Facebook now has 300 million users, and has announced that it has finally started making a profit. This is solid proof that although social media and networking sites are good fun, they are not a good business model, at least not for start ups.
If an online store had as many returning customers it would be driving a recovery in the world economy. The social networking model reminds me of how public houses have had to evolve. Whereas there was a time when more clients meant more money, increasing costs has meant that many businesses cannot rely of selling drinks alone. A large number of pubs make their profit from selling food, not drink. Drink brings in the clients at first, it is what leads them to the pub, but the hard sell must be on food for the business to make any profit.
Facebook is certainly moving that way. Its advertising, which is based on the Google Adsense model of PPC and impressions, is starting to be well received by advertisers. With a huge audience, and the software in place, success is now just a matter of time.
Facebook is still winning 5 million new customers each week too. Soon there may be two services on the Internet, the open model as run by Google, and the closed, subscription based model, run by Facebook. For other businesses to succeed, they need to work with both. It is rumoured that Facebook will soon be floated on the stock market. The people will be able to buy a stake in the website that they help to build and promote.
