How Does Facebook Make Money?

Facebook is big. Very big. The company claims more than 500 million active users; that's half a billion people who regularly log in to Facebook (they claim half of the active users log in on any given day). In other words: on any given day, between three and four percent of the world's population logs into Facebook...and you can imagine how that percentage would shoot up if you take out the third world!

So how does Facebook make money? Lots of users means lots of advertising; those quarter billion users that log in each day can see up to a half dozen ads on every page they view. In technical terms...that's a lot of ads!

Facebook is a great place to advertise because they let you target your audience very well. If I'm trying to generate interest in a new computer game, for example, I probably want to target males in their teens and twenties with an interest in games. I might also restrict it to those who live in the United States, or even in a particular area of my game has regional interest. What, you say it's a space game? Maybe I'll try showing the ad just to people who are interested in space..

Speaking of games, Facebook has quite a few of them. At least three members of my own family are addicted to Farmville, for example. Not only does this increase the number of page views and thus let Google serve more ads, but it also lets them sell game credits to be used as virtual money in hundreds of games.

With all that, it's no wonder that Facebook is worth billions; if anything, the question is whether Facebook or Google will emerge as the most powerful internet-based country. Facebook has surpassed Google as the most trafficked site on the net; can they keep it that way?