Facebook needs more ways to make money. Sure, the $4 billion advertising number is big, and it’s impressive for a company still so young … but it’s not enough. If we’re going to believe a valuation of over $80 billion, which would surge upon IPO, we need more than that number, especially since it’s the vast majority of the company’s revenue.
In order to become a truly iconic company, Facebook needs to develop new revenue streams, and make them fairly robust. A company that makes money only one way is a company perpetually at risk. The good news for Facebook is that there are plenty of other ways it can make money. Some involve advertising; some don’t. Put them all together, and you’ve got a pretty strong business.
Let’s take a look at five new revenue streams Facebook really should develop:
1. Premium accounts: it worked for LinkedIn, and I suspect it could work for Facebook. Premium features, including easier access to communities that would normally happen by referral, would help businesses grow their presences on the social network, likely much faster than they could using Facebook ads. As companies begin to focus more on the number of “likes” their pages get (whether this is prudent thinking or not), offering a way to accelerate growth is almost a sure thing for revenue.
2. Sell data: before Twitter started toying with its user interface and developing its ad product, it had a pretty solid business selling data. Why? Well, companies want data, whether it’s for their own application development or to learn more about their target markets. Facebook has had a bunch of incidents relating to privacy, but in the end, the end users don’t seem to care. Selling data (without anything that’s personally identifiable) is a goldmine waiting to happen.
3. Better analytics: it’s all about the numbers. Business users would pay hefty amounts of cash for improved targeting and metrics. This would be of incredible value to marketers using Facebook, especially big brands. This would probably be instant revenue for Facebook without intruding on the experience of individual users.
4. Advertising alternatives: I know, I know … everybody hates advertising. What’s interesting, however, is that everybody responds to it. Advertising works … well not so much on Facebook, but it does everywhere else. If Facebook were to offer a premium display advertising product, trucks laden with cash would be backing up to the company’s front door.
5. Ad networks: you see Google ads on sites other than Google. Why not Facebook? Facebook could push its ads out to other web properties, as it does with the “like” and “recommend” buttons and capitalize on its popularity. A lot of web publishers would use it because it’s from Facebook. A lot of advertisers would use it because it’s cheap. Too easy.
Pressure is mounting for a Facebook IPO, but with its current business model, the company probably isn’t ready yet. With a few more ways to bring in the bacon, though, Facebook could provide a much more pleasurable exit for its investors. At the end of the day, the only thing people really “like” is cash.