Facebook Revenue Sources

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THE REVENUE SOURCES OF FACEBOOK.COM
Facebook Revenues Up to $700 Million in 2009, On Track Towards $1.1 Billion in 2010 Facebook is tight-lipped about its revenue numbers, which is typical of private companies. The most it has said publicly is that it became “free cash-flow positive” as of last September. At the time, we estimated it was set to bring in around $550 million for the year in revenues based on previous reports that we and others had heard, and from our own calculations. But how did the year actually end? Somewhat higher. And sources estimate the company could make between $1 billion and $1.1 billion in total revenue this year. It ended 2008 making between $280 million and $300 million, according to many reports. The company’s revenues likely reached between $600 million and $700 million for 2009, according to a variety of industry sources we spoke with. The estimates match what we heard in September, which was that $550 million was looking too low – 2009 was clearly a big year for the company in terms of building its business, as we’ve been covering. The company has been roughly doubling its revenues every year — 2007 came in at $150 million. We expect that trend to continue for the foreseeable future, making Facebook a multi-billion dollar company within the next few years. The question is becoming how Facebook can hit the inflection point where its revenues increase much more quickly. Of course, it is not commenting on this story, except to provide the following statement: Facebook is a private company, and we do not publicly disclose our financial results. We understand there is a great deal of interest and curiosity in our past and potential financial performance. However, external attempts to forecast revenue are fundamentally speculative and should be treated as such. We’re focused on building our business to be successful over the long-term. 2009 Revenue

How did Facebook make money last year? By growing multiple revenue sources, mostly around advertising. Here’s the revenue we estimate for each component, followed by our analysis. Note that the 2009 run-rate numbers in the table circulated went around the financial community last summer, and were publicly reported by investor-blogger Fred Wilson and Business Insider. We’ll get into the 2010 projections further down.

Want more updates from Inside Facebook on Facebook revenues? Sign up here to be notified of future reports. Brand Advertising: Facebook’s internal sales force made a big push here throughout the year, building on past efforts. It made very public entreaties to advertisers with many millions in budgets, like its big presentation to Madison Avenue last year. There, it also announced a deal where Nielsen started providing better advertising data to help firms track campaign results. Facebook also continued to upgrade Pages and its home page advertising units, testing out a range of new features like engagement sampling ads. Meanwhile, the site grew to more than 350 million monthly active users at the end of 2009 from 150 million or so at the beginning of the year — that’s a lot of new eyeballs for advertisers to try to reach. Out of those users, around 100 million were in the US and another 100 million were in Europe: These two markets are where brand advertising brings in the most money. Brand ads revenue also expanded for a couple more reasons we’ll get into below. Between what we’ve heard from sources and our estimates, we think this category increased considerably over the course of the year, from the $125 million rumor in July to roughly $225 million by the end of the year. The bigger question is if major advertisers are starting to spend more than “experimental” budgets on Facebook, and according to sources this just started to happen over the course of last year. Microsoft Advertising: Revenue in this area is not clear. Microsoft has been running banner advertising on Facebook for years, one of the perks of its which it started...
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