Facebook hits a billion users - but second billion will be harder

Oct 5, 2012

Mark Zuckerberg faces challenge of growing in emerging markets and making as much money out of users as Google


FACEBOOK has become the first social network with one billion members who access their account at least once a month – but analysts are warning the second billion will be harder to come by.

Mark Zuckerberg, who co-founded Facebook at Harvard University in 2004 and is now its chief executive, thanked members yesterday on his own Facebook page.

"If you're reading this: thank you for giving me and my little team the honour of serving you," he said. But he added that his aim was to connect everyone in the world via the social network. "I am committed to working every day to make Facebook better for you, and hopefully together one day we will be able to connect the rest of the world too," he said.

As the world population is thought to be around seven billion, he has now reached 14 per cent of his target market.

Facebook is the first social network to reach the one billion milestone. Twitter, its nearest competitor, has more than 500 million.

But the achievement comes with a warning: Facebook's rate of growth has begun to slow, from 55m new users a month to 45m.

The website is now growing fastest in new markets, having reached saturation point in the countries where it first became popular, such as the United States and Britain.

The company will need to develop in emerging markets such as Asia, Russia and Africa if it is to continue to grow, says the Financial Times. Sustained growth is crucial for the company, which has seen its share price fall from $38 when it listed earlier this year to around $22, adds the FT.

"In the lucrative western markets, where the big advertising spends lie, Facebook can no longer rely on an increase in user numbers to increase revenue," said Gregory Lyons at the digital marketer iCrossing. "It must start making more money per user and monetising alternative channels such as mobile."

The Wall Street Journal asks if Facebook can ever profit from its giant user base. Last year, Facebook produced nearly $4 billion in revenue, mostly from advertising - far less than the nearly $38 billion that Google makes from a similar number of users.

According to the Journal, search engines such as Google and Yahoo make about $88 per person who uses its search engines in the US, while Facebook makes about $15.

Other social media businesses are also running into difficulties. On Thursday, social-games maker Zynga lowered its earnings outlook for the year, in part because consumers appear to be losing interest in some of its games.

Furthermore, the next billion might be more of a challenge. Many potential subscribers are in countries like China and Russia where growth has been hard to come by.

But the real question is whether Facebook can translate its service financially to mobile devices.

Last month, CEO Mark Zuckerberg admitted the company's previous mobile strategy was wrong and announced an application that displays ads on mobile devices.

With 600 million mobile users accessing Facebook (from a total of 5 billion mobile devices in use worldwide) Zuckerberg believes the company will eventually make more money per user on mobile phones than on computer desktops.

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1 Billion x nothing is still nothing.