FACEBOOK IS FREE CASH FLOW POSITIVE! THE COMPANY IS FINANCING ITS OWN GROWTH RATHER THAN USING INVESTOR MONEY.
Revenues coming from self-service ads
Facebook achieved double digit revenue growth through advertising. Not a revolutionary strategy, but one that Facebook has implemented far more successfully than other sites. While other social networks rely on traditional banner advertising, Facebook created an ad program tailored to its site.
But the real success can be attributed to Facebook’s design guidelines and unobtrusive placement. Facebook ads do not interrupt the user’s experience. As a matter of fact, ads are confined to the right side of all pages and conform to the size of highlights and Facebook alerts, and all use the same font, same layout. Facebook enforces rigorous copy guidelines, so you won’t see all caps, deceptive offers or misleading photos.
In 2008, the company brought in a total of between $280 million and $300 million. In July 2009, Business Insider and investor-blogger Fred Wilson both reported revenue was growing fast, to around $550 million, broken down as follows:
Significant growth comes from self-service ads used by brands to acquire more fans on their Pages and by local businesses that are starting to discover they can reach their customers in Facebook. CPMs are low and impressions can be high. And if the ads are the “Become a Fan” type, companies can establish an open line of communication with their constituents, rather than the click and vanish characteristic of banner advertising.
300 Million and On
Facebook just crossed the 300 million user mark. By turning cash flow positive a year ahead of plan with more than 300 million global users and scale that advertisers crave, it has taken a major step to transforming social media from a fad into a business.
Taking in more cash than it is paying out can be a precursor to profitability. If Facebook can crack the code to generating more revenue from its highly diverse and fickle member base, then its bottom line is sure to soar as quickly as its user count. Where consumers go, advertisers usually follow.
So what is Facebook doing with their money?
Data Center Knowledge reported that Facebook is making a big new investment in its existing Virginia facility. The publication cited analysts who estimated that the center could cost up to $125 million over the course of several years. Inside Facebook reports it’s not clear how Facebook is accounting for that expenditure, but the term “free cash flow positive” signifies that the company is able to cover its own capital expenses.
