A billion users raise Facebook stakes

Last Updated 10 October 2012, 16:41 IST

China. India. And now Facebook? The company has said that it had a billion users worldwide who logged into Facebook at least once a month. The number is all the more remarkable considering that Facebook was created only seven years ago and has doubled its user base in the last two years alone. It took McDonald’s about 40 years to attract a billion customers.

But what is the value of a billion? It is not the same for Facebook as it is for other companies.

At McDonald’s, for example, those billion customers all paid for their burgers and fries. Apple has more than 400 million customers on iTunes alone, who buy movies and music with their credit cards.

Facebook, however, does not make money directly from its billion users. It makes the bulk of its revenue by serving them advertisements based on the data they share about who they are, whom they befriend and what they like. And the company is under intense pressure today to make more money off them, more quickly.

Behind the 1 billion figure were details about the importance of overseas markets for Facebook. The company listed, in alphabetical order, the top five countries from which its users logged on: Brazil, India, Indonesia, Mexico and the United States. It did not say how many users came from each country, but it did say that four out of five users were outside the United States. Most of Facebook’s revenue comes from the United States.

Increase advertising

Of its billion users, 600 million log in from their mobile phones, illustrating how vital it is for the company to increase advertising on mobile devices. The company has only recently started offering mobile advertisements.

Facebook continues to be widely used to share photos: since fall 2005, nearly 220 billion photos have been uploaded to the site.

Under its terms of service, the company requires users to register with their real names. Yet it has been bedeviled by what it calls “duplicate” or “false” users, including accounts that are created under aliases or in the names of pets.

In documents filed with the Securities and Exchange Commission this year, Facebook said it had discovered that 8.7 per cent of its users at the time, or 83 million, had been logging on with duplicate or false identities. The company has been trying aggressively to get rid of them.

The social network hit the 1 billion mark on Sept. 14, the company said. But the news was not released until an orchestrated announcement Thursday morning, when Mark Zuckerberg, Facebook’s co-founder and chief executive, appeared in interviews with “The Today Show” on NBC and with Bloomberg Businessweek magazine. Zuckerberg also posted a brief announcement on Facebook.

“Helping a billion people connect is amazing, humbling and by far the thing I am most proud of in my life,” it read. “I am committed to working every day to make Facebook better for you, and hopefully together one day we will be able to connect the rest of the world too.”

Facebook has lost nearly half its value since going public in May at $38 a share. Thursday’s announcement did not seem to cheer the market much: the stock closed at $21.95, up 12 cents, or 0.54 percent. Facebook is scheduled to report its third-quarter earnings on Oct. 23. The report will be read closely for signs of how the company plans to increase revenue from its growing worldwide user base. The company is trying out some tactics in addition to advertising. For example, it is enabling marketers to sell products directly on its platform. It is also charging users to promote what they have posted on their pages – in effect, to get more people to see it on their news feeds.

Zuckerberg told Businessweek that while he found his company’s market performance “disappointing,” he was not prepared to make changes for short-term gain.

“I mean, we care about all the investors, and that’s really important,” he told the magazine. “And I think the only thing we can really do is focus on making the company worth as much as possible over the long term.”

He added: “I suppose there could be short-term things that we could do, but we’re not going to focus on those. We’re going to focus on the long-term stuff.”

(Published 10 October 2012, 16:41 IST)

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