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Summary:

Facebook has raised $500 million so far, but with costs mounting and ad-revenue growth slowing, that’s not enough. BusinessWeek reports that…

Facebook has raised $500 million so far, but with costs mounting and ad-revenue growth slowing, that’s not enough. BusinessWeek reports that the social-networking site is looking for credit lines of up to $100 million to finance the lease of new servers, which it needs to support its growing membership.

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  1. Facebook will have to make tougher decissions in the future. Giving away services for free to anybody doesn't work in a world where almost everybody is online and where especially the unemployed, retired and poor spent a lot of time online.

    There is a good example what happens to a company that tries the free for all approach – Lycos Europe http://www.lycos.co.uk/ – going out of business.

    Maybe Facebook should switch to a hybrid model: give the service for free in markets where advertising is able to cover the costs and offer only basic features for free in markets where not (selling "premium" features on top).

    Today all social networks with the target group "everybody" burn their cash, only specialized networks (myspace for music, linkedin/xing for business, some networks for special interest or minorities) are profitable and all offer premium services.

    A somewhat paid model would enhance the quality of service for the users who are highly relevant to advertisers.

    A deeper version of "social" targeting who has to pay and who not would be even more efficient – but then the term "social network" won't work any longer, as the social network evolves into a real mirror of the real world where some people "count" and others not for Advertisers etc.

  2. you charge NIL for needy person and charge for other person, if you keep free it want worth and everybody think it is of no value. you charge a token amount and then pass on

  3. SiliconValley Friday, March 27, 2009

    They should have an option where users can pay not to have advertising appear on their homepage. I would certainly be willing to pay 19.99 per year for that!

  4. What about vendor financing for the hardware and software? Cisco, IBM, HP, etc. all have deep cash reserves and certainly could extend vendor financing to Facebook. Of course, if they feel the Facebook financials are weak or the financial model is not viable, that would not happen.

    Given the resistance of the banks and vendors to provide financing, one has to question the business model.

  5. When are they actually going to create a valid business model? Bad investment.
    Try the <a href="http://sthrt.com">best homepage</a>

  6. Social Networks come and go……they should have cashed out after the $13 billion valuation. The friendster generation grew up and became the myspace generation. When they got bored with the media cluttered mypace pages, they found better use and interface control with bebo, hi5 etc, until facebook unified everything and made it simpler. Now that generation is getting bored and more or less moving on, hence ad revenue plummeting. As they grow up and face a tough economy, needing to pay bills etc, that leaves no time for face booking.
    It's simple economics…the law of diminishing marginal returns. When you hit your peak, you can never go above and beyond that point. Any efforts or investment becomes counter productive…..

    A

  7. I think Bank of America would be wise to take pause before investing in Facebook. Yes, Facebook has access to an extensive amount of information about an absurd number of people that can be used for marketing purposes. But their recent decisions and comments in regard to people's reactions to the new design suggests a possibly…reckless(?) or at least not very well thought-out business strategy. (And if facebook users are their product rather than their customers..that makes the issue more rather than less serious perhaps..)

    Dr. Tantillo pointed out on his marketing blog ( http://blog.marketingdoctor.tv ) that Facebook could have at least done test runs of the newest version of facebook to get feedback beore actually launching it….or take the advantage of free and voluntary labor by allowing users to contribute under a wiki sort of setup. Full post: http://blog.marketingdoctor.tv/2009/03/22/brand-winners-and-losers-obama-and-facebook.aspx

    Instead of counting on people to become fans of products and companies, it would make good sense for facebook to do a better job tailoring ads to user's interests. They definitely have a lot of information at their disposal to target as precisely as possible–as Google has tried to do with its ads (where advertisers only pay if the ads are clicked on), but even better….

    If ads were targeted to users, taking into account all the information in a user's profile, I doubt the consumers would resent the ads… Currently, there's an option to say you "do" or "don't" like a certain ad, but since we know we have to see some ads anyway, I think that some of us would be wiling to fill something out indicating the types of ads we would be more interested in seeing. (ex. If my favorite author's new book just went on sale and there's a link to buy it on amazon….I wouldn't mind… I might even be glad for the ad, since it's something I'd want to spend my money on anyway.)

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