Facebook may soon find profit

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Facebook, although worth a ton of money when it eventually goes public is still not profitable. Founder Mark Zuckerberg is the world’s youngest billionaire but his company still shows net losses every year. Well, that may soon change. I am not talking about Facebook’s eventual IPO or that new Facebook movie that is coming out later this year. I am talking about a new feature that can actually make their advertising more useful and thus, lucrative.

Currently, Facebook earns money by selling advertisements just like many other websites including Google. However, the rate at which people click on their ads is far less than other sites, especially Google. This means they are not earning as much off of them as they could. However, the social networking site with over half a billion users is in the process of rolling out a new feature that can change those numbers. It is a location feature which allows you to share where you are. This obviously adds to Facebook’s privacy issues, but it also makes advertising potentially more effective.

For advertisers, the name of the game is information. The more info an advertiser has about users, the better they can tailor their ads to suit what that user might be interested in. If you are in a mall and go into Facebook from your iPhone for example, then with this new Places tool advertisers from within that mall will be able to place ads on the page you’re viewing and let you know that lemonade is half price at the food court. There is a better chance of you clicking on that when you are in the mall than if you’re home or somewhere else.

Facebook already uses some information for ads but this could make it much more specific and effective. I don’t know that this alone will turn Facebook from a money loser to a net earner, but it is these types of tools that will help put them on that profitable path. This will also make them more attractive to investors when they eventually do go public.