Facebook facing potential revenue problems
It seems that advertising, which is the main revenue generator for the social network site, cannot keep up with the growth in the uptake of apps. The latter enables mobile phone users to go directly to Facebook without the need to use a computer.
The major problem for Facebook is that the site is essentially free to use, with posters uploading photos, videos and so on. Facebook as such does not make money, so in effect revenue generation can be affected.
A spokesperson for Facebook said: “We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users increasing more rapidly than the increase in the number of ads delivered.”
It seems that around 85% of the revenue accrued by Facebook last year was made from advertising. This amounts to a $3.7bn; however, unless the company can develop a better strategy to take into account the massive growth in app use, the company could potentially be in trouble.
What is more, it could affect the flotation of Facebook on the stock market, which is expected shortly. The flotation is thought to possibly raise as much as £96bn.
Aware of the problem, Mark Zuckerberg, founder of Facebook, has been looking at ways to improve the situation. He recently went on a shopping spree, buying up all sorts of businesses, such as Instagram, in the hope that this would help. Instagram is a photo-sharing application.