The Facebook Profit Conundrum

The admission by Facebook chief executive Mark Zuckerberg — that the social network’s optimum revenue model remains a mystery four years after its launch — has raised some eyebrows. Despite claiming that it will double its revenue to between $300m and $350m this year, the question remains as to when, if ever, Facebook will turn a profit.

Zuckerberg claims that growth of the network is the primary goal, and revenue secondary. He argues that social networks cannot be turned into money-makers in the same way that search is. But Mark Howe, country director of UK sales at Google, suggests this is a weak excuse. “A large-scale site with an attractive and attentive audience that values the time it spends there has the opportunity to make money,” he says. “If social networks are not making money through advertising, the only other model is the unsuccessful subscription model of the 1990s. I believe in the value of advertising. If ads are targeted and relevant, consumers will not reject them.”

Many in the online sector argue that consumers do not want to see advertising in their online communities. Geoff Ramsey, chief executive of eMarketer, claims people have “banner blindness” when using social networks. However, Howe says people accept ads online just as they do in commercial television. “It is a naive community that thinks the technological infrastructure that allows the business to exist does not need to be paid for somehow,” he adds.

Hitting the Target

Rival network MySpace is beefing up its ad services by launching HyperTargeting in the UK this month to index consumers’ interests and provide demographic insight. Anthony Lukom, managing director of MySpace UK, says Zuckerberg’s contention that social networks cannot effectively be turned into money-spinners is wrong.

“There absolutely is money to be made in social networking,” says Lukom. “We take 55 percent…