Facebook strengths and weaknesses

1. Facebook has a strong revenue and traffic dependence on gaming companies like Zynga.

In its S-1 filing, Facebook revealed that about 12% of its revenue comes from Zynga games purchases, about $445 million in 2011 alone. How much of that goes away if gamers are playing on Zynga.com instead of Facebook?

If a Facebook member playing on Zynga.com buys virtual goods, does Facebook still get 30% of the cut as it does now for purchases made through its social networking platform?

Techcrunch – Zynga now has 56.6 million daily active users and 246.9 million monthly active users

Appdata has a list of the top Facebook apps

Facebook delivers 93 percent of Zynga’s revenues. Zynga and Facebook are intertwined until at least 2015, when a five-year deal between the two expires. Zynga has taken steps to mitigate the risk of relying completely on Facebook by expanding into mobile and international markets.

2. Forbes – Faced with its first serious competitor, Facebook has dropped a billion dollars to purchase Instagram, a photo-sharing service. Why? To drop a roadblock in front of Pinterest, the Facebook-on-training-wheels that has recently been all the rage. A few changes to Instagram and it can compete very effectively with Pinterest, with the added ability to interface with Facebook even more directly than it already does.

3. Fast Company – Facebooks net income for 2011 reached $1 billion in 2011, on revenue of $3.7 billion, up from $606 million on revenues of $1.97 billion in 2010. The vast majority of Facebook revenue comes from advertising–roughly $3.2 billion in ad revenue in 2011. Revenues from payments generated only $557 million; remarkably, 12% of Facebook’s revenue come from Zynga.

Google reported revenues of $10.58 billion for the quarter ended December 31, 2011, an increase of 25% compared to the fourth quarter of 2010. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the fourth quarter of 2011, TAC totaled $2.45 billion, or 24% of advertising revenues. Google’s full year revenue for 2011 was up 29%, and our quarterly revenue blew past the $10 billion mark for the first time.

Google-owned sites generated revenues of $7.29 billion, or 69% of total revenues, in the fourth quarter of 2011. This represents a 29% increase over fourth quarter 2010 revenues of $5.67 billion.

Google’s annual revenue for 2011 was $37.8 billion. Google had after tax income of $8.7 billion in 2011.

Facebook has double the traffic of Google but 10% of the revenue

4. ZDNet – Facebook web traffic facts according to Hitwise:

1. Facebook.com captures 1 in every 11 Internet visits (January 2012).

   2. 1 in every 5 page views occurs on Facebook.com (January 2012).

   3. The average visit time on Facebook.com is 20 minutes (January 2012).

   4. Facebook.com’s audience skews slightly more female than the online population as a whole (43 percent male, 57 percent female, 12 weeks ending January 28, 2012).

   5. The ages of Facebook.com visitors are indicative of the website’s strength in the marketplace, with relative parity in distribution of its visit share by age vs. the online population (18-24 is 18 percent, 25-34 is 23 percent, 34-44 is 21 percent, 45-54 is 19 percent, and 55+ is 20 percent; 12 weeks ending January 28, 2012).

   6. Facebook.com under-indexes in visit share from the most affluent income group (less than $30K is 23 percent, $30K to $59K is 32 percent, $60K to $99K is 26 percent, $100K to $149K is 12 percent, and more than $150K is 6 percent; 12 weeks ending January 28, 2012). With that said, Facebook’s size more than makes up the difference; the site wins 499,949,430 visits from the most affluent income group versus YouTube’s 223,732,591 visits and Twitter’s 15,166,795 visits.

   7. Facebook.com became the #1 ranked website in the U.S. on March 9, 2010.

   8. “Facebook” is the most searched term in the U.S. and Facebook-related terms account for 14 percent of the 
top search clicks (12 weeks ending January 28, 2012).

   9. Facebook.com users are highly loyal to the website; 95.91 percent of visitors to Facebook.com were returning visitors in January 2012.

   10. Internationally, Facebook.com ranks in the top two websites in every market (week ending January 28, 2012) except China, where Sina Weibo, Baidu Zhidao and Renren are the dominant social networks. Facebook.com’s largest footprint is in Canada, capturing almost 12 percent of all visits in that market. It also recently surpassed Orkut, placing it behind only Google Brazil in market share.

5. Facebook should pass 1 billion users in August 2012

It’s clear by just glancing at the data that Facebook was previously growing at an exponential rate, but has recently slowed to a linear growth.

This is likely because the company’s quick expansion in many of its early adopting countries (such as those in North America and Europe) has slowed: most of those countries’ populations interested in social networks are already using the world’s biggest one. Developing countries are now increasing interest as well, however, and are thus keeping the growth more or less steady.

Two big countries in the second category are Brazil (16 percent on Facebook) and India (just 3 percent on Facebook), both of which have a potential of millions in new members for Menlo Park. In the last nine months, iCrossing says the former jumped 13 million to 30 million users and the latter increased its number from 22 million to 36 million users.

Facebook offers two types of metrics for its user base: total number of active users (800 million) and total number of mobile active users (350 million).

China has internal control of its internet. Facebook is banned in China.

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