When Facebook raised $240 million from Microsoft in 2007, and another $235 million in debt and equity in 2008, everyone thought they had plenty of cash to get through their big growth phase. With that kind of cash, the company could hire as many people as it needed to and not worry about profitability or going public until at least 2009, as board member Jim Breyer said in 2007.
But a confluence of factors may be conspiring to throw those assumptions out the window and force Facebook back to the capital markets much earlier than they originally planned. We’ve heard from multiple sources that they are testing the capital markets right now, in fact, and may be considering a near term capital raise at terms that could be much more favorable to investors than the previous $15 billion round that Microsoft kicked off in October 2007.
Facebook Is Growing, But So Are Costs
There’s no doubt that Facebook is growing at a breathtaking pace. A year ago, according to Comscore, they had just 74 million unique monthly visitors and 35 billion page views. Today those numbers have grown by 118% and 74%, respectively, to 161 million unique visitors and 61 billion page views per month.
Facebook’s growth, thanks to all these user-created translated versions of the site, has probably exceeded even their own internal projections. And running this engine isn’t cheap.
The company is likely spending well over a $1 million per month on electricity alone, say experts we’ve spoken with. Bandwidth is likely another $500,000 or more per month on top of that. The company has earmarked $100 million to buy 50,000 servers this year and next. And sources say they’ve been buying one NetApp 3070 storage system per week just to keep up with all this user generated content. At up to $2 million each, that adds up quickly – we’ve heard estimates that they may have spent as much as $30 million this year alone with the company. And the icing on the cake – earmark another $15 million per year in office and datacenter rent payments.
And don’t forget those human assets. With 750 employees and growing, Facebook is spending at least another $10 million per month on payroll.
It costs a couple of hundred million dollars a year just to keep the lights on at Facebook. But the real problem is keeping up with growth, particularly storage needs. Add another $100 million or more per year for capital expenditures, and you’ve got a company that’s doing exactly the opposite of printing money.
So How ‘Bout Those Revenues?
eMarketer estimates $265 million in revenue for Facebook in 2008. That’s great, right? Well, not really. The company is still losing money – lots of it – at current revenues. And it’s not clear that revenue will grow as robustly as costs.
Most of Facebook’s growth is outside of the U.S. A year ago, according to Comscore, Facebook had 31 million U.S. visitors, about 42% of the total. Today, U.S. visitors have grown to just 41 million.
19 million live in Africa and the Middle East. 26 million are in Asia. Europe, with 48 million Facebook users, has a larger share than the U.S. Another 16 million are in Latin America.
Just one in four Facebook users come from the U.S. today.
As we wrote last summer, most of these international users can’t be monetized today. And to make things worse, bandwidth costs in those countries is generally much higher than the U.S. So the users cost more, and they don’t bring in any revenue.
That international growth might be ok if U.S. growth remained strong. But the U.S. market just seems to be tapped at this point, and gaining market share from MySpace is a battle. As we wrote in August, at current growth rates it will take Facebook 18 years to overtake MySpace in the U.S.
Uh Oh, The Economy
So costs are skyrocketing, and revenues can’t keep up. Ok, But Facebook still has plenty of money, right?
Wrong.
The economy isn’t looking so hot, and it may get worse. If revenues don’t grow substantially, the company’s runway of cash gets much shorter. 2008 revenues are likely $100 million less than the company anticipated a year ago. If the economic train really derails, Facebook could be in big trouble.
A big chunk, probably a majority, of the roughly $500 million the company has raised is already gone. Even more will be spent next year, particularly if international growth rates remain constant (and there is lots and lots of room to grow internationally). Facebook could be down to just a year’s worth of cash at this point, with no IPO horizon in sight.
And even if they have cash into 2010 (its nearly impossible to figure out exactly how much they’re burning), the economic downturn is likely to be much, much worse than they anticipated. If they don’t grab the money now, it may not be available later on.
Which Explains Why CFO Gideon Yu Is In Dubai
Sources have told us that Facebook CFO Gideon Yu was in Dubai this week, possibly meeting with Dubai International Capital, exploring fundraising options.
U.S. investors, including VCs and hedge funds, aren’t interested or aren’t able to invest at the valuation Facebook expects. That leaves Sovereign Wealth Funds as the only viable funding solution. And the window to get money from them may fast be closing, too.
