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Facebook's $1B revenues: Now keep it up

A new estimate suggests that Facebook's revenues are higher than expected, something that highlights both the company's successes and its challenges ahead.

Facebook may pull in an excess of $1 billion in revenues, according to estimates and poking around on behalf of industry blog Inside Facebook. That's an increase from the same publication's estimate of $700 million last year.

Facebook board member Marc Andreessen said last year that he projected the company would break $500 million revenue in 2009, and that it had the potential to be a billion-dollar company already, but that it was acting conservatively.

(Naturally, Facebook says that as a privately held company it doesn't disclose its financials.)

What can Facebook credit this big jump in revenue to? It's all about the Social Ads program. Facebook ditched banner ads altogether earlier this year when its longstanding ad partnership with Microsoft ran out and has chosen to focus on its edgier "engagement ads" program instead--and often these are sold by encouraging brands to promote their presence on Facebook with ad space.

However accurate these new estimates from Inside Facebook are, Facebook is certainly making money--and it's making money because the Facebook "fan page" and complementary ad space to promote it are the hottest ticket in brand marketing right now. They won't always be, and Facebook will have to maintain that front-runner status in plenty of advertising innovations down the road as the industry evolves faster than ever.

Plus, it's well-known that some of the biggest buyers of Facebook advertisements are social-gaming companies looking to pull in more players: how long can they, in turn, keep up their place in the sun? Critics have long since pointed out the number of third-party companies that are effectively dependent on Facebook for traction and revenue, but the reverse is likely true as well.

Facebook has a potentially lucrative new revenue stream emerging when its virtual currency system, Facebook Credits, launches in full--Facebook takes a 30 percent cut of all proceeds. But the developer world isn't totally sold, and the product has grown far more niche from the days when it was rumored to be a "PayPal killer." As Inside Facebook points out, advertising is still the core of the company's business model. And here, it has to stay ahead of the pack more than ever.