How Did Facebook Do That?

Is anyone else amazed by Facebook? Even as lawsuits reveal the idiocy of Beacon, we’re also seeing news that virtual gifts -- those little $1 on-screen doo-dads you can give to your friends -- may be producing $34.5 million in annual revenue for the social-networking superstar.

That's stunning math if it's correct. Yet I wonder: Should we really be surprised? So impressive is the virtual economy of Linden Labs' Second Life that the Internal Revenue Service at one time considered taxing all of those virtual gains.

Expect virtual taxes to see more serious debate soon. The virtual and real worlds are blending more than ever:

  • Rolling Stone reports that a North Carolina teen has dropped out of school to pursue a career playing Activision Blizzard's (Nasdaq: ATVI  ) Guitar Hero professionally. He expects to clear as much as $80,000 per year.
  • Two Chinese "gold farmers" -- gamer-speak for pros hired to build up characters from the lower levels for gaming newbies -- were arrested this spring after clearing $200,000 in seven months on World of Warcraft. Think The9 (Nasdaq: NCTY  ) wants a cut of that action?

And let's not forget the more traditional profiteers of all things virtual. Microsoft (Nasdaq: MSFT  ) and Google (Nasdaq: GOOG  ) are waging war over in-game ads. Electronic Arts (Nasdaq: ERTS  ) is displaying them, and hiring real game geeks to star in its newest EA Sports TV ads. Hollywood, meet Digiwood.

Maybe Facebook's rise is less about our need for friends than it is our need for a digital fix. Maybe, to us, a virtual teddy bear is just as good as a high five or a hug. And maybe that's why Aaron Sorkin, creator of the TV hit The West Wing, is making a film about the origins of Facebook.

Or, then again, maybe we're just too darn lazy to get up from our computer screens. Either way, Facebook has found a way to profit. Genius.

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Fool contributor Tim Beyers owned shares of Google and its 2010 LEAPs at the time of publication. He also hunts for the best of tech as a contributor to Motley Fool Rule Breakers, which counts Google as a core holding. Here's how to try this market-beating service free for 30 days. Get access to all of Tim's Foolish writings.

Activision Blizzard and Electronic Arts are Stock Advisor selections. Microsoft is an Inside Value pick. The Motley Fool's disclosure policy went to the virtual bar and had more than a few virtual drinks last night. Surprisingly, it's feeling quite well today.


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