Which explains why Facebook may be looking for money sooner rather than later. If they don’t raise a big chunk of money now from someone who’ll pay whatever it takes to own a piece of Facebook, there may be a heavily dilutive down-valuation round for Facebook in the next 12-18 months.
It might be just the economy
But facebook helping human kind, by leading in area that really matters to everyone, without discriminating by rich poor etc.. It will definitely have fruitful rewards in future
new facebook should have reduced their bandwidth, by transmitting only useful data..
New site for college students: http://www.inkampus.com
“Don’t worry – we’re losing a buck per user per day, but we’ll make it up on volume!”
Why does facebook need that much money/people. I mean seriously, what is it used for? Looks to be something that just runs on its own now, just pay for servers and bandwidth..
Is not that simple, lawyers, vice presidents, and executives are very expensive.
Yeah…all those lawyers, vice presidents and executives are sure worth the money they’re getting paid.
Isn’t Facebook a glorified messageboard? I honestly don’t see the appeal or the monetary potential for the business. Once they slap ads on it people will leave en masse because everything thinks all things shouldn’t be ad-supported (thanks to Google…who “hide” their ads).
Might just be the economy?!? Did you read the article?
It might just be the business plan!
Facebook better QUICKLY hook up with Markus Frind of PlentyofFish.com to learn how to run their business more cost-effectively. PlentyofFish.com has huge pageviews, but no where near the crazy costs of facebook.
$100 million to buy 50,000 servers!!! Unbelievable!
markus is a walking legend of what one man can do running on crappy microsoft servers.
Facebook might make $100 million less than expected but who knows what that means. Does that mean they lost money or does that mean they only made $200 million instead of 300? If they want to charge for something they should create their own apps that can do stuff other apps can’t because of Facebook restrictions. If the application is useful enough, people will be willing to spend money on it.
There are a lot of things facebook could do to make money. This is definitely a VERY BAD idea.
People are developing applications that work with Facebook and Facebook reaps a lot of the reward from this. Basically facebook wants to charge developers to develop applications for them. That’s never going to work.
I have a question. Facebook has been around for a few years and very well might be reaching it peak. If a company with that many users/uniques can’t be profitable, why keep pouring money into it without a business model change. Is there not a concern that the next big thing will come around and people will begin to leave facebook? Just asking.
I dont care if people move out of facebook or not, but where the hell is the money going to come from?? I dont really think what they earn from ads is gona be enough to sustain something as big as this!
It’s just a type of business model where you basically throw money at a company so long as you can keep getting incremental growth rates out of it. Yes, even if it loses money.
The thought is that at some point when the growth is tapped out, you cut costs and reorganize for profitability. And when you do, you have a company that generates $100 million in profit on $500 million in revenue instead of a company that at a smaller scale would have made $30 million on $50 million in revenue.
It’s all about scale…so long as the huge finite dollar returns (not necessarily ROI or IRR) are possible, there are types of investors who will throw money at them.
Yes, that’s right. But this obviously entails more risk- generating 500m and then cutting costs, as opposed to organically growing to 50m being profitable most of the time. Since all the investment isolates the founder from personal risk, this is the rational thing to do.
MySpace makes $1 Billion a year now.
That’s big money.
It’s still a crappy company and a joke for most people. It’s like AOL, only AOL had a much longer time to be “hip” in consumers/users’ eyes.
The fact that the “crappy company” is rolling in the chi-chang and Facebook is not speaks volumes.
And when layoffs hit Facebook, what do you think that is going to do to the engineer moral?
They should build it on Rails 2.2. They’ll only need one server
@Andrew: They should build it on Rails 2.2. They’ll only need one server
IS it really possible?
no.
no. Is like trying to get all the people in the world in just 1 building, a good looking one…..
Wondering if you could link to the place where you got these figures “Facebook has 19 million users in Africa and the Middle East – 26 million are in Asia (16 million alone in India).” Especially the bit on India. Would be very helpful!
yeah sorry, it’s all comscore data, I’ll make that clearer.
Comscore shows 2.7M FB users in India. not sure where the 16M number is from.
Mikey get some sleep. You’ve been working too hard.
