Facebook Finally Profitable

For the first time since the social network Facebook launched, it is finally making money according to a recent article in the Los Angles Times.  Apparently the game plan all along had been for Facebook to be profitable by 2010 but with over 300 million users it was able to reach that mark earlier than expected.  For those of us that follow social media closely or are in the industry, this is a pretty big milestone.

I think it’s important to remember that other social media companies like Twitter are still looking for their business models and have yet figured out how to turn a profit.  Personally I think that it’s just a matter of time before Twitter finds it’s way and becomes profitable as well.  Something that a lot of people don’t realize is that these companies operate on angel investors until they can become profitable.  It’s a trend that didn’t exist a few years ago but as soon as some of these companies start turning profits and investors see dividends, I think there will be a lot more investors trying to get on board with these startups. 

Whether you are a Facebook fan or not, you have to admit that this is a big deal for our industry!  The more investors trying to get on board, the more profitable our industry will become.

Facebook Inc., the world’s largest Internet social network, said Tuesday that it made more money than it spent, attaining a positive cash flow for the first time since it was started in a Harvard dorm room nearly six years ago.

The Palo Alto company also said it had increased to 300 million active users. The site reached 150 million users in only five years, a fast growth rate by any measure. But like sprinter Usain Bolt, Facebook atomized its own speed record this year by climbing to 300 million users from 150 million in a little over nine months.

Propelled by that growth, Facebook swung to positive cash flow ahead of schedule, it said. The company had originally expected to hit that milestone in 2010. "This is important to us because it sets Facebook up to be a strong independent service for the long term," Chief Executive Mark Zuckerberg wrote in a blog post.

Facebook, which has taken close to $600 million in financing, makes its money from advertising, including an auction system in which marketers can pay to target small products and services to certain demographics. The private company does not disclose its revenue.

Facebook has had a tumultuous childhood, frequently getting in hot water over the way it shares, stores and uses the personal information uploaded by its users. In August, the company announced it was starting a yearlong project to clarify and tighten its privacy controls after a Canadian government agency complained about the site’s policies. But Facebook’s rapid growth is perhaps the best evidence of its utility and its general appeal to users around the world. The company says its fastest-growing demographic is now people ages 35 and over, and in the U.S., the site’s nearly 90 million visitors made it the fourth most-trafficked Web property in July, according to Web ratings firm ComScore Inc.

The company, which now has close to 1,000 employees, was valued at $10 billion in a transaction this year in which Russian venture firm Digital Sky Technologies bought $200 million worth of Facebook’s stock.