How to monetize Facebook

For many who follow Facebook revenue growth, Facebook has shown its prowess in facilitating and enhancing four major types of transactions: games, other digital content downloading or streaming, physical goods online shopping, and local service purchase. However, on each of these activities, Facebook so far has no tight partnership or in house services offered to its 350 million users worldwide. This leaves the lion share of the revenue increase facilitated by social network to the core service providers in these four categories. One would suspect that it is only a matter of time that Facebook will horizontally integrate to one or multiple categories of these services to really take on the monetization opportunities there.

After all, people on Facebook are looking to do something in addition to social networking, they all trust Facebook brand, and they would appreciate the convenience of well built and well integrated services when they are on Facebook. More importantly, Facebook is in a unique position to offer much better user experiences in any of these services. Why? Because Facebook knows the profile of each user, and every single user's action happens in a logged in environment. This is something that Google has been dreaming for but hasn't been able to quite achieve.

Imagine that Facebook harnesses the anonymous and collective info (no personal identifiable info) about product and service preference of its members, it can then provide highly accurate and smart recommendation and referrals among users with same gender, similar age, education background, professional background, social affiliation, geographical location, for similar events such as birthdays, anniversaries, family time, and social gatherings. Product and services can be ranked in ways to reflect the collective magnitude of preference, and similarities of customers' social graph. By doing so, Facebook will be able to up the ante of these services without infringing any individual members' privacy.

Facebook already is on it's way to make user purchasing experience better through Facebook Connect and its own payment system. Yet lacking tight integrations and wholesome offerings in any of the above four categories of services, Facebook will see others' revenue skyrocketing while forgoing the lion share of potential revenue and profit from these services.

Up till now, the key focus of Facebook is not on Monetization. However, to take on any of the four significant monetization opportunities would require product/business operation and organizational change that only happens when top-down resolve is firmed up. Such changes may not be too far off from now.