• Fri
  • Dec 26, 2014
  • Updated: 12:44am

Facebook is set to face increasing challenges

PUBLISHED : Thursday, 16 February, 2012, 12:00am
UPDATED : Thursday, 16 February, 2012, 12:00am

Facebook was launched in 2004 by Mark Zuckerberg, who was then just 20. Eight years on, his site is the world's leading social network with more than 800 million users.

Facebook will soon be traded on the stock market, enabling anyone to own a portion of the company.

You may rightly ask: How does Facebook generate revenues? After all, people can use it free of charge.

Yet little do most users know that while they are looking through their friends' updates, they often link to feeds by advertisers.

Last year 85 per cent of Facebook's total revenues of US$3.7 billion came from advertising. The company sells its users to advertisers. We're its product.

We are the reason companies pay Facebook millions of dollars every year to have their products advertised on the site.

Now that the social networking site will become a publicly traded firm, it will need to generate ever-growing revenues to please its shareholders. And it also has to make sure it does not become another has-been online giant.

A few years ago, Xanga was my Facebook. It was the site that I logged on to every day after school to keep in touch with my friends. Now, I could barely name a friend who still uses Xanga. Likewise, MySpace, which was once worth more than US$500 million, was recently sold for US$35 million.

Google is eyeing Facebook's market share of online social networking. Google+ already has some 90 million users - and counting.

Many analysts say the best way for Facebook to stay in business is to expand its advertisement market.

Yet more advertising may well annoy users. They may then decide to switch to other social platforms. Few users want to see yet more ads on Facebook.

Facebook's growth over the past eight years has been spectacular. Let's hope the company can hold up well under pressure both from its shareholders and its competitors - without compromising what we love about the site.

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