Submitted By dpnirvana
Long-Term Financing at Facebook
Facebook is the social networking website that opened in 2004 as a forum for university students, and that has exploded into a full-service social networking site open to all interested participants by the end of 2006. Facebook competes as a social network with the site, MySpace, which itself only began operating in 2002. The main audience for Facebook remains college students, in the age 18-24 range, though by early 2007 more than half of Facebook’s 24 million active users were outside of college age.
Facebook’s stated intent is to provide a forum for “real” people (not avatars) to share information about each other, without connection to job searching or gaming or other possible goals. From its beginning as a connection vehicle for university students, Facebook has maintained this focus, although allowing for expansion to any potential users rather than limiting access to those in a college or university. According to Mark Zuckerberg, founder of Facebook, “People communicate most naturally and effectively with their friends and the people around them. What we figured is that if we could model what those connections were, [we could] provide that information to a set of applications through which people want to share information, photos or videos or events.” [from an interview with Time magazine, July 2007. http://www.time.com/time/business/article/0,8599,1644040,00.html?xid=rss-business&iid=sphere-inline-sidebar]
In 2006 Facebook agreed to allow Microsoft to sell advertising on the Facebook site, thus creating a huge new source of revenue. This strategic alliance allows Microsoft to be the exclusive vendor of banner ads and sponsored links on Facebook. Thus far, this arrangement has produced banner ads that appear at the bottom of the page on Facebook, in a relatively non-intrusive manner, along…...