Facebook brought in as much as $800 million in revenue last year, higher than the $550 to $700 million range previously estimated, according to sources who spoke to the Reuters newswire. The social network also earned a solid profit in the tens of millions of dollars, according to the report.
Last year’s revenues were buoyed by self-serve ads, which are those tiny text and photo ads that anyone can buy and target specific demographic groups with. Rather than paying every time an ad appears, advertisers generally bid to pay a certain amount for users’ clicks, sometimes paying around $1 or more for every time a Facebook user clicks on an ad. (The recommended bid to reach an adult in the U.S. is 95 cents, for example.)
Social-game companies use the self-serve ads to lure new users to their games, as Zynga recently did with its latest launch, FrontierVille.
Chamath Palihapitiya, Facebook’s vice president of growth, mobile and international expansion, told us last fall that “self-serve ads are the gift that keeps on giving. All channels are doing very well, but that channel is just crushing it.”
The other revenue channels from last year included an advertising partnership with Microsoft, although the social network now feels confident enough to stand on its own. Microsoft is no longer serving display ads on the site as of February, although it remains the default search engine and serves search ads.
There were also virtual goods like Facebook’s Gifts and custom campaigns for big brand advertisers.
In March, InsideFacebook estimated that Facebook earned $635 million last year, with the following breakdown:
This year, the company is likely to see virtual goods become a larger share of its overall revenue mix as it aggressively pushes developers to use its virtual currency Facebook Credits. It earns a 30 percent take from transactions in Credits. So if a game earns $1 billion in annual revenue, Facebook will keep $300 million of that. Credits are controversial in part because many of the social-game companies which would have to pay Facebook a cut of virtual-goods purchases are also large advertisers with Facebook. Zynga and Facebook recently resolved an impasse over this issue, striking a long-term deal for Zynga to keep running its games on Facebook and use Credits, though financial terms were not disclosed.