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Facebook: Where is the Money Coming From?

We all know that Facebook is immensely popular. Almost everybody we know seems to be on it. Mark Zuckerberg, the creator and CEO of Facebook, declared in December 2009 that Facebook has over 350 million users around the world. Quite an amazing membership count. And although nobody seems to understand quite clearly how, Facebook and social media world in general are generating advertisement revenue. In fact, according to a Forrester Research projection social media marketing spend is expected to exceed $3.1 billion. While nowhere near $20 billion Google is making of search advertising, it is still a gigantic amount of money we are talking about being invested in social media. It is estimated that Facebook alone was able to generate $500 million in 2009.

Why is there so much money being invested in Facebook? Where are these ads showing up? Who is spending this much money? How are these “advertising” helping the companies that use Facebook to advertise? What does social media marketing really mean outside customer management? I will explore what is going behind the scenes to allow Facebook to operate and to expand at such astonishing rate.

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  1. mushon 11:14, Feb 6th, 10

    I think another question worth asking there is: “While we know what incentive the user has for clicking on an ad relevant to their search query, how is/can social media creating a context that supports the advertiser’s messege and might effect consumer habits?”

    if Facebook is making so much money, then there should be an answer to this question. Yet again, we should ask ourselves about the sustainability of this model in an ever changing media landscape and be critical of what might be signs of just a bubble 2.0.

  2. Harris 12:52, Feb 9th, 10

    This is a very intriguing topic, especially because every online advertizer keeps complaining about the low click through ratio on facebook, and majority of its users are young people who do not have a lot of disposable income, but it’s still making quite a lot of money. Is it because of sheer size?