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Facebook bragged that it has hit 300 million users. The firm’s CEO said, “It’s a large number, but the way we think about this is that we’re just getting started on our goal of connecting everyone.” The trouble is that Facebook does not have the revenue to go along with its huge audience.

Facebook claims it was cash flow positive last quarter. That is due much more to cost control than it is to enthusiasm among advertisers who might use the site to reach customers.
A Facebook board member told the media earlier this year that the company would have $500 million in sales. Yahoo! (YHOO), which is not viewed as terribly successful, will have revenue of $7 billion for the same period. By most measures, Yahoo!’s audience is not as large as the social network.

Facebook is still up against a problem that it has not solved and may be insoluble. A collection of millions of people joined only by loose common interests are hard for marketers to target. At sites like Yaho0! and AOL, advertisers can run their messages in the sports or finance sections, assuming a commonality of interests between the visitor and the marketers. Facebook can make no such claims.

Another problem marketers face with Facebook is unruly users. Facebook members are vocal about their “privacy” being violated by targeted marketing. Facebook management has very little control over visitor activity which makes the site a possible booby trap for advertisers whose messages are not appreciated.

Facebook is also the home of a great deal of unpleasant and antisocial content, including pornography and graphic, salty language. The web company tries to check this, but 300 million users are a lot of people to track. But, this is not the kind of environment in which large advertisers are comfortable.

Facebook may be big, but there is a real chance it will not be successful.

Douglas A. McIntyre