Wednesday, September 28, 2011

How much money does Facebook make?

We all know Facebook is the biggest social network having almost equivalent number of users that would be the world's 4th largest country.


Recently, I saw a post on FB that was viraling that mentioned about Facebook no longer remaining free.


That compelled me to do a surface study on the kind of revenues that Facebook makes.


Facebook clocked revenues of $2 Billion in 2010 and will close 2011 at approx $4.27 Billion recording a CAGR of approx 103%


Below is split of their revenues:


If Facebook decided to start charging $10 per month per user to access the network, what do you think will happen?

Your first reaction is absolutely correct, the revenues from advertising and FB credits will go down by 40% making it approx $2.5 Billion (which is still a healthy growth as compared to last year).

Now the other part of the story.

$10 per month will make it $120 annually.

Facebook has 800 million active users. Now let's say 20% of the people decide to pay for it and use it.

That makes 160 million users pay $120 for using Facebook per year.

That will give a new revenue stream to Facebook making its revenue case look something like below.


A whooping $21 Billion, an annual growth in 4 figures.

This is hypothetical and Facebook is still free:


But it is always worth a thought ;)

Cheers!
Neelesh R Pednekar
Business Consultant - IdeasThatFailed

1 comment:

  1. This is still very high... My guess is only 2-3% users will pay... Nice analysis anyway.

    To break this down more, we'll have to apply guesstimates on each segment... like more corporates will pay for their pages, than moms for their FB profile. So each segment will have a different conversion rate.

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