Will Facebook profits cause it to go public?
Steve Chiotakis: Next time you go social networking, you’re probably thinking more about what your status should be. Or looking at pictures of a friend you haven’t seen in a while. What you’re probably not thinking about is how much money Facebook is charging for that ad on the screen. Some insiders there tell Reuters, a lot — $800 million last year. Scott Austin is editor of Dow Jones VentureWire. He’s with us live from New York this morning. Hi Scott.
Scott Austin: Hello, thanks for having me.
Chiotakis: You got it; $800 million in revenue, that’s a big deal. How much of a big deal is that?
Austin: It is a big deal. I think every few weeks there’s a report out there that says Facebook is generating $500 million in revenue, $600 million in revenue. It really shows that Facebook is making a lot of money off of advertising, and this is really only the beginning. This company’s been around for just a few years, but I think the more striking fact in that Reuters report is not necessarily the revenue, but the fact that this company may be making a profit.
Chiotakis: A profit as in how much money?
Austin: Well, I don’t know for sure, and this is again just according to this Reuters report, they say tens of millions of dollars. Even if it’s making $1 in profit, to me that is a big milestone. That’s what people have been wondering is, OK Facebook can make all this money revenue-wise, but can it actually secure a profit, bottom line net income? And it appears it may be doing that, and again this is just sort of the beginning and we have to see that growth curve, but tens of millions of dollars in profit is a pretty big deal.
Chiotakis: What else are they making money off of? Is it just adds or are there other things they can possibly make money off the site?
Austin: Yeah. Right now, they want to keep the site free. So they make money primarily from advertising, but they do take a cut from some of the applications that are on there, you know some of the games that maybe you play.
Chiotakis: There’s Farkle and Farmville and all these things . . .
Austin: Yeah, they have a new currency system called credits Facebook does, so people can buy virtual items on Farmville or something and Facebook will take 30 percent of that money that people are paying in.
Chiotakis: Hey Scott I want to ask you quickly, very quickly, is this going to cause investors to push it to go public?
Austin: I don’t think so. I think the investors have really stated that they’ve very patient. There’s really no reason for Facebook to go public right now, the IPO market is still not doing very well, the economy isn’t great. They might as well wait until the conditions are better, maybe 2011 or 2012.
Chiotakis: Scott Austin, editor of Dow Jones VentureWire. Thanks.
Austin: Thank you.
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