Advertising accounted for 83 percent of Facebook’s total revenue of $3.71 billion in 2011. Facebook, the social media platform powered by internet also revealed last week that it made $1 billion profit.
In its report of financial standing, Facebook established in 2004 said there was an 88 percent increase in its total revenue from the $1.97 billion total reported for 2010, though falling short of eMarketer’s 2011 projection of $4.27 billion.
The increase was mostly attributed to the 69 percent growth of advertising revenue, which was buoyed by a 42 percent increase in the number of ads delivered and an 18 percent increase in their average price.
While advertising made up $3.15 billion of Facebook’s revenues last year, the company earned $557 million from Facebook Payments - the virtual currency it began requiring game developers on the platform to use as of July 1 - and other fees. Payments are making up an increasingly hefty chunk of Facebook’s revenue, and in the fourth quarter of 2011, advertising constituted just 83 percent of revenues, down from 90 percent the previous year.
Facebook takes a cut of all money exchanged through the use of “Payments,” and in the case of virtual goods purchased on Zynga, that cut is up to 30 percent. CEO Mark Zuckerberg, who founded the company in a Harvard dorm room in 2004, owns 28.1 percent of the company worth $28 billion, assuming a likely valuation of $100 million when the stock is issued. In a letter to shareholders, Zuckerberg mentions advertising just once, but spells out his users-first philosophy.
“We don’t build services to make money; we make money to build better services,” he said. “These days I think more and more people want to use services from companies that believe in something beyond simply maximising profits.”
One recurring doubt that surfaces about Facebook’s revenue prospects is that the service brands are most keen on dedicating resources to free: the maintenance of their fan pages. But as Facebook fan pages become a more integral part of media strategies, the dollars to prop them up will flow more freely, according to Bryan Wiener, CEO of 360i.
“As the integration between earned and paid media becomes tighter, brands are going to need to advertise more with Facebook to spark conversations and draw attention to the increasingly interesting experiences they’re creating [within Facebook],” Wiener said.