It is the burning question in tech circles, and Mike Murphy answers it before it is completed.
"I hear it every time I'm on a (tech) panel," Murphy, Facebook's vice president of media sales, says with a wry smile.
He's referring to the inevitable question on when Facebook and other social-networking sites will turn their steep market valuations into mounds of currency. (Invariably, Murphy answers that Facebook has a long list of major advertisers.)
Facebook, MySpace and other social-networking sites have been the rage of the tech industry for more than a year. Following investments by Microsoft and News Corp., the companies are valued in the billions of dollars and are considered blueprints for how to build a Web site. Yet a deeper question lingers: How are they going to consistently produce profits to match their soaring valuations?
It is a parlor game that has Silicon Valley buzzing. With online ad spending booming into a nearly $50 billion market this year, there is plenty of money to be had. Big-name advertisers are drooling over millions of young, affluent consumers who are spending more time on their online profiles than in front of TV and movie screens. They are particularly smitten with the prospect of tailoring ads to people's specific interests.
But Google commands a sizable chunk of the market -- especially in the USA -- leaving dozens of social-networking sites to scramble for a piece of the advertising pie. Plus, there is the ticklish task of sites and advertisers pitching products without trampling the privacy of consumers.
Short of striking it rich with online ads or creating a new revenue stream, how can so many sites leverage their vast audiences? In many respects, it is the same query that dogged portal companies in the mid-1990s and search engines in the early '90s. Some were sold. Some...
More...