A Cash-Flow Positive Facebook Helps the Industry

Facebook is making money. It shouldn’t be shocking, we know.

But let’s be honest—social media is an industry that’s been more often rich in potential than profits. And no social media platform embodies this gap more than Facebook.

Despite the site’s massive growth, Mark Zuckerberg’s enterprise—launched in a Harvard dorm room five years ago—has actually struggled to break even. 300 million users (traffic has tripled from just 100 million a year ago) means a massive advertising base, but it also means prohibitive bandwidth and operations costs (a growing percentage of users come from developing countries, where advertisers are reluctant to invest).

But for the first time since the site hit the mainstream, enough cash is flowing in for the ballooning site to cover its operating expenses and continue to expand. It’s not quite profit, and major questions remain, but it could be a landmark step in the right direction.

So how should we—the social media community—read this latest news?

Facebook as the “Bellwether”

A profitable Facebook is good for the social media industry, primarily because an unprofitable Facebook could be devastating.

Look at it this way: While Facebook’s success would signify a well-run, innovative company capitalizing on an unprecedented user-base, Facebook’s failure would say more about systemic, industry-wide limitations. If a massive, efficient, innovative, pioneering company can’t turn profits, how are smaller ventures supposed to earn investor confidence?

In other words, with 300 million users, Facebook profits seem to some almost inevitable. But if even Facebook falls short on the bottom line, investors could see the basic premise of social media success—profits via advertising embedded in free content—as too inherently flawed to overcome any significant amount of operating costs.

It all comes down to targeted advertising, and the fact that Facebook has appeared to finally figure it out bodes well for the rest of the industry.

Investment Capital is Coming

Improved confidence should only signal an easing in venture capital, and the hard numbers appear to be particularly welcoming: $240 million from Microsoft in 2007. $200 million from Russian investment group Digital Sky last May.

Overall, since its 2004 launch, the site has raised nearly $600 million, and — with expected revenues of $500 million this year — appears to be in much better shape for a potential IPO in 2010.

“This is important to us because it sets Facebook up to be a strong independent service for the long term,” said Zuckerberg on his blog.

Belief in the system — and belief that the potential can, in fact, turn into real profits — boosts social media and internet marketing ventures industry-wide. Bellwether Facebook is again leading the way.

Real-time search is one of the newest battlegrounds on the web. In fact, history may show real-time search as the development that saved social media sites like Twitter and Facebook as stand-alone entities.

You see, despite all of the growing attraction of web users to social media sites, the ugly truth is that most social media sites have never been able to show a long-term profit. Myspace has been the exception since completing a 3 year, $900 million advertising contract with Google in 2006, but there is no way to know whether Myspace will be able to maintain their Google contract or their profitability.

One common way of start-up companies making money is to auction their business to the best offer such as when Google bought Youtube. There have been rumors of numerous companies from Microsoft to Google and even Apple buying up Twitter.

Real-time search may just re-define how users use the internet. It is the ultimate combination of search and social media. Searching real-time information allows engines that provide the service to display as results that are happening across the web without delay. Since social media postings are updated frequently they are easily able to gain dominance in this sort of platform over traditional articles or blogs. Combining these results with ads seems to be the obvious sought after answer to the profitability questions. Below are some of the hottest real-time search engines across the web.

General Real Time Search

Collecta: This site has not quite reached beta, but the home page does provide two example sneak-peaks. The layout is likely to change before it gets to beta.

Google: Google recently launched a number of new features, and real-time search is one of them. This is found by doing a search from the Google main page, and then selecting “show options” directly under the Google logo. One of the options available is “Past 24 Hours”. Larry Page recently discussed real-time search at the Google Zeitgeist conference in the UK. It is difficult to imagine Google being left behind in anything search-related. The results from this page appear to contain very few, if any social media pages, so it is possible that Google is focused on displaying links that come from already trusted sources.