Mike the whole can’t monetize easily all of the non NA and European users is pretty huge. That alone is pretty scary and I wonder if gaining ground early and holding onto it is worth the short term huge losses.
This is the kind of posting that makes you go hmmmm – yeah worldwide might not be all that it is cracked up to be.
Cool thanks – something to think about.
Thanks – Eric
Startups are interesting beasts because they stand on a tipping point of
monetize vs. make themselves pristine for a buyer
ie… Facebook can Monetize better than she is right now, however in doing so they will start to look like a used up trailer park aka MySpace and that will push away the buyers for two reasons
1 – Then it is clear that Facebook is Rev maxed and any real valuations will revolve around that like they are a “real” company. Meaning absurd valuations will not hold water because buyers will simply look at the hard numbers of rev vs. expenditure.
2 – As soon as they start to truly monetize and throw up the ugly and aggressive ads, then they will lose the early adopter luster and their value will go down
so they CAN monetize, but it will be at the cost of their sell-off valuation.
Good point Neyma – but I think that talking in terms of monetization at all might be missing the bigger picture here…
The massive powerful database that Facebook owns, as well as the volume of traffic has enormous inherent value. It is an asset of itself and the revenue from it, whilst not completely immaterial, is surely secondary.
The commercial applications that this powerful database may be put to in the future are almost unlimited, and I think that the fb team are entirely correct in refusing to turn it into a short term cash cow. There is something mightier at stake here…
Mike,
Nice analysis and thought went into this post. Well done.
They need to ramp up the revenue asap. And the revenue might not come from traditional marketing or advertising; but rather user profiling. Facebook is awash in a sea of data of user behavior.
Finding a way to turn that behavior data into a monetizable product/s is something that market researchers would find invaluable and pay money for.
Let’s hope they can raise investment funds to keep the engine humming.
Cheers!
How ’bout this. Get billed 3.47 every month… ask what it is for… get no answer… dispute 3.47, all the while paying the other monthly 3.47 charges. Facebook then blows your account off the air, won’t bill your account back the 3.47, won’t let you pay via Paypal, NOTHING. No way to remedy the situation!! They make you wait 3 to 4 days to even respond and could CARE LESS. Amazing. Still off of Facebook as I can’t fix it but at least LinkedIn is getting competitive.
750 employees? WHY!?!?!
Ya seriously…each employee is earning around 13k per month (if Facebook’s payroll is 10 million per month)
Probably most of the money goes to managers, executives and the big name hires from other companies (Google etc.).
Average employees and developers get much less, at least I would suspect that.
An employee’s “total burden” is more than just salary.
Go back to class kids.
everything will be OK
same as google .they didnt know what we=ill they make money of till late 2001.
face book will come up with something that maximize their profit.
Maybe they should have sold to Yahoo for $2 billion.
Nice article, it presents a different view of Facebook. How are the other social networks (esp. Myspace) doing on the costs side?
Did you just change the headline?
Yes he did. Does anyone remember the original headline (title) of this article? I think Michael Arrington got a call from some very prominent Jews. Shame on you Michael for selling out.
Hey, I’m a prominent Jew. I didn’t call anyone.
worst comes to worst they start charging like 5 dollars a year per user. I would sure as hell pay it, and i guarantee most current users would. I feel like that is the reason the company doesn’t seem too stressed about a business model.
I would be willing to pay $12 a year. No problem.
Facebook tries charging and I guarantee everyone will jump ship. There are a lot of competitive alternatives to facebook, but people generally don’t want to leave b/c of the minor inconvenience. $60/year for what many others offer for free is a major inconvenience to most.
Let’s not forget that not everyone in the world has a credit card.
think about how many users don’t have access to a credit card, online bank, etc. it’s not feasible.
I’m sorry but most computer users won’t pay even $5 for something they have always gotten for free.
Facebook is just doomed to eventually load up their site with display advertising. They’ve avoided it up ’til now because money is coming in from other sources but eventually they’ll have to push that onto the users sometime. And when they do…Facebook users (who are made up largely of ex-Myspacers/Friendsters) will simply jump ship to the next big, non-ad-covered, simply looking thing.
Google has really wrecked the tech world with the whole “no ads” look.
