Ante post: I apologize for the slow blogging – a lot has been going on recently. I’ll make sure I get back to a sort of ‘one day, one post’ pace pretty soon – actually, somewhere in the middle of next week (Thursday?). Meanwhile, thanks to Herdrick from Y Combinator, Ouriel Ohayon from TechCrunch France and Valérie Thompson from Alarm:Clock Europe for the plugs.

After raising 38.5 m$ in total, 10-million user strong Facebook is expected to generate about 100 m$ in revenues in 2007. Not bad for a traffic company few people believed could be monetized. But how could such a figure be achieved? This is the question I’ve been investigating (a little bit) after realizing how many experienced Internet executives the Palo Alto-based social networking start up had attracted. Indeed, Matt Cohler from LinkedIn and Owen van Natta from Amazon recently joined a executive team. Leaving managers aside, the board of directors accounts Peter Thiel, the cofounder of PayPal (sold to eBay Inc. for 1.2 bn$ in 2002) and angel in LinkedIn and Friendster, Reid Hoffman (also a PayPal cofounder and board member at Six Apart and Kiva), and founder of Mosaic and Netscape Mark Andreessen.

Consequently, a search and text advertising deal with Microsoft has been signed 2 weeks ago: Facebook has selected Microsoft’s adCenter as its exclusive ad provider until 2011. Microsoft is supposed to generate 200 m$ in revenues for Facebook through 2008. Furthermore, ‘local’ social ads have recently appeared (as a Frenchman living in Paris, France, I got an ad related to the French upcoming presidential election for instance): the bulk of Facebook subscribers being modern students, it’s likely most can’t cook anything else than spaghettis and iron their tie. I bet targeted local banners are to mushroom everyday more. On top of it, if 2 things could characterize the life of a student, I’d say it’s books and music. Hence the fact that I wouldn’t be surprised if Owen van Natta (from Amazon) stroke some deal with a major bookstore very soon. Last but not least, large corporations have started to use Facebook as a canal to interact with students more and better. I belong for instance to the Microsoft Student Group, alongside with another 15,000 other students or so (I have to admit though that I still didn’t quite get the point of belonging to such a group).

Up to now, Facebook has been using rather conventional ways to generate revenues, and has become one of the happy few profitable ventures of the Web 2.0 universe. So it looks as if Mark Zuckerberg, the founder and CEO of Facebook, is ready to give virtual economics a go. For sure, Second Life has been a fertile source of inspiration – but if inspiring oneself from someone else’s paper in class is a major ethical blunder, I believe it would be a shame not to look at competitors and market players out there in the real world. Facebook launched the 1$ / gift initiative (the gift changes everyday: an umbrella, a thong, chocolate hearts on Valentine’s Day, etc.) enabling Facebook members to purchase, give and receive virtual gifts, relevant when a special event comes (like a birthday, noticed by Facebook; or a graduation) as well as in getting-back-in-touch situations (like you met that girl at a party and send virtual flowers to her on the next morning). I came accross a really excellent blog post on Many 2 Many, in which Danah Boyd explained why Facebook didn’t explore most of the potentialities of virtual gifts compared to, say, Second Life. Here’s Danah’s major point: in Second Life, purchasing a clothe is a status thing – a necessary, long term, sustainable, persistent move. In Facebook, giving or receiving a gift appears widely on your public wall, but for a very short while (24 hours or so).

I sort of agree with Danah Boyd (her article again, right here): Facebook is right to try to derive cash from a virtual business that hardly costs more than the cost of designing a new icon everyday (roughly speaking 10 minutes for any skilled graphic designer). However, virtual economics are pretty sensitive in the sense that in order to make the consumer feel a virtual value to a virtual something, you have to manage to pay back real cash with real, social (as that’s what Facebook is all about) reward.

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