Thursday, October 4, 2012

Facebook: One Billion and Counting – The Wall Street Journal

Facebook said it has topped one billion monthly active users, a milestone that raises growth questions anew for the social network and whether it can profit off its giant user base. Geoffrey Fowler reports on digits. Photo: Getty Images.

"Mr. Zuckerberg said Thursday that Facebook Inc., FB +0.54% the social network he started in his Harvard dorm eight years ago, reached the milestone of one billion monthly active members on Sept. 14.

The Menlo Park, Calif., company had reached 500 million active users in July 2010, making Facebook one of the fastest-growing sites in history.

Facebook didn't specify whether the one-billion count includes fake accounts, but it has been on a campaign to remove them. In August, Facebook said fakes constituted 8.7% of its users.

Facebook founder and CEO 
Mark Zuckerberg in San Francisco
on Sept. 11.
The announcement couldn't come soon enough for Facebook. Investors today value the business at a fraction of the $100 billion opportunity they saw in the company when it held its initial public offering in May.

Other social media businesses are also running into difficulties. On Thursday, social-games maker Zynga Inc. lowered its earnings outlook for the year, in part because consumers appear to be losing interest in some of its games.

The question for Facebook is just how much value Mr. Zuckerberg can extract from all those people that Facebook signed up for free. Last year, the company produced nearly $4 billion in revenue, mostly from advertising—far less than the nearly $38 billion that Google squeezed out of an equally large set of users in the last fiscal year.

Facebook still trails behind other Web companies in capturing revenue from users. In the U.S., search engines such as Google and Yahoo make about $88 per person who uses its search engine, while Facebook makes about $15 per user, according to eMarketer Inc.

This week, Facebook executives attended New York's Advertising Week, trying to convince advertisers that its mix of direct access to people and their network of friends provide a potent marketing tool equivalent to five Super Bowls each day.

Chief Operating Officer Sheryl Sandberg said earlier this week Facebook is looking at "premium services for businesses" as a way of adding to its revenue stream.

Meanwhile, Facebook has grown increasingly bold in its efforts to find alternative lines of revenue.

On Wednesday, it began testing a service in the U.S. that charges members $7 to ensure that their friends see posts on the social network, angering some users who said Facebook was turning its back on a long-standing promise to remain free.

Facebook's next billion members may be tough to come by. There are some 2.5 billion people on the Internet today—and many of the ones not on Facebook are in countries like China that haven't welcomed Facebook's particular brand of online communication.

Mr. Zuckerberg has visited China, home to more than 500 million Internet users, but the site remains blocked there except to people who use tools to bypass government censors.

On Monday, Mr. Zuckerberg met with Prime Minister Dmitry Medvedev of Russia, another market where Facebook has had difficulty growing.

Mr. Zuckerberg, 28 years old, showed just the extent of his aspirations in a celebratory post on his Facebook profile in which he compared his social network to other inventions that have "connected" humans.

"We belong to a rich tradition of people making things that bring us together," he wrote. "We honor the humanity of the people we serve. We honor the everyday things people have always made to bring us together: Chairs, doorbells, airplanes, bridges, games."

Lately, Mr. Zuckerberg has also touted Facebook's efforts on mobile phones, which will prove crucial to the company's ability to attract more members from the developing world, and more ad dollars from consumers around the world amid changing Internet habits.

On Thursday, Facebook said it had 600 million mobile users, meaning more than half of the social network's members access the service on phones or other on-the-go devices. There are five billion mobile device users in the world.

Facebook has struggled to keep up with this trend, only this year beginning to show mobile users ads. Investors have been concerned that Facebook won't be able to generate ad sales at the same rate as desktop ad dollars.

Digits: Facebook's Milestone
Last month in an onstage interview at a technology conference, Mr. Zuckerberg admitted the company's previous mobile strategy was wrong. But he said Facebook could eventually make more money per user on mobile phones than on desktops.

In a "Today" show interview that aired Thursday on NBC, Mr. Zuckerberg sought to reassure investors that he is the right person to lead Facebook, as some on Wall Street have questioned whether he has the ability to helm a large public company. "I take this responsibility very seriously," he said.

A Facebook spokesman said Mr. Zuckerberg wasn't available for an interview.

To date, people have made 140 billion friend connections on Facebook, the company said. As it matures, Facebook users are getting younger: The median age of a user joining today is about 22, down from 23 for a user who joined at the time the site hit 500 million users.

The Web industry has various ways of measuring user reach so it's difficult to full compare companies. Facebook defines active users as a logged-in member who visits the site at least once a month, or accessed it in some way through a third-party site connected to Facebook.

Looking at reach by another measure, Google is the only Web company with more than a billion unique users visiting its stable of websites monthly, according to data from comScore Inc. It took Google from 1998 to 2011 to reach the one billion mark." — The Wall Street Journal

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