There’s been a lot of talk about Facebook’s valuation, but the real question behind that valuation, is how Facebook makes money and what its prospects are in the future.
First: The value of Facebook’s reach shouldn’t be underestimated. Facebook had 901 million monthly active users at the end of the first quarter — and it turns those users into dollars, primarily by showing them ads.
It had 526 million daily active users at the end of the first quarter, 41 percent more than the prior year. Users generated an average of 3.2 billion likes and comments per day in the first quarter, and there are more than 125 billion friend connections.
One key number: mobile is a huge driver of growth — the company now has about 500 million monthly average users. That’s a potential source of revenue growth, but also a challenge.