Facebook Revenue: User Data More Important Than Traffic?


Facebook Inc (NASDAQ:FB) has finally struck gold in its new monetization strategy, which focuses on using user data to great effect, than optimistically relying in traffic. In the last several months, media personalities and equity analysts have challenged Facebook and other social networking sites, including Twitter, Google Inc. (NASDAQ:GOOG)’s Google+, and the professional network site Linkedin Corporation (NYSE:LNKD), among others on their ability to monetize their user base.

Facebook Revenue: User Data More Important Than Traffic?

However, Facebook Inc (NASDAQ:FB) seems to have pulled out one of the most tremendous moves among them all, by identifying a different strategy that focuses more on using subscriber data, than trying to focus on monetizing its active monthly users numbers.

The social networking giant has introduced new measures of gaining income from its subscribers, without necessarily having to deploy massive ad campaigns on its platform. Facebook is taking advantage of user information at its disposal, along with other websites and mobile applications, to targeted custom ads to users with specific preferences. This allows Facebook account holders to receive ads that only match their user profiles in terms of age, gender, likes, profession, past experiences, and location, among others.

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While traditional web advertising throws everything at you, including some very awkward ads, the new targeted custom ads, with a little help from Facebook user profiles, ensures that you see only what is relevant to you. The ads are available off-site from your Facebook page, either in other websites or applications.

Facebook stands to gain more from new strategy, as it will not have to rely on how many customers visiting its site are converted to cash. This has been a major challenge for the Silicon Valley company, but now, it can use its user base whenever they visit the internet, and they do not have to be visiting its site. Additionally, advertisers will also be drawn to using Facebook in driving their ad campaign, by targeting browsers with specific details.

Another user data related revenue generating activity launched by Facebook recently is Facebook Gift services, which helps users to identify fitting gifts to various recipients, through their Facebook profiles. It seems as though Facebook is in a position of conjuring strategies that can result in increased revenue, by using its subscriber base profiles, more than relying on their visits to the site.

Facebook gifts also allows users, to search for other users with similar profiles to their targeted recipient, to find out the kind of gifts they were sent at similar occasions or similar circumstances. This is likely to guarantee continuous income, in a revenue stream that will be competing against other e-commerce giants, such as Amazon.com, Inc. (NASDAQ:AMZN), and eBay Inc (NASDAQ:EBAY).

However, this does not completely rule out ads on Facebook Inc (NASDAQ:FB). Ideally, it means that Facebook has more options of revenue generation, and does not have to completely keep on sweating at the increasing obstacles in traffic monetization. Consequently the number of ads on Facebook should reduce drastically with time, with a future of Ad free Facebook pages.

In one of our recent articles, we analyzed Facebook’s revenue potential from its gift service platform, whereby, with only 1% of its active users factored in the equation, Facebook would be making $9 million from it. While this may be somewhat seem to be a small figure, scaling up, the percentage of gift service users from the total monthly users could result in amazing levels of income.

There will be challenges at the early stages, but as time goes by, we could be talking of a third ecosystem in e-commerce, with a massive exposure to customer data.

At the time of this writing, Facebook Inc (NASDAQ:FB), was trading at $22.15 per share 8.19 EST, up $0.49, or 2.26% rise from the previous close.

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