How does Facebook stay free of charge for its users? And for how long will it remain that way?

"We want the world to use Facebook and I think the best way we get revenue is when people put up the page and it is all free and then they advertise to show people where the pages are. You've got to show people you've arrived. If I'm a business I can advertise to the whole world or to the people in Liverpool. We offer at both ends of that spectrum." – Sheryl Sandberg, Facebook COO

Since Facebook had gained over four hundred million subscribers, users began to worry that the company would begin to charge them for its services. It only seems logical that once the network, which is indeed a business, had gained so many users, it would seek to realize profits beyond those garnered from its extensive advertising ventures. During this panic, the social network saw the creation of a bevy of groups dedicated to “keeping Facebook free.” The rumor that Facebook would indeed begin to charge its users spread like wildfire until company executives finally ended the outcries for free social networking in an April 2010 conference.

Sheryl Sandberg, Facebook’s chief operating officer, quelled rumors concerning the social networking site’s possible new business ventures. She stressed that the site will continue to be an “ad-based business” and not exploit its frequent usage by consumers by charging them fees to access or personalize their profiles. Sandberg stressed the fact that the key to keeping Facebook’s membership high and increasing is keeping the network free. Word of mouth sees the success of many Facebook advertisers and patrons, particularly those catering to the needs and wants of Facebook’s mostly youth user population. Facebook officials find that the updated “like” feature and personalized ads attract a considerable population of the network’s users and thus increase profits for advertisers.

It is Facebook, Inc.’s view that rather than forego additional users by barring many from accessing the site with fees, it ought to rely on advertisers to make up for possible increased revenue. Sandberg states that increases in the social network population have led to “compelling” profits for the company, a sign that keeping Facebook free in the future might benefit its users just as much as its shareholders. Continuing to cater to the “likes” of its users, Facebook believes in matching advertisers with potential consumers in a global and local manner. The social network uses web browser activity to pinpoint goods and services any particular user would be interested in. It might offer you tickets to a concert in your city or present you with a screen cap for a worldwide movie premiere this weekend. As long as Facebook excels at this type of producer-consumer matching game, it should have no problem supporting its rapidly growing user population.

Facebook executives are confident that the interactive features the site provides its users when it comes to advertisements will rocket this ad format past the success of television commercials. As more people are using the internet to watch their television programs, Facebook executives expect users to spend more time on their sites and thus see further increases in ad revenue. But as Sandberg states, Facebook will not veer from its original goal of connecting people by introducing pop-up ads or access fees. Over six years after it’s opening, Facebook still appears to put user satisfaction first and profit-making strategies second.

Source: http://www.inc.com/news/articles/2010/04/facebook-services-to-stay-free.html