How does Facebook make money?
That digital cow on the Farmville game? Facebook makes a $1.20 every time you buy one.
And that bullet-proof vest on Mafia Wars -- and your survival knife?
Facebook gets a slice of those sales, too. A $1.20 for your virtual protection. But the main way Facebook makes money is from the ads you see on the site.
"We spend several million dollars every month, frankly on Facebook ads," says fab.com CEO Jason Goldberg.
Design website fab.com says two thirds of their users come from Facebook, but others are not sold on paid Facebook ads.
"The marketers we talk to tell us they're just not happy with the performance they're getting from Facebook."
The social network made its $872-million in ad revenue last quarter from paid ads.
"When you click on those ads, that's how Facebook makes money. Facebook quite frankly doesn't care from a revenue perspective what happens after you get to that branded page," says analyst Nate Elliot.
GM has a branded facebook page with 396,000 likes ….
"Unfortunately it's just about the only thing many marketers look at - how many likes do we have? We think it's an overly simplistic metric and one that doesn't really tell you whether you're having success."
But those likes may not translate to profits. Two months ago GM pulled all their paid advertising on Facebook. And, that's not the only concern.
What really scares Facebook? Your smartphone. The company launched mobile ads four months ago and they're still not making much off them. Facebook's challenge? How to make money off this, among other things.
