Facebook Loses Money 5 years in a Row

From our good freinds at France24.com http://www.france24.com/en/20090205-facebook-turns-five; Facebook has celebrated its fifth birthday with 150 million guests but no clear path to profitability. Chief executive Mark Zuckerberg, who co-founded the social networking website with two Harvard University roommates five years ago, marked the occasion in low-key fashion with a blog post urging members to send a virtual gift to their online friends. "In the spirit of celebrating connections between people, we encourage you to use this gift to give thanks to your friends, colleagues and family members with whom you are connected on Facebook," he wrote. Zuckerberg, 24, said he was "humbled" by the phenomenal growth of a website which began as a way for his fellow Harvard students to stay connected and has blossomed into a worldwide network that has dwarfed rival MySpace. "Facebook was founded in 2004 to give people the tools to engage and understand the world around them," he said. "We are glad and humbled that so many people are using Facebook in this way."

Zuckerberg, who has a personal worth of 1.5 billion dollars according to Forbes magazine, launched Facebook from his Harvard dorm room on February 4, 2004 with roommates Dustin Moscovitz and Chris Hughes. It quickly spread to other schools around the country and eventually anyone aged 13 or older with an Internet connection was allowed to create a Facebook profile and post photos or update their friends on their status. With the astronomical growth has also come controversy. Facebook has been accused of violating privacy, facilitating online sexual predators and hate groups and simply being a colossal waste of time. It has also been touted as a force for good, serving as bridge between people and even as a tool to counter terrorism and repressive governments. Both Moscovitz and Hughes have since left the company -- Moscovitz last year to set up an Internet technology firm and Hughes to join the online campaign of then-Democratic presidential candidate Barack Obama.

Zuckerberg predicted a bright future for the Palo Alto, California-based Facebook and its 800 employees. "Building and moving quickly for five years hasn't been easy, and we aren't finished," Zuckerberg said. "The challenge motivates us to keep innovating and pushing technical boundaries to produce better ways to share information."

One challenge Facebook is yet to overcome is how to make money. US software giant Microsoft bought a 1.6 percent stake in Facebook in 2007 for 240 million dollars, valuing the social network on paper at 15 billion dollars. But Facebook, unlike other Web giants such as Amazon, eBay, Google and Yahoo!, is yet to prove how it is going to translate traffic into cash. "There's no significant visible source of revenue other than investors," said Silicon Valley analyst Rob Enderle of the Enderle Group. "There's a lot of potential there but they're still kind of living in this dotcom mindset where a business plan doesn't make a difference," he said. "And as we saw with the dotcoms, that has a very unfortunate end to it." "Google was able to figure out fairly quickly how to monetize what they were doing and they became a giant and that's the potential for Facebook but they've got to cross that chasm," Enderle said. Going public with an IPO, or initial public offering, would not appear to be an option for Facebook right now. "Doing a public offering when you have no revenue? Good luck with that -- particularly in this market," said Enderle. Advertising could be a money-spinner but "the ad model doesn't seem like it works all that well for Facebook -- though it could," said Enderle. "You know an awful lot about people, and so you would think they could do targeted ads."

"Whatever the path, Facebook doesn't have an unlimited period of time to find it," Enderle said. "They need to grow out of their childhood really fast. They can't be a five-year-old anymore," he said. "They have to grow into adulthood and adulthood means paying the bills."