Facebook hits 1 billion users

Can the company monetise its audience?

More than 1 billion people, 1 in every 7 people on the planet, now log in to Facebook every month. And that’s almost half the estimated 2.5 billion internet users, as measured by the International Telecommunications Union.

It took Facebook just two years to double the number of users from the 500 million it hit in July 2010, and most of those users are outside the United States. It’s an amazing achievement when you consider that the Facebook has almost zero users in China, the world’s most populous country. China blocks access to Facebook from within the country.

The problem for Facebook and its shareholders is how to make money from all those users. A vast majority of its current revenues comes from advertising, while the rest comes from payments when users buy virtual goods on Facebook games – Facebook takes a cut of the payment. Advertisers are attracted by the massive audience they can reach, plus the ability to target ads with relevance based on information users share with Facebook and Facebook applications.

The company has also recently started charging users to promote posts to their friends, and it has been suggested that advertisers could soon start offering movies and shopping on Facebook – for which the company would of course take a cut. Shareholders will certainly be hoping Facebook can make more money from its users in the future. Since the company listed at US$38 a share in May 2012, shares have fallen by 38% to US$21.95.

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Motley Fool writer/analyst Mike King doesn’t own shares in any stocks mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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