Facebook's Mark Zuckerberg insists that his new venture Internet.org will not make much money for the mammoth social network. He's right, but, at what cost to his company's financial future?
In an interview with Wired's Steven Levy today, Zuckerberg pushes back on critics who suggest that the Facebook CEO created Internet.org — an Internet-for-everyone consortium that aims to connect the entire world to the world wide web —just to find new customers for his social network. "...that criticism is kind of crazy," Zuckerberg said, adding:
The billion people who are already on Facebook have way, way more money than the next 6 billion people combined. If we wanted to focus on just making money, the right strategy for us would be to focus solely on the developed countries and the people already on Facebook, increasing their engagement rather than having these other folks join. Our service is free, and there aren’t developed ad markets in a lot of these countries.
All of this is true, which means that Facebook's generosity also presents a pretty significant revenue problem for the 9-year-old company. For one thing, Facebook makes nearly all of its money from advertisements, which aren't very valuable in markets without robust internet infrastructures. In fact, Facebook's rapid growth in developing markets like Latin America, India, and the Middle East has corresponded with a drop in the company's average revenue per user. (Residents of emerging economies are nowhere near as lucrative as users in places like the U.S. and Canada, where growth rate has already started to slow. So, even if Internet.org creates 4 billion new users, they won't be nearly as lucrative as the first billion.)
In addition, most of the users in these markets will access the Internet via phone, meaning that Facebook will have to rely on less lucrative mobile advertising revenue. (Although Facebook has figured out how to make more money off of mobile users than analysts anticipated, mobile ads are still worth pennies to dollar compared to desktop ads.) That number gets even lower when one considers that much of the developing world uses feature phones (a.k.a dumbphones), rather than fancy smartphones.
Then again, just because Internet.org won't make Facebook money any time soon, doesn't mean it won't have some monetary value later. "...for a very long time this may not be profitable for us," explained Zuckerberg. "But I’m willing to make that investment because I think it’s really good for the world." In other words, the 29-year-old is playing the long game.
This article is from the archive of our partner The Wire.