OneRiot: From the searches I’ve done this site also appears to show links indexed from posts on social media sites purely. They appear to rank the posts by popularity (re-tweets, diggs, ect. ) and how recently they were posted. Each link shows the original author’s logo or profile picture that posted the indexed link so that credit is given. While each of the sites give credit to the original posting author, this extra step may be the distinguishing feature makes OneRiot more favorable. The layout is a basic vertical format.

Scoopler: My favorite between each of these has been a toss-up between Scoopler and OneRiot. Scoopler appears to index any links it from posts all over the web as fast as possible, though I did not notice any repeat links. While this allows for seeing a lot of information this also allows for a site like Twitter to dominate the results. To combat one domain dominating the results the site provides popular searches and popular links that are posted throughout the web. The site also automatically displays the next result on the page without requiring the user to refresh or click a button. The layout is probably the best out of the four general real-time search engines.

Twitter-Based Real Time Search

Twitter Search: The search feature allows a user to search all of Twitter’s posts for the specific keywords. While the search is only for Twitter users it is a very powerful tool.

TweetMeme: This tries to display Twitter posts by popularity as well as organizing the posts by categories. It has a search option that mimics Twitter Search for the most part, and each link has a button that allows the user to re-Tweet the link in question. There also seems to be a lot of integrating features with Twitter, which may help it keep from being disregarded as Twitter Search expands.

Twitmatic: Much like TweetMeme, Twitmatic tries to integrate with Twitter by having a Twitter login link directly on the page. It only indexes videos posted on Twitter. I tried multiple attempts to search on two different days with no success after at least 10 minutes. This service will need to be at least serviceable to attract users.

There have been many reports earlier this month on Squidoo, a co-op site that allows anyone to create web pages on just about anything they want for free. Squidoo has been used (or abused?) by SEO’s, internet marketers, and spammers for the last year to gain links and search engine visibility. Squidoo pages, or lenses as they call them, ranked surprisingly well for relatively competitive terms rather easily and quickly. The traffic to lenses which ranked well could then be directed to any other site via links.

That all changed when Google seemingly penalized the site. Squidoo lenses disappeared from the search engine results across the board. Duncan Riley of TechCrunch wrote about Google Acting Against Squidoo Due To Spam:

“The reports indicate that some Squidoo pages have seen a 75% drop in traffic, and in other cases have either been removed from high ranking positions on Google, or removed all together.”

Now I have a few Squidoo lenses out there with links pointing to my clients sites. These were ranking well in the search engines, but we didn’t really feel the hit of the so-called “Squid Slap”. Fortunately, we Never Put All our Social Marketing Eggs in One Basket as social marketing blogger Michelle MacPhearson suggests.

Well apparently Squidoo is back. Seth Godin, founder of Squidoo, wrote on the Squidoo blog:

“Those of you who track Squidoo pretty closely know that we had a lousy week. 30 spammers took advantage of us and blew Squidoo’s name all over the web.

The good news is that as of Thursday, July 12th, all of those holes are closed. We erred on the side of goodwill, and we’re going to be a lot more careful in the future.”

Today we noticed Squidoo lenses back in Google’s search results, even at #1 & #2:

Interestingly, the results above show our lens at #1 and the links feed at #2. The clients actual site with the keyword in the URL is ranked at #3. While I love to see a domination in the SERPs like that, I can’t seem to figure out why the Squidoo lenses are now outranking the actual site that has more content and a stronger domain.

Has anyone else noticed Squidoo pages not only back in the search results, but perhaps ranking even higher than before the “Squid Slap”?

MasterLink’s Director of Internet Marketing, Mark Barrera was interviewed and featured in the Cover Story of the February 2007 edition of Website Magazine, available now.

The article, “Going Social” focuses on social media and user-generated content on the internet. MasterLink’s Director of Internet Marketing, Mark Barrera was contacted by Website Magazine for an interview for the article via the MasterLink MySpace profile. The interview focuses on the use of Myspace and YouTube as social networking for business purposes.

Website Magazine is a publication available both online and in print with a free subscription. Their mission is to help readers succeed by providing helpful and valuable information about online business trends, industry insights and best practices.