact people in both your immediate and expanded group. If they can work with companies to integrate registries from different stores and provide this service directly on the Facebook interface it might be quite successful. They could also eventually integrate an exclusive multi-vendor shopping system in which users would be able to shop via this "Facebook Mall" while merchants pay a fee to be a part of this mall ecosystem.<br /> <br /> 3)FeedSense and FeedSearch: These are ideas I've read about on a few different entrepreneurial blogs. These all involve Google-esque monetization of searches and clicks. For FeedSense the idea is that Facebook creates a program that allows people to help discover and promote interesting sponsored News Feed stories and Social Ads based on click through rates. Basically you empower people so that they can help create visibility around a product or service that they use and endorse it, but you do it in such a way that is scalable so that businesses of any size can participate. FeedSearch entails creating a search bar at the top of the News Feed that enables people to search for specific activity within their works via keywords. Similar to Google, they can create sponsored and paid search opportunities that allow for more focused and monetizable user actions. One big challenge here is that social network users (and Facebook users are no different) tend to exhibit browsing behavior as opposed to targeted search, but if they are able to refine the information such that targeted search is easy and useful there may be an opportunity here.<br /> <br /> In general, one of Facebook's biggest concerns should be continuous improvement of their user interface so that the information they have actually scales well. As the amount of information they have about each user and each user's network grows, the proper organization and mining of information in several different ways may open the door for real money minting.<br /> << Less