Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Is Facebook Inc (FB) the Next Google Inc (GOOG)?

Page 1 of 2

Some technology companies have quite an innovative business strategy for making money. In this new era of diverse hardware options paired with free or at the least very cheap software, many tech companies have forgone the traditional software model for something different. Instead of users being the customer, the actual revenue often comes from advertisers.

Facebook Inc. (FB)

The genesis

We all know the story about how Google Inc (NASDAQ:GOOG)developed its product, search, and then figured out a way to make money off of it. But no one realized just what a hit advertising would be: in 2004, when Google Inc (NASDAQ:GOOG) first became a public company, revenue hit $3 billion. Last year, Google had revenue of over $50 billion.

From 2012. Source: ABCNews

Most of that money comes from ads. It comes from using targeted data with keywords people are searching for and serving up what they want. The best part? Public perception places Google Inc (NASDAQ:GOOG) in high regard. This can be linked to the fact people use Google for something. They realize that the company needs to make money in return for using their services. It’s an exchange that users are more than willing to make with Google.

The user angle with Facebook Inc (NASDAQ:FB)

Facebook Inc (NASDAQ:FB) has had a similar strategy as Google Inc (NASDAQ:GOOG), and this is why people draw comparisons to the two companies. The plan for Facebook from the start was to obtain users, then figure out how to monetize them. And as Facebook Inc (NASDAQ:FB) surpassed 1 billion active users, the company’s revenue has increased: from 2011 to 2012, revenue was up 37% to $5.7 billion.

Facebook operations data. Source: Facebook 10-K

Facebook was also profitable in 2012, making a $53 million profit. But, that’s a far cry from the $1 billion profit it made on $3.7 billion in 2011. For the first quarter, income was up slightly, 6% year over year. And the company is making heavy investments in infrastructure. The past two quarters have seen Facebook Inc (NASDAQ:FB) spend a combined $3.9 billion in networking equipment alone.

Making bets

That’s hefty capital spending at a time that Facebook has been criticized recently for poor performance. But investing in all that hardware means that the company continues to believe that it will experience a high degree of growth. Growth in user activity is good for Facebook. But the only question is whether or not Facebook Inc (NASDAQ:FB) can properly monetize its user base’s activities.

Source: Business Insider

Facebook Inc (NASDAQ:FB)’s not monetizing the way Google Inc (NASDAQ:GOOG) does, at least not under its existing business model. Instead of users voluntarily providing like in a Google search, Facebook leverages the user data that is shared on its platform in order to target advertising and other services to them. Online ad spending is expected to top $40 billion in 2013, so it is trying this within the reality of a growing market.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!