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This week, Facebook announced it became cash-flow positive during the second quarter.How is that possible?
We wonder because it was also during the second quarter that Facebook launched a press offensive to tell everyone that it planned to be cash-flow positive…sometime during 2010.
At that point, Facebook revenues were supposed to grow 70% in 2009. Obviously, they must be growing much faster now.
So how did Facebook end up so far ahead of plan?
Earlier this summer, we spoke to several sources with insight into Facebook’s financials. Taking the sources’ input together, we estimated the company’s expected 2009 revenue breakout this way:
- $125 million from brand ads
- $150 million from Facebook’s ad deal with Microsoft
- $75 million from virtual goods
- $200 million from self-service ads.
Compiling the breakout, the number that sources kept telling us to nudge upward was revenue from self-service ads.
Why are they such a big business? Three main reasons:
- The virtual goods economy in Facebook gaming is getting huge and appmakers spend a lot marketing their latest launches to users. Zynga spent $1 million marketing its latest hit, FarmVille.
- Instead of microsites, brands from TV shows to consumer packaged goods are building Facebook pages. They buy very cheap ads on the site to promote them.
- Facebook’s self-service ads are very, very easy to make.