A friend asked me a question and I wasn't entirely sure of the answer. I told him that they probably found investors after seeing how fast Facebook is growing, and that's how they made money at first. But I gotta ask, how did Facebook (or any other such site) generate revenue in the beginning? If I'm not mistaken, there were no ads on Facebook at first, so how did they profit?
a lot of people are going to tell what they saw in The Social Network. like an expert. http://en.wikipedia.org/wiki/History_of_Facebook#Initial_funding
The dude was going to Harvard so I don't think he really needed any pocket change at first. He aimed high right away
They didn't make money at first - same as a high proportion of businesses in the tech sector. Even when they started making money they weren't profitable. FB's route was fairly typical - bring on board investors and use the funds to support the business whilst they grew their user numbers. They were always generating ad revenue and of course that revenue increased as the user numbers increased They only really started to make decent profits around the time Zynga started growing like wildfire. Zynga was making huge revenue on the platform (I think something like $400 million in their 2nd year) and then the gaming side of Facebook went nuts. At some point FB decided they wanted a piece of the pie and so they effectively taxed the gaming companies by taking 30% of their revenue I can't recall the exact numbers but I think that move almost doubled FB's profits overnight.
I don't know about now, but they definitely were for a few years. Mark Pincus killed it in the first few years - he used every shady trick in the book to get big quick - and all on the Facebook platform. He was about as Black Hat as it gets. It was the tricks Pincus employed that caused Facebook to start cracking down on the permissions that apps were allowed. When FB levied the 30% tax it hit Zynga hard and Pincus tried to migrate all their players away from Facebook - unsuccessfully. Overnight that tax cost Zynga about $200 million per year. And added far more than that to FB's bottom line.
