The consensus since the early days of the Internet has been that if you build it, they will come. And if they come, eventually they will pay. Or someone will pay to reach them. Once it was assumed that customers paid money. Now they need to be “monetized.”
Problem is, you have to spin pretty hard to turn all that chaff into gold–or at least, as much gold as the public markets expect. At its current market value of $13.8 billion, Groupon is worth $96.57 per member. If after its IPO Facebook has a market value of $75 billion, that would put it at $88.75. Meanwhile Netflix, rebounding from its slump, is worth almost $298 per (paying) subscriber.
So far Facebook doesn’t look out of line. However, then there are those smaller circles. The difference between Netflix and Facebook is that Netflix takes in a lot of money from each paying subscriber–about $148.20 (Netflix reports a monthly number of $12.35, I’ve multiplied that by 12). Groupon gets a small fraction of that.
Facebook gets a still smaller fraction, a relatively paltry $5.02.* Sure, Netflix is a movie/media delivery service and Facebook is an all encompassing world straddling monster of content and connection. The bottom line remains that to get to Netflix’s level, Facebook has to increase the money it gets from each user by 30 times.
That’s a lot of ads, and you can’t exactly tie folks to their chairs and force them to pay attention. Google has succeeded with the bring ‘em in, monetize them later approach. Many others, less so. Right now, maybe one of the key attractions of Facebook is that it doesn’t make all that much from each user. It’s been profitable for three years, but what it’s selling right now is still mainly a promise.
*To give Facebook the benefit of the doubt, that $5.02 is based on Facebook’s $3.71 billion in revenue by the 739 million members it had in the middle of 2011. Using the 845 million members Facebook ended the year with would make the per-user revenue slightly lower.