Facebook had revenue and profitability problems up until 2016. They had raised many billions of dollars in funding and went public in 2012 with a valuation of about $100 billion. Facebook had many years of problems solving the problem of generating a lot of money from advertising.
Facebook needed all the income and revenue that they could get. They targeted children playing video games to make unauthorized in-game purchases for many millions of dollars. from 2011-2015.
This chart shows that net income was very low for a company with a $50-100 billion valuation up until about 2015.
Facebook Net Income 2015 $3,669 2014 $2,925 2013 $1,491 2012 $32 2011 $668 2010 $372 2009 $122 2008 $-56 2007 $-138
In 2012, the money that Facebook was earning from children spending on video games was nearly equal to Facebook’s entire net income.
Revenue was also not that high.
Facebook encouraged game developers to let children spend money without their parents’ permission – something the social media giant called “friendly fraud”. An internal Facebook survey of users found that many parents did not know Facebook was storing their credit card information. Parents also did not know their children could use their credit card without re-entering a password or some other form of verification.
Facebook game revenue from children for three months from Oct. 12, 2010, through Jan. 12, 2011 was $3.6 million. Facebook had internally identified the problem in 2011 and actively chose not to fix it. They made decisions to increase this game revenue. In 2011, Facebook was preparing to IPO. Facebook’s IPO stock offering was May 17, 2012.
Facebook encouraged developers to let children make purchase mistakes. Facebook told developers to give free virtual items to users who complained, things such as flaming swords, extra lives and other in-game enhancements.
A child would play a video game and then click in the corner to get new items or abilities. This would trigger a purchase but there be no notice or verification.
Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
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