2008 growth puts Facebook in better position to make money

This summer, Facebook predicted it would hit 200 million monthly active users by the end of this year — a number some scoffed at, as Facebook had less than 100 million at the time. Today, it looks like Facebook will likely miss its lofty target, according to its current growth rate. But this isn’t a new opportunity for Facebook doomsayers to start gloating.

Because Facebook is currently adding between 600,000 and 700,000 users per day, it is more likely to hit the 200 million mark in March, InsideFacebook predicts — up from 140 million this month. And that’s not all. Below, I’ve compared Facebook’s internal stats currently available from the company, versus those published in January. Basically, as the site has grown larger, a wide range of site metrics have been looking better and better. In January, for example Facebook was only (if “only” is the word) adding 300,000 users per day.

Of course, the big question is how Facebook will make money off of all these users. The metrics are starting to point in that direction, too. The company has been experimenting with a variety of ways for users to share information about advertisers on the site. For example, an advertiser can set up a “Page” about a product, then users can become fans. When a user becomes a fan, the users friends see a message about that action in their news feeds. Now, more than 2.5 million users are joining pages each day.

Facebook’s redesign, implemented this fall, refocused the site around news feeds and profile feeds to help promote user activity, including ad-focused actions like joining an advertisers page. Obviously, the redesign didn’t hurt the site’s growth — even though millions of users were angry about it at first. Instead, the combination of more users and more sharing means Facebook will continue to make more money on advertising.

The problem is that advertisers are cutting back ad spending everywhere. Third party marketing analyst firms like eMarketer believe that “experimental” forms of advertising, like advertiser Pages, will be cut. Also not good for Facebook: 70 percent of it’s growth is happening outside the U.S., much of it in countries that aren’t valuable advertising markets. Yet, Facebook is also growing within the U.S. AllFacebook’s analysis of the site shows its active U.S. users quickly climbing to above 40 million.

If Facebook keeps growing, advertisers won’t have any choice but to “experiment” with Facebook if they want to reach web users. Growth is also why Facebook continues to attract third-party developers, despite the changes it regularly makes to its platform.

General Growth

January:

  • More than 60 million active users
  • More than half of Facebook users are outside of college
  • The fastest growing demographic is 25-years-old and older

Today:

  • More than 140 million active users
  • More than half of Facebook users are outside of college
  • The fastest growing demographic is 25-years-old and older

User Engagement

January:

  • Sixth-most trafficked site in the United States (comScore)
  • More than 65 billion page views per month
  • More than half of active users return daily
  • People spend an average of 20 minutes on the site daily (comScore)

Today:

  • Average user has 100 friends on the site
  • 2.6 billion minutes are spent on Facebook each day (worldwide)
  • More than 13 million users update their statuses at least once each day
  • More than 2.5 million users become fans of Pages each day

Applications

January:

  • No. 1 photo sharing application on the web (comScore)
  • Photo application draws more than twice as much traffic as the next three sites combined (comScore)
  • More than 14 million photos uploaded daily
  • More than 6 million active user groups on the site

Today:

  • More than 700 million photos uploaded to the site each month
  • More than 4 million videos uploaded each month
  • More than 15 million pieces of content (web links, news stories, blog posts, notes, photos, etc.) shared each month
  • More than 2 million events created each month
  • More than 19 million active user groups exist on the site
International Growth

January

  • Canada has the most users outside the United States, with more than 7 million active users
  • The U.K. is the third largest country with more than 7 million active users
  • Remaining top 10 countries in order of active users (outside of the U.S., Canada and UK): Australia, Turkey, Sweden, Norway, South Africa, France, Hong Kong

Today

  • More than 35 translations available on the site, with more than 60 in development
  • More than 70 percent of Facebook users are outside the United States

Platform

January:

  • Over 7,000 applications have been built on Facebook Platform
  • 100 new applications added per day
  • More than 80 percent of Facebook members have used at least one application built on the Facebook platform

Today:

  • More than 660,000 developers and entrepreneurs from more than 180 countries
  • More than 52,000 applications currently available on Facebook Platform
  • 140 new applications added per day
  • More than 95 percent of Facebook members have used at least one application built on the Facebook platform

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About the Author, Eric Eldon

Eric currently covers digital media technology and business news, especially what's happening on social networks and their platforms. He also writes and edits stories about venture capital, and lots of other stuff, too. He started at VentureBeat in the spring of 2007, half a year or so after Matt Marshall left his reporting job at the San Jose Mercury News to found the site. Eric previously cofounded a startup called Writewith, that was building editorial software for newspapers and other groups of writers. The startup didn't work out, but he learned a lot.

  • Eric: wow, I'm now officially a "doomsayer." Thanks.

    A few points:

    1. Active users and user engagement != revenue. When you find a bank that will allow me to cash active users, pageviews, application installs, etc., let me know.

    2. Advertisers have been experimenting on Facebook and other social media websites for years now and the results are the same. There are none. Perhaps you missed the New York Times discussion of this recently, which I responded to at:

    http://www.drama20show.com/2008/12/17/new-york-...

    3. You say that marketers will have no choice but to experiment with Facebook yet you also note the fact that experimental budgets are being cut. You do the math on this. Experimental budgets have never made a medium; shrinking experimental ones won't either, logically. Facebook has to get beyond experimental budgets to thrive. Experiments don't last forever.

    4. There's a reason that eMarketer continues to cut its estimates for social networking ad spend: advertisers keep cutting their spend. I'll let you figure out why.

    5. International growth is as much a liability as it is an asset. Every Facebook user has the same associated costs in terms of resource usage but because most advertisers don't value international traffic very highly, revenue-per-international-user is almost certainly far lower. Therefore more international users = larger spread between revenues and costs. I'm sure you can figure out what will do to Facebook's income and cashflow statements.

    Perhaps the best way to address the argument you make is the story of a middle manager who goes to his boss and says, "We're losing money on every product we sell. What are we going to do?" His boss responds, "Don't worry, we'll make it up in volume."

    Brilliant logic.

    I think the recent reports that Facebook is still shopping around for more cash and is seeing its shares sold privately at a significantly reduced valuation speak for themselves.
  • uga
    Advertising might be a very hard bet for facebook.
    However, before google launched adwords, internet was full of doubts about google's future.

    I know there are tons of internet advisors for facebook each time some article about advertisment problems on facebook appears, but.. i'll venture to make one advice - think out of the box. take a look in smaller markets, where some local social networks have gain their way and are very profitable (and not only from advertisement). there are some in Europe for sure. and there are some not-that-bad-ideas there.
  • JC
    Let's see. Facebook is adding a lot of users. Handling a lot of load in terms of messaging, notifications, photos, videos, and so on. Basically, it is SPENDING A LOT OF MONEY.

    Returns? Not so much. It is a pretty shallow platform which can engage high schoolers who really don't have much purchasing power.

    How will it make money? Gone are the days when you sold the company based on number of users (remember geocities or globe.com?). Real revenues will be hard to come by, especially to cover these humongous costs.

    Good luck to Facebook anyways.
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