The Globe and Mail

As colossal as it is, it's not the number of users that matters – it's how loyal those users are.

Facebook cemented its place as the most popular social network in the world and appears poised to overthrow Google as the most-visited site on the Web when it announced Wednesday it had officially hit the half-billion user mark.

“As of this morning, 500 million people all around the world are actively using Facebook to stay connected with their friends and the people around them,” Facebook founder Mark Zuckerberg wrote on the company blog.

“This is an important milestone for all of you who have helped spread Facebook around the world. Now a lot more people have the opportunity to stay connected with the people they care about.”

To be sure, the website offers no shortage of such impressive statistics: Users share more than 90 billion pieces of content every month, according to Facebook, and there are more than 550,000 active third-party applications running on the site. It has, as a result of users uploading content, become one of the largest video and photo databases on the Web.

But the most significant statistic, vital to the website's business model, is how much time people spend on Facebook.

According to recent Nielsen numbers, Facebook's half-billion users spend, on average, about six hours a month of the site. The company says about half its users log on to the site on any given day. By some measures, Facebook is the most magnetic site on the Internet.

“Google is a great business, but people don't spend too much time on the site,” says Deloitte technology analyst Duncan Stewart.

“People spend a lot of time in front of the Facebook screen. Engagement levels are startlingly high, that's why we're talking about it.”

The company sought to highlight its 500-million-user milestone Wednesday with a public relations campaign called “Facebook Stories,” which called on users to describe how the site has helped them to connect with others. For the company, stories such as a woman using her Facebook status to communicate with the outside world during the Haiti earthquake serve to improve Facebook's image at a time when the website has been plagued by complaints over user privacy. An upcoming Hollywood movie depicting Mr. Zuckerberg is believed to cast Facebook's founder in a less-than-stellar light.

But for investors who await Facebook's rumoured initial public offering with a level of eagerness not seen since Google went public, such stories aren't nearly as important as statistics such as those that came out of a recent study by Syncapse, a social media firm. The study found, among other things, that Facebook users who become “fans” of businesses or products spend an average of $71.84 (U.S.) more per year on those products than non-fans, and are more than twice as likely to recommend a product.

But despite its meteoric growth – the site had 100 million users only two years ago – some of Facebook's revenue sources have a very real ceiling.

Mr. Zuckerberg has repeatedly stated Facebook will never charge users, meaning that advertising is the company's primary means of making money. Citing anonymous sources, Reuters reported last month that Facebook’s annual revenue in 2009 was around $800-million. But as Mr. Stewart notes, the site faces the same challenges other media outlets, such as TV stations, face.

“[If you sell] 60 minutes of advertising an hour, nobody's going to watch.”

As such, the site must leverage its unprecedented store of user information to make ads more relevant to users, rather than simply showing more ads. For example, users who list running as a hobby are more likely to respond to running shoe ads – a level of specificity companies are willing to pay a premium to access.

Queen's University professor and social media expert Sidney Eve Matrix says Facebook still has a lot of room to grow on the mobile front, as more and more users adopt Web-enabled smart phones. That's part of the reason the site has invested so heavily in GPS-based technology: to add location to the growing list of personal data it collects from its users.

However, ad specificity also has a ceiling: The company can only leverage so much personal information before incurring the wrath of users, privacy officials and, possibly, courts.

“That's always been their greatest challenge – that's why consumers right now are pushing back,” says Prof. Matrix. “All [Facebook's] updates involve more risks with our privacy and information.”

Mr. Stewart says the company does have one advantage over many other tech firms: Whereas anybody who tries to start up a search engine will face daunting comparisons with Google and other big players, Facebook has no site to emulate, so many users and investors are willing to cut the company some slack as it creates a new business category from scratch.

“They are out there, inventing the business model as they go,” Mr. Stewart says.

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Face Time

500 million

Number of active users on Facebook.

30 billion

Number of blog posts, photo albums and other pieces of content Facebook users share every month.

550,000

Number of active applications, such as games, running on the Facebook platform.

1 million

Number of websites that have integrated its platform on their own sites.

150 million

Number of users who access Facebook through mobile devices.

700 billion

Total amount of time, in minutes, users spend on the site every month.

130

Number of friends an average Facebook user lists.

Source: Facebook