George S. May Business Blog

Facebook: The Cost of Free Social Networking

When I was in college, I was a few years younger than Mark Zuckerberg, the inventor of a start-up little website called Facebook.com. Less than a decade later, that young man who designed this big site as a college student has already turned down an offer to buy the company. Zuckerberg probably refused the offer because it was an insult: only a bit more than $2 billion dollars.

Whlle I’d rather not mention my own net worth, it’s amazing at how quickly this website has captivated such a stunning array of people of all ages, genders, and stages of life. Facebook’s net worth was recently estimated by the Wall Street journal to be worth in excess of $11 billion dollars.

And yet, Mr. Zuckerberg has once again said that this offer of money is one he’ll politely decline. The CEO could take his company public, make a fortune, and be a multi-billionaire before he can manage to get a single grey hair, but this man seems to sense an even brighter future for Facebook.

Perhaps Zuckerberg is wise not to cash in on his billion dollar paycheck just yet. Facebook once stood as one of two, perhaps even a few other social networking sites vying for contention. Now there is Facebook, while long-time rival Myspace seems about as relevant as a sequel to Titanic.

Facebook has grown by leaps and bounds, and is still growing at a speed that makes the universe’s expansion look a bit sluggish by comparison. Facebook’s advertising is now targeted to each individual user’s information, allowing advertisers of products trending well towards people in the 21-25 year-old demographic to laser in their efforts at users who identify this as their age (whether it the user’s actual age is a different matter altogether).

Moreover with the addition of games such as Farmville, Mafia Wars, and a myriad of other offerings, Facebook users are browsing their friend’s profiles, writing and commenting on status updates, and spending hours logged onto the site at a time, which is assuming they ever log off.

Also, the company that develops many of these games, Zynga, Inc. is itself worth $2.6 billion, which is still an amount of money Mark Zuckerberg couldn’t blow his nose with, apparently.

Facebook’s continued dominance might have something to do with the website’s ability to stay on top of what internet users desire in their online interactions. As Twitter has risen to prominence, Facebook began offering news streams and comments for status updates, giving users more and more reasons to constantly check in to see if anyone has commented or merely given what was said nod of approval.

Facebook has taken several steps to insure that they are compatible with all smart phones commercially available.  And then, in an inspired move, the company added chatting compatibility, rolling yet another internet staple, live chatting, into an already large list of features.

Facebook has become a digital realm, and our profiles our “avatars” of our digital selves where we proclaim our tastes in music, television, and what we like (but wish we had a button we could identify what we hate). The multitude of features keeps users coming in droves, while MySpace’s creator Tom might find out that not all of his millions of friends are as true to him as he’d hoped.

Facebook is itself worth ten times what Twitter is thought to be valued at, and as Facebook’s marketing becomes savvier and the amount of content they offer, the more this website will continue to dominate social networking.

Just remember the next time you log in to see a photo you were tagged in, or are invited to an event, that while the service might be free to the user, someone is making scads of money off of the giant, and the advertising dollars it drives in.

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