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How Facebook Makes Its Money

82% of Social Network's Revenue Comes From Ads, But That Could Fall to 69% in 2017

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Can Facebook build a moneymaking engine as ruthlessly efficient as its social-networking products? That question will be top of mind for investors in the weeks and months following May 18, when the company is expected to raise in the neighborhood of $100 million in an IPO.

On the face of things, there's room for doubt. Facebook generated 82% of its revenue from advertising last quarter, mostly from display ads. The growth it needs to support its valuation over the next few years dwarfs projections for the U.S. display market, according to an analysis by the research firm BIA/Kelsey.

But there's no lack of possible revenue channels for the social network to try. Though Facebook's "payments" business, where it takes 30% of transactions made with its virtual currency "credits," is still largely bankrolled by Zynga, it could become 31% of Facebook's revenue by 2017 by enabling users to buy physical goods and digital content such as music and movies.

How Facebook makes money
Revenue per user was calculated using ComScore data on the number of Facebook and Google-sites users for the sake of consistency. For Google, computations used top-line revenue reporting that doesn't account for traffic acquisition costs, or substantial payments made to other sites (Google Network members) and distribution partners like AOL and Ask under Google's revenue-sharing agreements.
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