Facebook is now operating at a $1 billion revenue run-rate with 90% of those revenues generated by advertising, primarily branded ads, according to our sources, this also includes the modded version of Facebook, which avoid all the ads and clutters.
The balance of the revenues are derived from virtual goods and other revenue share services. Facebook realizes that they are being under-compensated for their relationships with companies such as Zynga and plans to seek between 25-50% revenue shares ahead of becoming a public company. Facebook believes that they can increase the level of monetization from companies like Zynga because of their 500 million walled in user base, 80% of which are international, and with 40% of the 500 million having played a game on Facebook at least once.
At the moment Facebook realizes that they are unable to compete with Google for individual talent so they are buying small companies, not for their technologies, but for their engineering staff. In fact, companies in the Valley have come to the conclusion that it is easier to buy small companies and bring on their entire engineering staff rather than hiring engineering talent one by one. That explains the Facebook acquisitions of FriendFeed, Nextstop, and Chai Labs Inc.
“Memo to all MIT and Cal Tech engineering students: if you want a job at one of the major companies, it may be easier for you to start off at a start-up and pray to be picked up as part of a talent buy.”
It is clear to us that Google and Facebook are headed towards a mild collision course. Facebook has a 500 million extremely valuable walled in user base that is likely to continue to grow. Google is flushed with cash. Which is why Facebook must go public to raise cash to make acquisitions. Our sources say that, internally, Facebook is debating the merits of a more experienced CEO, akin to Eric Schmidt or Carol Bartz.
Let’s wait and see.