To sum it up: They need up to one billion $ to keep scaling this fast. That won´t be easy but doable. For all the people here asking for the business model: You are such nitpickers
Interesting numbers. 500K in bandwidth costs/mo doesn’t seem all that much. maybe that’s why FB keeps me waiting when trying to view photos.
“16M alone in India”.
how many people alone in other parts of the world ?
Fascinating stuff. However, I’m not sure about the revenue projections. That Hitwise study is a flimsy basis for any sort of strong statement about how much the company is bringing in – although certainly non-US ad markets aren’t worth too much, as you point out. Other estimates of FB revenue go up to $350 million. So, we still have no idea. The company has loosely suggested to me that growth in things like gifts are better than third party estimates. So I figure more than $40 million on that front, alone. I’ll see what else I can track down
Just charge 50 bucks a year
Why are international users not monetizable?
I was just asking myself the same question. Indeed, Mike’s assumption that international users are not monetizable is false. I believe they are. However, Facebook will have to take a more pro-active approach to effectively monetize them. For example, the following markets are certainly worth their attention: Europe (UK, France, Germany), Asia (India), Africa (South Africa, Nigeria).
What they should NOT do is charge the user as I read here and there.
How does FB make $? Advertisements
Who pays for these ads? Large Corps
Who are these large corp advertisers interested in? Mostly people from the US.
Small time affiliate marketers are the biggest advertisers on FB. Spammin and jammin is the name of the game with super-shady offers that get you to sign up to things free then have to cancel your credit card because you will never be able to unsubscribe from non-existent customer service.
Yeah, FB is totally doomed. CTR is so low you wouldn’t believe it and clicks are dirt cheap. That’s a recipe for making a little coin if you’re into Aff marketing and going out of business if you’re FB.
Oh well, it’s a living. By the way, I first mentioned this FB scenario almost 2 years ago in various TC comments. And eMarketer is way way off. There is no way in hell they are going to bring in $265 mil. Absolutely no way. Just do some back of the envelope math based on what they earn for revenue per page view. Sorry, not even close. I would guess they are in mid single digit millions per month. I don’t see any possible way they can improve this much, even by heavily loading down pages with advertising.
I just read an article in BW about Google working on a social networking PR to identify the people that have greater social networking gravitas. I don’t see this helping advertisers much. FB already hamstrings advertisers, by blocking Ad copy that refers to important demographic data like age, etc. Marketers could target and convert much better with the data FB already has, but they restrict it because it becomes a little too personal. All that is possible with the dumb system based on basic demographic info FB already has in place. However all that said, I don’t think FB could even get close to be where they need to be if it was no holds barred for marketers.
Anyone investing in FB will have to understand that there is no good way to monetize social networking with ads. People don’t care about ads when they are in the social mindset. It’s like email. It will just have to remain a loss leader. FBs only hope is to hook up with big old world media and monetize through conventional media content like movies, music, TV. That is their only freaking hope in the world.
Anyone who gives them a half billion and doesn’t demand a majority stake in the company has their head up their ass. On top of that, their is no way Zuckerberg can lead that organization to profitability. They need to dilute him down and force him out. Seriously, he may be a bright bulb, but he’ll burn right through your cash like he’s already done for previous investors. I don’t see that he’s done anything other than preside over viral growth that really has little to do with him.
One last thing, a previous commenter mentioned that Indian and African users were monetizable. That was the funniest thing I’ve read all day. No way in hell are they going to be monetizable to a US based company for decades.
>> If they don’t raise a big chunk of money now from someone who’ll pay whatever it takes to own a piece of Facebook.
if what you say about cash burn and revenues is true then I don’t think an investor would ‘pay whatever it takes’ to own a piece of facebook, I think the company will ‘take whatever they pay’, surely?
angus
They need to segment their users. Very active Users who attract other active Users and who are attractive to advertisers = free super premium account, maybe you should even pay them to spend time and be attractive. Very active Users from Countries that don’t generate Revenues = charge them a little bit. Users who are not active should be desactivated after say 3 months. Growth would be smaller but profitable this way and FB would learn really fast which features are important and which not. Now they are listening to the loudest crowd out there – people who have plenty of time and no life. They should listen to the silent but important users who just stay away if the service gets worse.
