Facebook Finds a New Way to Boost Revenue
Facebook (NASDAQ:FB) users in the U.S. can now pay the social network a fee to boost the visibility of their postings, ensuring that a comment or photo gets prominent billing on their friends’ newsfeeds. It’s not yet clear how much of a market there is for such a service, which was rolled out on Wednesday to a limited number of customers for testing, but it demonstrates the company’s willingness to look beyond advertisers for revenue.
Advertising accounted for roughly 84 percent of Facebook’s revenue in the second quarter, with the rest coming from the company’s 30 percent cut of virtual goods purchases made on its website through Zynga’s (NASDAQ:ZNGA) social games. But as revenue growth slows, analysts and investors are looking for outside-the-box thinking, and a more diversified revenue stream.
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Last week, Facebook unveiled a feature, again on a limited basis, that allows U.S. users to buy and send real gifts to their friends, a service that, if successful, could signal the company’s intent to play a larger role in e-commerce. Facebook takes a cut of all goods sold through its site.
Facebook is still considering a variety of prices for the promoted-posts service, which is currently testing in the U.S. at $7, according to a spokesman. “When you promote a post — whether it’s wedding photos, a garage sale, or big news — you bump it higher in news feed so your friends and subscribers are more likely to notice it,” Facebook said in an announcement on its official blog on Wednesday.
The paid postings will be visible on both desktop and mobile versions of the social network, appearing near the top of people’s newsfeeds for a limited period of time. The service was first tested in New Zealand in May, and has been tested in 20 other countries since. That testing began in a relatively small market, and has now reached Facebook’s largest, seems to indicate that the service has met with some success, and that the company may be nearing a wide release.
But as it ramps up efforts to monetize its 955 million-user base, Facebook assures users and investors that its main social networking service will remain free. “Facebook has offered paid products –virtual gifts, virtual goods in games, sponsored stories, ads — for years, and still remains free. This doesn’t change that,” said spokesman Jonathan Thaw.
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