Friday, February 3, 2012 at 12:14 pm.
How Does Facebook Make Money?
Facebook’s IPO filing this week confirmed what we already knew: Facebook makes the vast majority of its money by selling ads on its site.
But now we know just how much of its revenue comes from advertising: 85% in 2011, with the remaining 15% coming from payments and other fees.
For comparison, that’s actually slightly more diversified than Google, which still gets 96% of its revenue from advertising. And it’s even a significant change from 2010, when Facebook got 95% of its revenue from advertising.
A few other nuggets from Facebook’s IPO filing:
- Zynga, the company that makes FarmVille and other popular Facebook games, is driving the growth in Facebook’s payments business, and is therefore driving Facebook’s revenue diversification away from advertising. (While making it more dependent on Zynga at the same time!) Some 12% of Facebook’s revenue in 2011 — but less than 10% in 2010 and 2009 — came from Zynga. That includes revenue for processing payments — Zynga is the bulk of Facebook’s Credits/payments business — and also advertising that Zynga purchases on Facebook.
- Netflix bought $3.8 million worth of advertising on Facebook last year, representing 0.1% of Facebook’s total ad revenue. The Washington Post company bought $4.2 million worth of ads from Facebook last year, also about 0.1% of Facebook’s total ad revenue. Both were disclosed because the companies have officers who are on Facebook’s board of directors.
- Facebook does “not currently directly generate meaningful revenue” from mobile, even though about half of its user base accesses Facebook from a mobile device. This is an important growth area for the future.