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In chapter 14 we discussed pricing techniques and strategies. Although we highlighted many methods of calculating a price of a product or service not all business models are the same which results in new and innovative approaches to pricing. Industries such as online advertising will have pricing policies that can be significantly different from those who operate within traditional business models such as the manufacturing sector.

Facebook Inc. is a company most of us are familiar with and the Initial Price Offering document (www.facebook.com) of Facebook Inc. gave us some brief insights into the business model of this company. Using value networking as a basis of their business model, Facebook Inc. generates revenue from two main sources; advertising and payment processing. The revenue for payment processing is achieved through credit cards and virtual money. For this service Facebook Inc. charge up to 30% of the face value for any one transaction.

In addition to this service, Facebook Inc’s. largest source of revenue is from online advertising.  The pricing techneque for online advertising includes two methods; Cost per 1,000 impressions (CPM) and Cost per Click (CPC). CPM works by optimising adverisments, for example, if a company wants to get more people to like their Page, the advertisement will be shown to users within a specific targeted market. A CPC pricing policy works by charging the company who is advertising every time a user clicks on the advertisement they have paid for. Facebook Inc uses a bidding process for advertising and this is similar to google, this is a good example of value based pricing.