Facebook and Twitter: Making Money Takes Back Seat to Growth Even in Economic Recession

Executives from Facebook and Twitter told Web 2.0 Summit attendees they were focused on growth and helping their users--rather than making money--despite the faltering economy.

Despite the economic downturn, making money is not a concern for two of the biggest players in the Web 2.0 consumer market. During separate keynotes at the Web 2.0 Summit in San Francisco, executives from Twitter and Facebook said their companies aren't focused on creating a profitable business model anytime soon, telling the audience they were more interested in growing their respective sites and catering to end-users.

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Mark Zuckerberg, Facebook's founder and CEO, told attendees at the Summit that during the past year his company of 700 employees had largely focused on user growth, moving from 50 million active users to 130 million. He also noted that they were focused on expanding internationally, adding 20 languages to the service.

"Growth is a strategic thing for us," he said. "We're not as focused on optimizing revenue. Now, people have said we're not thinking about it [and not developing a strategy], but that's completely wrong. We have thousands and thousands of advertisers coming to the site and reaching people."

Throughout the keynote, moderated by John Battelle, the founder of Federated Media, questions centered around the company's ability to make money.

Zuckerberg said that the company had made progress selling its social ads, which broadcast the users' behavior to their friends. For example, if they watch the preview of a movie, and comment on it, that information will be broadcast to their friends on the service.

Facebook received criticism when it first tried such a method, known as beacon advertising, last year. But when it relaunched a similar feature, known as social ads, it offered an opt-out capability. Many see this ad model as a big part of the company's future.

"Advertising on the Web is less about just hitting someone with a message," Zuckerberg said. "It's about engagement [with that user]."

Facebook CEO Mark Zuckerberg (pictured left)
Facebook founder and CEO Mark Zuckerberg (pictured left) took questions about the health and future of Facebook's business model on the second day of the Web 2.0 Summit in San Francisco.

Last October, Microsoft bought 1 percent of Facebook for around $240 million, a move that valued the social network at $15 billion. Zuckerberg says the company doesn't dwell on the valuation. "We don't feel pressure to live up the 15 bullion dollars," he says. "We want to grow internationally and build a good business around that."

While Facebook has many monetization possibilities, the future of Twitter, the micro blogging tool that allows users to exchange short messages, remains less clear. During the morning keynote, Evan Williams, chief product officer at Twitter, was questioned by New Yorker magazine journalist Ken Auletta, who said rather bluntly, "Twitter isn't making money. How are you going to make money?"

Williams paused, letting out a prolonged "ah," which solicited laughter from the audience.

He then responded, "I don't think it's as big a dilemma as people seem to think it will be for us," Williams said. "We haven't focused on it yet and we can't say how it's going to work."

But Williams did hint that commercial avenues could open up on Twitter. Many companies—such as Dell, JetBlue and Comcast—have begun communicating with customers on Twitter. Because a Twitter user must decide to "follow" another user's handle on the service (even if it's a company), the model is attractive for consumers who want to hear from specific organizations whose product they feel passionate about tracking. Some business leaders have examined if Twitter could be used as an internal communications and collaboration mechanism for their employees..

"It's completely opt-in," Williams says. "It's one to many. There all kinds of companies using it to do sales. People are opting in for more marketing related messages. So if you look at it today, there is commercial value not just personal value. I don't think it's going to be hard to monetize that."

Copyright © 2008 IDG Communications, Inc.

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