I guarantee that if Facebook tried to charge even so much as 1 cent to use their site the majority of users would jump ship.
Halloween in Madison, WI used to bring 120,000 people onto State Street but then when they started charging people $5.00 to get in to State Street the number of people who showed up was only about 30,000.
If Facebook was charging 50 million users $5 a month, they’d be doing quite well.
errr…i’ve been saying this for a while now. i’d gladly pay $5 a month to have ads turned off so i don’t have to be asked if i want to lose 5 LBS quick because i’m 32 with relationship status set to single or some targeted ad like that.
i’m sure i’m not the only one. $5 a month for an ad-free user experience multiplied by other users who don’t want to be told they have love handles either. that’s a revenue model to me. just sayin’
you need higher self esteem if an advertisement effects you at all. i get weight loss and dating ads all the time, who cares? ignore it. there’d be an exodus from facebook if they charged money, and they know it, thats why it’s free.
I’ll be more than willing to sponsor you, babe.
This does not bode well for Facebook. If they aren’t profitable after three years running the kind of service that they are running, then chances are that their current business model is not working. Until they come up with a new, better business model, they have a serious problem.
Compare this situation with the historic cost/revenue growth at Google: http://www.wiki...m/stock/Google_(GOOG)
and you will see that it is a completely different story.
I think FaceBook will survive but with less valuation. But I have same doubt why international users are not monetizable?
Dotcom Bubble2.0 is coming….
Yup! Bye FB. Won’t miss ya’…
An International user base w. segmented customer information is valuable to global players, or can be pieced off to regional/national corporates ready to reach FB users. They need to re-evaluate foundational thinking about the business they are in, beyond the issues of walled gardens and open source. Every time they buy a server, or pay an electricity bill they should be thrilled.
Very good article. However this kind of problem should be for other companies like YouTube and MySpace aswell. Where they need to cater to millions and millions of growing visitors and need lots of space to store their contents.
VV-umm Myspace has been profitable for awhile, they brought in close to 1 billion last year.
Facebook came into business with a very good perception of the market and the first social network to really go international. http://www.youtechno.info
they cant monetize because they dont have a strategic niche offering. the all you can eat free social network website offerings are flooded. appears fadbook is nothing more that a fancy hula hoop. fadbk looks like gold but when you measure its weight its as light as a feather.
GoldLocator.com- setting the standard.
The probability of Facebook making a profit is equivalent to Locator guy being able to sell one of his thousands domain names.
I am not sure how they think international users are not monetizable, we are based in Pakistan and all the time I see ads of local mobile operators, banks and other local sites so I am sure they are making money of Pakistan as well.
http://www.confiz.com
your offshore development partner
The question is how much? Chances are it’s only a fraction of what they’ll make in the US, and yet storage costs are the same and bandwidth costs may be even higher.
you are right Raja, while I was in Austria and now in Germany, I see Ads in german from companies like O2, deutsche bahn (german railway). When I saw the ads from O2 mobile and german railway, I was very surprised because till now I had an idea that Facebook is not making money. But they are indeed making good money and getting many ads. I see a good and successful future for facebook. But that may have a negative effect on Google. Once I read an article in Time, I guess two/three months before, where the author wrote that may be it’s Facebook who is Google’s real competitor. I think Facebook is going to that direction. And as you saw in Pakistan and I noticed in Germany, they are getting lots and high-vlaue local ads. That means they are monetizing internationally. No doubt, Facebook is on its way to be very successful enterprise of Mark Zuckerberg. I am happy for him.
Hey interesting post, Michael. Long term, their major recurring costs should be on bandwidth, electricity and payroll. If your estimates are correct, that comes to about $12 million a month, which, if they’re pulling $300m a year at this stage, is not a lot of money.
They should be buying up office space if they’re really blowing $15 million a year on rent. And they can get away with setting storage limits for non-paying users and charging others a small premium. I doubt the Google start up team would have burnt through cash the way FB has. Still if their costs eventually plateau, and I believe they will, they’ve got a strong business model.
Well, worst case scenario, Microsoft can always take advantage of the hard economic times and buy up the other 98.4% of Facebook at a discount.
Considering what they did with the X-Box, and their ~$35B cash in the bank, I’m sure they can eat a few hundred million in losses per year for a couple hundred years before starting to pay attention to monetization.
