How I made $10k in one day with Facebook Ads

"I counted $10,000 in cash (and some payments accepted via Square - yes, I’m reporting the income, IRS"

As an aside the only reason he owes taxes to the IRS would be if this was inventory that he purchased and expensed for the business.

If you pay money out of your pocket for some CD's and sell the CD's and assuming you recoup only the amount paid you don't owe taxes on the money that you collected. You haven't made a profit.

There aren't enough details in the OP to determine the proper tax treatment of the sale of these records. But typically if he was in business he would have bought records and they would be inventory. When he closed down the business he would have had a taxable event and had to dispose of the inventory and there might have been a loss. He could have purchased that inventory as a private person for any amount and then he becomes the owner. At that point typically any gain over what he paid he might owe taxes.

The IRS is not trolling around looking for people who post stories and spending time to see if they reported the income. Besides this would relate to 2012 income which wouldn't be reported until April 2013 and with an extension the return wouldn't be due until Oct 2013.

And lest you think someone could turn him in or tip the IRS off - not going to happen. If you don't believe me try to contact the IRS and tell them your neighbor is cheating on their taxes. They want tangible proof. Proof enough to open a case which involves access to actual numbers and records. Like you worked in the office not "I know he's cheating" type info. A story is not enough to get them to investigate. Besides there is nothing they can do until he doesn't pay the taxes by the above dates.

Side story: I know of pharmacist locally who dealt in drugs (and went to prison) who was found with $200,000 in cash in his home safe. Eyebrows were raised. Oh boy cash! Did he report it!

No problem he went to jail for the drug charges but had no problem with the $200,000. He just reported it on his next tax return that was due. Problem solved.

The article reminded me of a thought I had regarding FB's monetization strategy: strictly local advertisements. The ad matching algorithm would place the most weight on geographical distance then interests etc. FB's ubiquitous nature today could make this work.

Here's a use case that motivated the idea: I live in a densely populated area where everyone around me has a car. Say I wake up to a flat tire. I'd much rather pay someone $20 to just fix it in 10 minutes than get the car towed or figure out how to do it myself. Imagine searching for "fix spare tire" on Facebook and receiving search results for five people that all live with-in two blocks. Choose a person, agree to pay with cash, they show up and fix the tire.

The service FB provides in this example has real value. If this service existed I'd actually use Facebook, take a good look at the ads and perhaps even pay a small monthly fee.

To use an over-used term I see this as "the Airbnb of everything else". It could be applied to simple plumbing tasks like fixing the toilet (which was a real pain-in-the-ass to figure out). It could even apply to borrowing vacuum cleaners! The point is there's under-utilized resources around people. Imagine FB helping people utilize these resources like Airbnb helps people utilize extra living space.

It's worth noting that this was a local ad in the Bay Area, near Berkeley.

http://g.co/maps/6vmc6

i.e. the garage sale took place in a highly-cultured, net-savvy area full of people who do bargain/antique shopping. Back in the late 2000s, my friends in the same area put a cheap 30 word ad in the local newspaper for a garage sale and got dozens of visitors. I don't know how much the ad cost but probably something like 50 to 60 dollars.

It's hard to gauge how much of a "success" this is when a Craigslist ad, plus some postings on large music mag forums (and I'm sure SF/Berkeley have their own large local websites) would've drawn the same attention...with a little more handiwork on the seller's end, but without costing $150.

* edit: I'd even argue that he might have drawn more people in with Craigslist and a few other nichey-type posts. I'm not a record-collector myself, but I'm guessing that there's a fair amount of them who are used to "digging" to find gems, as opposed to checking out ads/events on Facebook...antique collectors regularly scour the old-fashioned newspaper ads for garage sales because they know the type of old-fashioned people who might have undiscovered antiques are also the type to advertise in newspapers.

For fun, let's look at the net income from this venture.

The seller sold about 3,300 records. Let's say that he paid an average of $0.60 per records. That's a cost of goods sold of $1,980 and a gross margin of $8,120. The Facebook ad cost $150, which brings net income in at $7,970. Not bad, hey?

As per return on investment, let's toss in a measure of time. Let's say that, over the years, the seller spends an average of two minutes on each piece of vinyl he sell. That means that he spent 6,600 minutes (110 hours) on these 3,300 pieces of vinyl. Add in another 6 hours for the sale and the seller still made over $69/hour off of this venture.

This analysis ignores all the time it takes to become good enough to actually deal records.

As has been pointed out the 10k is revenue, not profit. At $3 a record I doubt there was much profit at all, though it sounds more like a liquidating event so it is still a happy result.

To the point of the article though, he advertised on facebook and people showed up and gave him money. Whether or not he is actually profiting from the business isn't really relevant. His ROI is clearly wrong, but the ads had the desired effect of bring in customers.

I really hope he doesn't report 10k in profit to the IRS though as he would then be losing even more money than he probably already did on that sale.