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Facebook’s Monetization Strategy (Part 1)

Posted on Wednesday, Jul 25th 2007

I have, so far, refrained from joining the hype machine around Facebook. However, things are plain out-of-control right now, with rumors about them turning down $6 Billion acquisition offer from Microsoft, and more recently, that $10 Billion is what they think they’re worth.

All this, on an annualized revenue of how much? $150 Million, right?

So, I want to discuss the obvious question: how does Facebook monetize?

To answer this question, I will bring you back to the two fundamental articles I have written about what I see as Web 3.0:
Web 3.0 = (4C + P + VS) and Web 3.0 & the Semantic Web. In these two articles, I articulated my vision of a Verticalized, Personalized web, organized by Context.

So with that assumption as Exhibit A, let’s ask the question what do Facebook’s users do online? The answer is, the same things that the rest of the web universe does. They try to find a mate, look for a job, look for a car or a house, shop, download music, share videos, photos, etc. Notice, all these activities align with the big verticals online that have so far generated large chunks of online revenues.

Let’s take the example of the Online Jobs vertical. Yahoo bought Hotjobs, thwarting Monster’s effort to consolidate the space. Today, Jobs is one of the top online segments in the US with $5.9 billion online advertising revenues, which constitutes around 25% of Internet ad revenues in the US. The top players in the online jobs market are CareerBuilder, Monster, Yahoo! HotJobs and vertical search engines like Indeed, Jobster and SimplyHired. According to Hitwise, CareerBuilder is the leading job site in terms of web visits with 13.73% visits, followed by Monster (11.51%) and Yahoo! Hot Jobs (5.33%).

Monster is an independent public company with a 2006 revenue of $1.1 Billion, and a market cap of $5.37 Billion.
You can read about the Online Job Industry on my site. and reviews of the strengths and weaknesses of the top 3 properties for the segment: CareerBuilder, Monster, and HotJobs, based on the Web 3.0 framework described above.

So, explain to me, why Facebook should not become a major player in the Online Jobs area, and pick up a large chunk of $6 Billion Total Available Market for that segment? Considering that it has in its database the cream of the US educational institutions, Facebook’s Online Job / Career Management offering is one that is a no-brainer!

[Part 1]
[Part 2]
[Part 3]

This segment is part 1 in the series : Facebook's Monetization Strategy
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[…] Facebook’s Monetization Strategy (Part 1) – Sramana Mitra on Strategy (tags: web3.0 web 3.0 facebook) […]

links for 2007-07-26 « Las Vegas Real Estate News Wednesday, July 25, 2007 at 11:25 PM PT

When is the IPO ;)
Seriously – some very good points here but just as there is a critical mass which makes sites like Facebook fly, there must be a tipping point where people start to crave the fun, social site they joined. The secret will be integrating these offerings so they can be found if you are looking and easily ignored if you are not.

Tomas Jones Thursday, July 26, 2007 at 8:20 AM PT

[…] [Part 1] [Part 2] […]

Facebook’s Monetization Strategy (Part 3) - Sramana Mitra on Strategy Friday, July 27, 2007 at 5:54 AM PT

[…] It would tackle their looming monetization questions. For more on this topic, please read my Facebook’s Monetization Strategy […]

Online Dating & Web 3.0 (Part 5) - Sramana Mitra on Strategy Friday, August 10, 2007 at 7:27 AM PT

[…] Facebook’s Monetization Strategy […]

Web 3.0 and Verticalization - Sramana Mitra on Strategy Thursday, September 6, 2007 at 6:43 AM PT

[…] (higher than that of Google’s 11, and let’s assume for a moment due to its extraordinarily high monetizing potential), to the estimated revenue of $350 million, its optimistic valuation turns out to be $5.25 billion. […]

Deal Radar 2008: Facebook Woes Coming? - Sramana Mitra on Strategy Tuesday, February 5, 2008 at 10:16 AM PT

i dont get it. i have linkedin for my professional network, and facebook for my personal network. wonder why we should tweak that balance. facebook acquiring kayak/travel site is a good idea. i am sure they will do something about the photo stuff u r talking about too!

Victor Brown Friday, January 22, 2010 at 12:18 PM PT

There are many people who use Facebook for professional networking as well. In fact, I think most use it for both. LinkedIn is great, but doesn’t have the valuation to do this kind of a roll-up, although I do believe that they should have a job search engine as well. They have a partnership with SimplyHired at the moment.

Sramana Mitra Friday, January 22, 2010 at 12:31 PM PT

So, explain to me, why Facebook should not become a major player in the Online Jobs area, and pick up a large chunk of $6 Billion Total Available Market for that segment?

Because i want LinkedIn to do that. Facebook is for my social life. LinkedIn for my professional job. Dont want balance to be disturbed

Victor Brown Monday, February 1, 2010 at 11:57 PM PT

Would disagree on the job part of FB. AFAIK, almost all of my 30+ aged working friends use it for connecting with people they know – friends and family. The "job" network is non-existent, as it exists in linkedin.

Photo monetization: Google still hasn't been able to do anything around that, yet. Nor yahoo.

Pradeep Monday, August 2, 2010 at 9:46 PM PT

what beats me is – why is FB not monetizing at all today? what are they waiting for? 100mn is a piddly little amt for a co that has so many daily users!

Pradeep Tuesday, August 3, 2010 at 4:46 AM PT

They're monetizing plenty at this point. App developers, virtual currency, virtual goods, advertising … there's plenty of monetization going on. But Search would add a much bigger monetization model.

sramana Tuesday, August 3, 2010 at 4:50 PM PT

Yahoo! charges fees for storing photos on Flickr beyond a certain threshold, so they DO monetize photos. And as I said above, all the Search Engine type apps including Jobs, Travel, Dating – are very appropriate for FB to get into through acquisitions.

sramana Tuesday, August 3, 2010 at 4:52 PM PT
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