I’ll take their overseas users if they don’t want them. I have an old 386 and a Commodore 64 I could hook up to manage the load.
Great post finally; not sure all the numbers are right, but the analysis makes sense. Wonder why Zuck & co. don’t want to focus on revenues… they may be already doing so, just his public statement make it look like a deception…
I can tell you one thing, the 15B Valuation is out the window. I think facebook peaked about a year ago, and then they have been going down hill since…
I guess it is appropriate that it is Halloween and that cash burn rate is very scary.
The solution is simple, cut employees expand the support with help files and support forums.
AND charge for using facebook, its one thing i wouldnt mind paying for, its better than myspace in layout, speed, everything!
£10 a year i wud pay havent they got 120 million users!!
I have a bridge that I would like to sell to you.
Growth is really positive news.
Sunita
Time and time again you have to question Facebook’s strategic management decisions.
Their attempts to increase page views by splitting up profile pages into the wall / apps etc does not seem to have worked if you go by Alexa (they spun this as improving user experience/profile tidy up but was in fact to increase ad revs) . In doing so they have also killed the fundamental user identity aspect of social networks.
Facebook has given out most of its revenue generating options to third party application developers. Smart money is on the likes of Slide. They should have kept these opportunities in house and were probably premature in launching apps to third parties before they had their own trusted business model (ad revs is not such a model yet). They became a mini “internet” and of course the internet is not a listed company or ever going to be sold. You have to ask whether Facebook can ever exit for value.
Everyone uses Facebook differently, but for me, its increasingly a photo sharing site. They need some services with value – photo printing? We hear they are considering music but that’s myspace / imeem / itunes etc and Facebook are going to struggle to capture that market. There’s no money in it for online service providers anyway. As for paying for Facebook – forget it. Would you pay for hotmail / gmail?!
They also don’t seem to have attempted to compete on user homepage with Yahoo / igoogle killing them on customisation. If they become a homepage they may be able to tap into search revenue. Homepage needs RSS customisation in long term.
Anyone know of a study which compares the number of homepages a website has against its internet revenue?
They would be best off selling to the United Nations as part of a platform for a future global governance model…
Great comment, I think you have it right, their is no business model that anyone can clearly see. They need to sell, MS is a proper exit. Sell for 3 billion (tops!!!) and call it a day.
They certainly need to gradually introduce users to the idea – “Facebook – a place I spend money”. For me, photos are their best way in. Or have those little gift things been a breadwinner?
Shutterfly have revenues but again a poor balance sheet http://ir.shutt...y.com/index.cfm. Hard to say how Snapfish are doing as they are subsumed with HP. My girlfriend uses them though… must be good.
Its easy to come up with lots of ideas for Facebook revenue – they could be the biggest publisher in the US by now – having started with Colleage year books…
However, on the inside there are probably valid reasons (and volumes upon volumes of research into potential business models) as to why they haven’t gone down those routes – at least I hope there are – for their investor’s sake.
Great breakdown. I read all the time but never comment, just wanted to say awesome work, I love this stuff.
In order to seek a new series of funding, the company will have to show they can continue to innovate and increase revenue streams (substantially). Of course, this will result in changes and improvements to their current platform.
A large shift in the business model is a definate no go at this point. This risk of losing users is too great. Instead, the company will seek to build revenue opportunities out of their current busienss model and this is no easy task my friends. The best thing going for them was the Beacon Advertising platform. Unfortunately, it was very poorly launched by the company and thus resulted in users garnering the ability to opt out. Don’t think google and other platforms are any less intrusive; not in the digital age anyhow.
I’d like to see some readers comment regarding unique revenue streams Facebook could create out of their current platform??!! I’m not referring to $20 million/annual revenue opps., I want to see real large ideas!!!
The U.S. government could always bail them out if they are “too big to fail.” HA!
Fck Facebook.
They’ll easily get the money. Facebook has millions of users who spend tons of time on the site.
Charging users, even a small amount, isn’t going to work for college students (dirt poor, would rather spend money on food) and high schoolers (no credit cards, tough time convincing parents to cough up the dough). As soon as Facebook tries to charge those two demographics will flee somewhere, either back to Myspace or to some other Facebook clone that sprouts up. As soon as a competitor is declared “the cool place”, they’ll all wind up there.
