Advertising as a business model?

If it was not already well-known that Internet advertising as a way to make money is extremely hard, today's Facebook IPO filing gives us more data to support it. In 2011, 85% of Facebook's total revenue (USD 3.711 billion) came through advertising, which is approximately USD 3.15 billion. That's HUGE! However, what is equally huge is their MAU (monthly active users) number at 845 million in Dec-2011. If we take some approximations and do the math, it means Facebook managed to make barely 36 cents per active-user, per-month.

Yes. Barely 36 cents per-active user, per-month. [1]

According to Alexa, Facebook gets an average of 13 pageviews per-user per-day. According to this report each user visits Facebook an average of 40 times per-month. This would mean:

• a minimum of approx 440 billion pageviews (!) in Dec-2011 [2]
• a maximum CPM of 60 cents per thousand page views [3]

Yes. Barely 60 cents CPM. On a per-impression basis this number could be 3x lower because Facebook has about 3 ads per page.

And that's the #2 website in the world. No wonder traditional publishing companies are dying everyday - not everyone can have close to a billion active users to allow a few cents per-user to cover their costs. Internet advertising is such a horrible monetization model. We have to think of something better!

[1] And that's the number per active-user. If we compute this for total users, the number will be much lower.
[2] 845 monthly-active-users  x 13 pageview per-user per-day x 40 visits. Not the best calculation, but good enough to give us a minimum value
[3] USD 3.15 billion divided by 12, to get the average monthly revenue, divided by 440 billion pageviews x 1,000. Again, I know, not the best, but good enough to give us a ballpark.