With over 900 million users, Facebook (News - Alert) remains one of the world’s most popular online destinations. While the number of people with Facebook accounts is growing, advertising revenue is declining. In fact, research firm eMarketer (News - Alert) found that Facebook ads were less effective at generating revenue than both e-mail marketing and direct marketing.

Another research firm, Gartner (News - Alert), found that only 20 percent of Facebook users are likely to make a purchase based on product or service recommendations in friends’ posts.

Increasingly, Facebook users are accessing their accounts from their smartphones, and Facebook has yet to figure out how to make money off of its mobile platform. The company posted $3.7 billion in revenue last year, mostly from advertising, but its numbers are slipping.

After a rocky IPO, Facebook stock has slipped to $26.90 per share at the close of the market on June 4. Facebook stock originally traded at $38 per share.

Advertisers seek out Facebook because of its massive reach—about 500 million daily users—and because ads can be customized according to the relevance of a person’s Facebook posts. With Facebook check-in, stores and other venues can analyze which customers are checking in at their locations. They can then send targeted advertising or promotions to those specific customers.

Facebook’s recent purchase of Instagram could be one way that the company will generate mobile revenue. With Instagram, users can add filters and effects to the apps that they take on their smartphones and then share those photos online. Facebook’s Instagram strategy, however, is not yet clear.

Facebook’s games are a major source of non-advertising revenue. The social network takes a 30 percent cut of all in-app purchases made while users are playing Zynga games. As Facebook extends its app portfolio, they may decide to add more in-app charges to a variety of gaming and other platforms. However, they have to be careful not to alienate the user base, which is used to receiving many Facebook services for free.

Many open source companies make money from offering support and from delivering services. For instance, you can host a free blog on WordPress, but you receive a very limited feature set. Facebook could continue to offer free profiles with limited features and then start offering premium profiles for a subscription fee.

It’s a common conundrum for the open source community. The best way to gain popularity for your products and services is to give them away. The problem is figuring out how to make money when your customers are already familiar with the free ride.