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Social Media Websites’ – Who Is Making What – Insight Into Revenue Generation

Social media sites, notably Twitter, FaceBook, MySpace, YouTube and LinkedIn have become household names and have become an integral part of people’s life so much so that it is tough for regular users to imagine a life without social media.  Social networking websites have become virtual celebrities, with an enormous fan following and all the glitz and popularity that is hoarded on them.  But are they making the kind of money that real world celebrities get to make is the million dollar question.

The people behind these social media websites had remained mute about this until recently, probably because the sudden rush of success was more than a sweet surprise and they themselves did not know how to monetize the maddening popularity received by these websites.  Of late, there seems to be lot of thought put into revenue generation and the paparazzi is finally getting their questions about revenue answered.  Here is a report of the popularity score of some social media giants and relatedness of their respective revenue generation.

Facebook

Facebook

Brief History: Originally called “thefacebook”, Facebook was incorporated from a hobby of Harvard student Mark Zuckerberg.   The hobby soon crossed the realms of Harvard dorm rooms and Facebook was officially launched in February 2004.

Key takers: High school and college students.

Finances: Facebook initially received a $500,000 funding from Peter Theil, co-founder of PayPal.  A few months later, it received a $13 million financial aid from Accel Partners and another 425 million from Greylock Partners.   A sum total of $40 million was conjured up to kick start the venture in a big way. 

FaceBook today: Facebook is one of the fastest growing social networking websites today.  Its interactive features and its global appeal have helped in its membership going viral.  Facebook now has over 250 million active users, with over 30 million active users accessing it through mobile devices.

Revenue generation:

  • August 2006 was a milestone year for Facebook as it signed a three year deal with Microsoft to provide and sell ads on their website for a revenue split.  Silicon Valley entrepreneur Mark Andreessen who is also a board member of Facebook holds that Facebook would make well over $1 billion in the year 2009 if it pushed harder on selling advertisements.
  • In the year 2008, Facebook was able to rake in $350 million, a huge progress from its 2007 revenue of $150 million.  (Source:  http://news.cnet.com/8301-13577_3-9862792-36.html)
  • However, the company had a $150 million negative cash flow for the year 2008, a deficit created by its $50 million EBITDA expenditure.
  • But,  Andreessen has said that Facebook is on track and has expressed confidence in generating about $500 million revenue by the end of 2009.  The recent acquisition of social media site FreindFeed is sure to feed some funds as well.

The Verdict: The financial history of Facebook and the recent business developments indicate that Facebook is in a safe mode at the moment and also holds promise for upscale revenue generation moving further.  The company is full of investor cash including $240 million from Microsoft that nails Facebook at a massive $15 billion evaluation.

Twitter

Brief history: Twitter was the outcome of a daylong brainstorming session by the board members of the podcasting company Odeo.  The first prototype of Twitter was designed for the internal use of Odeo employees, which was later developed and launched for public use in July 2006.  But Twitter spun off as an official company in April 2007 when Biz Stone, Even Williams, Dorsey and other members of Odeo formed a formed Obvious Corporation and acquired Odeo and all of its assets including Odeo.com and Twitter.com from the investors and other shareholders.

Key Takers: Unlike other social networking sites, it is difficult to single out a particular kind of users who use Twitter most.  Twitter has gained wide popularity across the globe with diversified user population ranging from college students, entrepreneurs and entertainment freaks.

Finances: Twitter is backed by Union Square ventures, Digital Garage, Spark Capital and Bezos Expeditions.  Though Twitter has kept its funding under cover, its first round of funding is rumored to have been between $1 million and $5 million, followed by an equally enormous second and third round funding, all totaling up to an approximate US$57 million.

Twitter Today:  Since its creation in 2006 by Jack Dorsey, Twitter has gained notability and popularity worldwide.  Between the year 2008 and 2009, Twitter has seen a monthly growth of 1,382 percent.

Revenue generation:  Twitter has always been discrete about its revenue and has evevn projected losses in its earlier announcements.  However,  in an unfortunate incident,  one of Twitter’s computer was hacked and its revenue information was published by TechCrunch.  The records contained Twitter’s internal projections for 2009 that indicated revenue of $ 400,000 in the third quarter and a $4 million in the fourth quarter in its net earnings.

The data has projected that Twitter will have over 1 billion active users by 2013 and its future revenue run rate, a massive $140 million by the end of 2010.

Twitter co-founder Biz Stone has said that the company is developing various add-on tools and services for the businesses and professional users of Twitter, which could create a revenue stream for the company. He said Twitter plans to introduce some of these tools by the end of 2009.

But Stone dismissed the notion of selling advertisements on the popular service at least for the 2009, even though ad revenue is the main way most web start-ups manage to stay in business while keeping their service free for consumers.

The Verdict: Until recently Twitter was believed to be running a loss, and that did not seem to surprise anyone because sudden appraisal of fame and authority can be a bog down.  However,  the recent Twitter revenue leakage and the fact that Twitter did not retaliate to this in a big way seems to confirm that Twitter has a sound financing system or is at least in the path of stabilizing its finances.  And the unstoppable viral spreading of Twittering practices only adds to the joy of great finances.

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