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A few of you might
remember a brief debate a while back about whether it would ever be
acceptable for Facebook to charge it's users if it was unable to make
a profit from advertising. I was strongly of the opinion that if they
couldn't make enough money from advertising – and I didn't believe
they could – then it would be reasonable for them to ask users to
pay a usage fee.
It looks like my fears
may have been groundless. On Tuesday Facebook announced that it had
reached 300m users and was now – a year ahead of schedule – cash
flow positive. Whilst this isn't quite the same as being in profit –
it means they are making more from advertising than it is putting
into capital expenditures – it's the main hurdle which has to be
passed for a business model like Facebooks to be profitable long
term.
The three hundred
million user figure is however the one we should be focussing on.
It's an impressive user base in itself but even more impressive is
that six months ago, that figure was two hundred million; to gain
100,000,000 users in six months is an amazing feat. To put that into
perspective, the population of the UK is a little over sixty
million...
Mark Zuckerberg,
Facebooks CEO is quite rightly concentrating on the increase in users
rather than the cash flow
(http://blog.facebook.com/blog.php?post=136782277130).
This growing user base is the key to Facebooks long term viability.
As the user base expands, the appeal to those buying advertising
grows because they can reach more people and target campaigns better.
As the network continues to grow, Facebook will find themselves in a
position where the size of the network dictates than anybody who is
serious about advertising online give them serious consideration.
I don't usually like
being wrong but I have to admit that on this occasion I'm quite
pleased – I don't really want to pay for Facebook; now it looks
like I won't have to.
Don't forget to follow me on twitter: http://twitter.com/bdixon_dxnx for regular updates and general chat.
Resources:
http://blog.facebook.com/blog.php?post=136782277130
http://www.ft.com/cms/s/0/d93f766a-a24c-11de-9caa-00144feabdc0.html
Related Articles:
http://www.moneywhatmoney.co.uk/index.php/Bens-Articles/Why-you-should-pay-for-Facebook.html
http://www.moneywhatmoney.co.uk/index.php/Scotts-Articles/Hitting-BEN-is-FREE.html
http://www.moneywhatmoney.co.uk/index.php/Bens-Articles/Hitting-me-is-free-but-servers-aren-t.html
http://www.moneywhatmoney.co.uk/index.php/Alex-s-Articles/What-Facebook-needs-is-a-Niche.html
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