[subwindow]

Do you have any idea how much money Facebook is raking in with advertising? The targeting available on Facebook is unparalleled in human history, and they are making a mint on it.

[borism]

oh yes, they do! much better than google! however there's absolutely nothing advertised on them that I'm interested in.

I literally can count on both hands number of times I clicked on google or facebook ads.

[il]

So obviously nobody else clicks on Facebook ads either, right?

[petewarden]

In my experience, a good click-through rate is about 0.1%, which makes sense since they're essentially banner ads 2.0, there's no intent captured at all. That said, they were cheap enough that I was able to acquire new users for my Facebook app at around $2 each in my small-scale tests.

[borism]

obviously a lot of people do for now, since it's kind of novel and obtrusive way of advertising.

the point is - online ad market is getting saturated.

[axod]

Either cite some hard facts and data, or stop making sweeping statements.

[suckafree]

Yes, I do have an idea. And it is largely do to their user growth. This growth is not sustainable and will start to taper in 6-12 months. Facebook clearly is making money from ads (I'm not discounting this). It's been estimated at somewhere in the $400-600MM range. Of that Microsoft and their own ads make up the bulk of that. That is starting to dwindle and they are going to be headed in the direction of virtual goods a la Tencent. My point is that social media sites like Ning, Facebook, and Twitter are figuring out that free is not a business. Ning is just the first to admit it.

[axod]

Lets not come up with a crazy assed WRONG meme like "free is not a business".

Free IS a business, and has been proven time after time over the last few centuries if not longer.

Companies don't fail because they chose to offer something free, they fail for other reasons.

From the very little I've read about Ning, it's clear they took way too much funding for a start.

[mixmax]

"..has been proven time after time over the last few centuries"

Could you come up with some examples of this? Not trolling here, but I can't come up with any pre-internet free models off the top of my head.

[algolicious]

Broadcast radio and television.

[mixmax]

Of course! Stupid me...

[axod]

Advertising has been around for quite a while.

[easp]

Huh? You seem to be implying that a growing user base gets them unreasonably high advertising rates. Are you suggesting that advertisers are willing to overpay for facebook ads because of their strong growth trends? That may have been the case when Microsoft did their deal, but that was a while ago. These days, advertisers either have past experience to draw on, or they can dip their toe first without making a big commitment. Either way, I expect most of the ad revenue on Facebook is from people paying what they consider to be a fair price.

As for virtual goods, this has been part of their revenue mix for quite a while too. From the whispers I heard a couple years ago, it wasn't the majority of revenue, but it was a healthy chunk.

Facebook's estimated average revenue per user has hovered at the same level for a few years and is something like 1/3rd what MySpace's ARPU was. Both suggest to me that Facebook has still been favoring growth over revenue, and that as growth starts to taper off, they'll have plenty of opportunity to offer a "free" service and make a profit at the same time.