I guess it depends how valuable the college and high school kids to the overall business.
Great article – useful information.
Hopefully Facebook will stand strong, because we need strong companies in these times.
At times Mike seems to be rational in his analysis, at other times completely biased and I wonder if I’m reading TC or Valleywag. A few important points:
1) No one has any real idea what FB revenues look like at this point. Every estimate I’ve seen is like 6 months old, and seems to be throwing darts. For a company with as much momentum as FB, revenue #s could be significantly larger. I see their sales guys everywhere.
2) One minute we’re all raving about how we need to go international, the next we’re complaining about having too much int’l traffic? Which one is it? I think any smart company these days has to have a real presence across multiple continents, and FB does. And I think it’s time we stop comparing FB’s reach to MySpace and simply look at the largest sites in the USA and figure out what commiserate ad $$ they’ll get – the competition at this point is as much Yahoo and Google as MySpace.
I appreciate Mike’s review of the facts, but I think his conclusion is wrong. As any entrepreneur knows, you ALWAYS need to be out looking for money, from the minute you close your previous round. In the case of FB, unlike 99% of the co’s mentioned here, growth is fantastic, the product is rock-solid, and they can still both command a huge valuation and easily raise money from a variety of sources, whether it ends up being at $10B or $15B or whatever. If more than 1/2 your traffic is outside the US, then why wouldn’t you raise money from abroad?
I’m all for ripping on stupid businesses, but Mike leaves us thinking FB is heading for the deadpool, and I think the facts tell us otherwise.
so to sum up the comments
- cut staff and other costs (like housing allowances unless those are already cut/ fancy digs / perks etc)
- stop releasing other language versions/ support English first and then only subsequent languages
- fire most of the lawyers (a business process patent is no good any more anyway)
- cull some top-heavy staff
- go back to MSFT with hands out / lower valuation
- charge users premium rates based on usage and/or ad blockage
- set up sales offices in other countries
- share revenue with the third party apps
- if all else fails, go to the gov’t for a bailout
Although I’m a long-term fan of the service itself, I’ve never been supportive of Facebook’s business decisions at any stage in its life.
Facebook did the right thing on many occasions by staying as far from Myspace’s “business model” as they could, but they certainly could have tried much harder to monetize their user base.
Forget about things they could have sold to everyone… you’ve got nearly every college student in America completely drooling all over your site… HELLO… TEXTBOOKS!
A $5 billion dollar industry that they left completely untouched. Half.com and Amazon aren’t catered to college kids, and they’re not on those sites 1/10 the amount of time they are on Facebook. Would have been one of the easiest kills in history.
There are plenty of similar options and different markets they could have explored– with a near monopoly on such a highly prized (even if not wealthy) market, they had the world by the balls.
Incredible technologists, sub-par businessmen. Alright, that’s all I have to say.. I have to upload a Facebook photo album and eat up some more bandwidth.
I think they tried creating a textbook marketplace at one point. I’m a textbook seller and I would certainly list all of my books on facebook if they created a viable marketplace similar to Amazon.
their marketplace was a cheap looking craiglist for the networks, if they even just niched a textbook application for all people tagged as college students, they’d have a hit right there as Brian said, hes right textbooks would bring a significant amount of income right there.
it was mainly college students at one point, now its everyone which makes it harder to focus on one vertical when they are thinking how to monetize the whole thing, instead of focusing on niche segments of their user-base like college-students “promote textbooks”
Er… what’s so incredible about their technology?
They’re better off selling to college kids condoms and beers rather than textbooks.
Another market for facebook to monetize:
Strike deals with local restaurants and stores where friends can buy friends real gifts (including a beer)… goes with the entire connect with your friends thing
I mentioned this further up the thread. If you have any experience with online marketing and advertising you know that people on FB are the worst targets for ads. It’s all about user mindset and they are in a social mindset, not a buying mindset and not a mindset to be marketed to. That’s why there is not enough money in ads to sustain them. It just isn’t there. They will monetize at the same level as email. There is a good 10 year history for email. That is the kind of money they will bring in. Too bad email still isn’t profitable.
This is biggest opportunity for Facebook.facebook is largest growing Social Site.
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