Facebook announced earlier this week that they had passed the 300million user mark, and that they are making money or, as CEO Mark Zuckerberg put it this week, they are cash flow positive. Put another way, Facebook is raking in the revenue.
In a blog post this week entitled “300 million and On”, Zuckerberg shared the good news that they started making money last quarter, explaining that “Earlier this year, we said we expected to be cash flow positive sometime in 2010, and I’m pleased to share that we achieved this milestone last quarter. This is important to us because it sets Facebook up to be a strong independent service for the long term.”
The big questions are what exactly that means, and how exactly they are doing it. If they had only 4 employees, for example, being cash flow positive wouldn’t mean a whole lot. But of of course their expenses are far greater than salary for four employees – in fact based on information revealed in Zuckerberg’s post, they have approximately 300 engineers alone, with Zuckerberg saying that “the ratio of Facebook users to Facebook engineers makes it so that every engineer here is responsible for more than one million users.” And that’s not including other employees and, of course, their server farm.
[Ed. note: Of course, this could be taken the other way, and when Zuckerberg says that each engineer is responsible for “more than” 1 million users, he may mean that they are each responsible for way more than 1 million users. Which leads to other questions, such as the robustness of their engineering support. We choose to assume that he meant that each one was responsible for only a bit more than a million, which is what the reasonable average person would infer.]
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Assuming those engineers are making at least $50k, that puts the salaries alone for just the engineering team at a cool $15million per year. Even if they are cheaping everything else, that means their expenses must be at least $20million a year.
So, being cash flow positive now has to mean that they have managed with their advertising – which so far seems to be the only form of revenue that is apparent – to be pulling in at least $20million a year (and that’s a very conservative estimate).
Now remember, this is advertising which is predicated on Facebook taking your content and monetizing it, including Facebook selling the contents of your updates to advertisers. For example, if I post in to my Facebook updates that I love Ben & Jerry’s Chunky Monkey ice cream, Facebook would sell to Ben & Jerry’s the right to show all my friends an ad that says “Anne loves Chunky Monkey – how about you?”
Zuckerberg closed his post by saying “we hope to serve you and many more people in increasingly deep and innovative ways in the months and years ahead.” And no doubt they hope to dip into the web’s collective pockets in increasingly deep and innovative ways as well.
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