Why Facebook will always be free?

Why Facebook will always be free?
Why users are not charged of using Facebook? Where Facebook does gets its revenues? Those questions would be enough to satisfy our main inquiry, “Why Facebook will always be Free?”. Now, to answer that question, let us look first at how does Facebook work.

Maintaining a big site

With 900 million users on Facebook, it is quite hard to moderate explicit user activities. User posts that contain explicit content are removed by Facebook administrators and moderators to maintain the wholesome Facebook image. That also applies to spam messages and posts that are circulating in their network.

How many Facebook administrators and moderators are there? Well, I don’t know. But according to Facebook Statement of Financial Performance of 2011, their General and Administrative Expenses are amounting to $280 million. That’s as far as we could assume on how many Facebook administrators and moderators are there.

Costs of Hosting

Pictures drive Facebook as a social networking site. For every occasion or an event, Facebook users upload pictures and video that would be shared among their friends and relatives. Now that Facebook has 900 million user accounts, think where can they store the humongous data being uploaded almost every day? These data we upload to Facebook are stored in a dedicated hosting server. These hosting servers are computer(s) that run 24/7 to ensure 100% uptime, so that you can access your pictures and files any time you want.

How does Facebook pay for those hosting server? It depends if they rented out on a hosting company or, they themselves bought a powerful server that they now own. If they rented, they would pay for each server per month, and if they bought their own server, they would be paying for generation costs (electricity) and maintenance fees. The price? Let us look at Facebook Statement of Financial Performance to find out.
Facebook Statement of financial performance of 2007 2008 2009 2010 2011
Credits to Pinoymoneytalk.com
As we can see, that Cost of revenue is $860 million. Great money spent on such a big site.

The Facebook Developer Team

To keep a site running, a web administrator must always update their site to keep people from using their site. People love to see what something would be brought upon them. People love surprises. That is why Facebook is paying for developers that would add value to the Facebook site. These developers are responsible for adding the timeline profiles, the newest Facebook messenger, security issues, etc.

So, why is Facebook still free?

Facebook Income

According to Facebook Statement of Comprehensive income of 2011, Facebook has generated revenue of $3,711 million covering up its expenses of $1,955 million. That answers our question, “Why users are not charged of using Facebook”. Facebook does not need to get revenues from its users, for they have already satisfied the needs of Facebook maintenance and its owner, and its stockholders.

Where Facebook gets its revenues?

Advertising Revenues

Being one of the largest media in the internet today, Facebook has created a way for people to communicate through each other by means of sharing on a wall or on fan pages. What you post on Facebook now can be read by the world in real time.

Big or small companies use this media to attract potential customers and thereby create a social buzz among their products, making their products stand out in the social media today.

Politicians also use this media for their messages to the people, be heard, as to create their presence in the internet.

Facebook Advertising works out by having a product or a link displayed on every page. For every time you see a Facebook ad, companies are paying for it. Also, every time you click a Facebook advertisement, companies also pay for a “Cost per Click” campaign.

Facebook Credits Sales

Facebook gets commissions for every sale made on Facebook Credits. These Facebook credits are exchanged for gaming purposes. Zynga, Kixeye, et al are known games that enable the use of game credits. 
With that, I hope I had answered our question, Why Facebook will always be free?. Comments are welcomed if you wish to add value to our post.

Reference(s):

  • http://www.pinoymoneytalk.com/facebook-ipo-income-statement-2012
  • http://beta.fool.com/apinkasovitch/2012/02/02/analysing-facebooks-financial-statements/1573/ 
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+ comments + 2 comments

September 3, 2012 at 12:11 PM

Awesome article and straight to the point. I am not sure if this is in fact the best place to ask but do you people have any thoughts on where to employ some professional writers? Facebook marketing

January 4, 2013 at 2:24 PM

Facebook is really one of the best social networking site today in the net. I'm not sure but I know that it is the 2nd or the 3rd site that is most visited by internet users. So it is not a surprise that Facebook is very useful in marketing.

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