Business models on Facebook

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• Business models on Facebook
• Stanford Facebook Class
• Nov 15th, 2007

Jeremy Liew Partner, Lightspeed Venture
Partners jeremy_at_lightspeedvp.com www.Lightspeedvp.
com Lsvp.wordpress.com
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Its cheaper than ever to start an internet or app
company
000s
Source Carsonified.com/SXSW Presentation
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and cheaper than ever to run an internet company
SAMPLE EXPENSE BUDGET
Annual Fixed Costs Assumptions
Staff Costs 0.84m 7 employees 120k fully loaded
Infrastructure Costs 0.18m 15k/month
Other Costs 0.20m Rent, Legal, etc
TOTAL 1.22m
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As a result, getting to breakeven isnt too hard
Media Media Media
'000s
Revenue 2,440 100
Cost of Goods 1,220 50
Marketing - 0
Staff Costs 840 36
Infrastructure Costs 180 7
Other Costs 200 7
EBITDA - 0
Illustrative
Assumes ad sales by an ad network or ad rep firm
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Advertising RPMs depend on your ability to
deliver a targeted audience
Example 2007 Revenue March US PVs Annual US PVs RPM
Myspace 271M 44B 524B 0.52
Facebook 150M 12B 126B 1.03
Fandango 25M 50M 600M 41.67
0.50 - 2
1-5
10-40
Source Myspace, Merrill Lynch Facebook, MSNBC
Fandango, Techcrunch Traffic, Comscore
Lightspeed Analysis
RPM Revenue per thousand pageviews, taking
into account multiple ad units and all forms of
advertising CPM, CPC and lead gen
Facebook revenue estimate well over 100m,
Fandango revenue estimated to be around 50m
with half from advertising and half from
ticketing
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Pageview targets get progressively harder as
revenue aspirations increase
Monthly Pageviews needed to hit Revenue Goal
Annual Revenue Goal
250k 2.5m 25m
0.50 42m 417m 4,167m
2.50 8m 83m 833m
10 2m 21m 208m
RPM
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requiring stretch targets for installs
Total app installs needed to hit revenue goal
Annual Revenue Goal
250k 2.5m 25m
0.50 9m 93m 926m
2.50 2m 19m 185m
10 0.5m 5m 46m
VS.
RPM
21m installs
Assumes 5 active per day, 3 pageviews per visit
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Implication for ad models get big or get
expensive

• Get big
• Multiple apps
• Multuple platforms
• Get expensive (High CPMs)
• Endemic categories (Movies, Travel, Health,
  Shopping etc)
• Standard ad units
• Targeting

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What about digital goods?
Total installs needed to hit Revenue Goal
Annual Revenue Goal
250k 2.5m 25m
0.1 14m 139m 1,389m
1 1m 14m 139m
5 0.3m 3m 28m
Purchase rate
Assumes 5 active per day, 1 per item