As details from Facebook’s S1 filing filter into public view, there’s a distinct parallel between Facebook and some of the more mature businesses in social media marketing. Facebook, like a few social media marketers, have already figured out the acquisition game. They have a strong user base that’s still growing (Facebook is predicted to hit 1 billion users by August) and engagement on their platforms is slightly up.
Many envious marketers would call these accelerated trends successful, but as it turns out this is just half of the equation. The first step may be turning consumers into an active and passionate audience, but the next, and potentially more important part of the equation is all about revenue.
Facebook Isn’t Making Much Money Per User
On a per user basis, Facebook is making half of what Yahoo! makes per user, one sixth of what Google generates on a per user basis, and just over one fiftieth of Amazon’s per user revenues. (See chart below.) Part of this could have to do with how Facebook actually counts a unique user. Anyone who either visits the site or interacts with a third party plugin that runs in conjunction with Facebook (e.g. anyone who clicks Like) is counted as a user. This counting methodology may inflate Facebook’s effective user base, but the principle still stands. Facebook needs to learn to make more money per user.
According to recent financial statements, in 2011 Facebook generated 85 percent of its revenue from ads. Another 12% is derived from their partnership with social games company Zynga. Stack this up against Google’s 90%+ reliance on ad revenue and we’re talking about a fair amount of diversification, but Facebook is missing out.
For starters, Facebook could benefit by ramping up the amount of money they earn on mobile users. Even though half of Facebook users log in via their mobile device, it wasn’t until today that the social platform integrated ads into the mobile experience. Still, there’s opportunity to be had elsewhere.
When You’ve Achieved Community, Businesses (Like Facebook) Must Focus on Revenue Per User
As it turns out, there are a lot of companies who are in a position that’s similar to Facebook. They have fans and followers, they’ve built a community around their brand, but they aren’t succeeding (yet) with that last magical step. In other words, they aren’t necessarily making money off of their community.
This part of the equation, as Facebook is finding out, is both an art and a science. It’s about diversifying revenue streams and the fine balance between providing value and selling. Don’t sell at all and you risk going out of business. Sell too hard and you lose a customer forever. Get it just right though, and unlock the door to wildly loyal consumers without a geographic limitation.
Infographic source: StatistaInfographic: Facebook (Like Businesses in Social) Needs to Focus on Revenue Per User by Lauren Proctor