"Team A" final presentation for Consulting Skills & Frameworks, Fall 2012. Product pitch: "Facebook Stream" - a web browser from Facebook allowing users to seamlessly browse the web while enjoying the tools of Facebook. Stream also allows Facebook to collect unique data about users to offer more relevant and targeted ads, promotions, and information.

1. Facebook Stream
Team A: Erin Gibson, Zack Hargett, Lexi Jankun, Reed
Romine, Mary Catherine Wilkison
1
November 29, 2012
Increasing market value through company
acquisition and revenue growth

2. 2
Grow Facebook revenue by expanding into
a social networking web browser
By year 5, exceed analyst-projected revenue by $1.26B to achieve
20% increase in market value
Executive Summary
Acquire
RockMelt
Establish
Strategic Partnerships
Adapt
Stream to Mobile Platform
• Integrate software
• Become first social
network browser
• Partner with bing as
default search engine
• Incorporate apps & ads
to drive revenue
• Engage mobile-only
users
• Enhance experience by
linking detailed user data

3. Acquire
Facebook must increase market value by growing revenue
through a social network web browser
3
Cutting cost is not a
viable option
Opportunity for
revenue growth via
Web browsers
Leverage network to
enhance customized
experience
• Customer expansion
• Capital Investments
• Advertisement
1 Billion
Facebook users
Cost
Synergies
Revenue Growth
$30.59 0.00% 1.00% 2.00% 3.00% 4.00%
0% $25.43 $27.85$30.59$33.67$37.15
5% $25.99 $28.48$31.29$34.45$38.02
10% $26.54 $29.10$31.98$35.23$38.90
15% $27.10 $29.72$32.68$36.01$39.77
20% $27.66 $30.35$33.38$36.79$40.64
25% $28.22 $30.97$34.08$37.58$41.52
30% $28.77 $31.59$34.77$38.36$42.39
Source: M&A Valuation Model

4. Acquire
Facebook Stream will leverage Facebook user information
through “Likes” & browsing history to customize experience
4
Source: Team Analysis; New York Times
Data on User Preferences
DataonUserHistory
Note: Size of plot denotes number of users
Google Chrome
• 310 MM users
• Data through cookies
Facebook
• 1 B users
• Data through demographic questions
& Likes
Facebook Stream
• Estimated 80 MM users in Y1
• Data though cookies, Likes, &
demographic questions
Google +
• 25 MM users
• Data through demographic
questions & limited cookies
RockMelt
• 1.2 MM users
• Data through limited cookies &
demographic questions

5. Acquire
Facebook Stream combines chat, notifications and web
browsing to enhance user experience
5
Source: RockMelt Browser

6. Acquire
Facebook Stream combines chat, notifications and web
browsing to enhance user experience
6
Source: RockMelt Browser

7. Acquire
Facebook Stream combines chat, notifications and web
browsing to enhance user experience
7
Source: RockMelt Browser

8. Acquire
Facebook Stream combines chat, notifications and web
browsing to enhance user experience
8
Source: RockMelt Browser

9. Acquire
$105
$110
$115
$120
$125
$130
Organic Development Acquiring Rockmelt
WebBrowserStart-upCostsFacebook will take advantage of cost and time efficiencies by
acquiring RockMelt to create Facebook Stream
9
COST SAVINGS
cost savings
Acquisition of RockMelt provides for $6MM in
cost savings and 2 years time savings in the
launching of Stream
TIME SAVINGS
time savings
Assimilation Costs
M&A Fees
Stand-Alone Value
* In Million $USD
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Development
Negotiations
Stream Launch
Due Diligence
Adaptions to FB Stream
Stream Launch
2013 2014
Source: Team Analysis

10. Establish
* In Million $USD
Strategic Partnership with Microsoft’s bing will earn Facebook
Stream revenues of $105M
10
105
0
20
40
60
80
100
120
140
160
05 06 07 08 09 10 11
Revenue
Mozilla revenue from
Google search deal
0%
20%
40%
60%
80%
100%
Web Browser Market Share
Internet Explorer Firefox Chrome Other
Microsoft will
partner with
Facebook
Continue
relationship
with Mozilla
Completely
reliant on
search
traffic
Competing
Web
Browsers
Leaving
would cause
loss of traffic
& money
$
Case Study
Google/Mozilla
Source: Extremetech; Computerworld; 25labs

11. Establish
Stream + “Facebook Bay” External Ad Network + Partnerships
will position Facebook to compete with Google
11
Facebook Google
Social Network
Web Browser
Ad Network
Search Engine
Facebook
Stream
Facebook Bay
bing
Google +
Chrome
AdSense
Google
Facebook Bay
external ads
target Stream
users based on
“Likes” AND
user history
(cookies)

12. Establish
Developing partnerships with key businesses could increase
user engagement and generate $101MM in revenue
12
Paid
35%
Free
65%
By Year 5, Facebook will generating $101.07MM per year by offering
paid applications to Stream users
$101
$-
$50
$100
$150
Y1 Y2 Y3 Y4 Y5
Revenue from Apps
0% 50% 100%
Price
Breakdown
Facebook
App Developer
App. Store
Facebook gain 5% of Paid
App. Revenue
* In Million $USD
Source: Thechromesource; Team Analysis

13. Adapt
Expanding Facebook’s browser to the mobile platform will
improve ability to customize Stream to user preferences
13
1 Billion
600 MM
113 MM
Facebook users
Facebook mobile-only
users
Facebook desktop &
mobile users
Facebook Stream Mobile can
always be with you, on the go
Placement Targeting
Desktop (News Feed + Side Bar)
Desktop News Feed
Mobile News Feed
1
2
3
0.00%
0.20%
0.40%
0.60%
0.80%
1.00%
1.20%
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
$0.70
$0.80
$0.90
$1.00
Desktop
(News
Feed +
Sidebar)
Desktop
News Feed
Mobile
News Feed
1
2
3
Cost per Click
Click through Rate
Source: TechCrunch
Source: SEC.gov

14. Impact
With 410 MM users adopting Stream by 2017,
Facebook will generate $11.9B in 2017
14
$10,645
$11,908
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
2013 2014 2015 2016 2017
StreamRevenue
TotalFacebookRevenue
Increasing trend of Stream
Adopters Among Facebook
Users
0
500
1000
1500
2000
2013 2014 2015 2016 2017
MillionUsers
Current Revenue Projection
Projected Revenue with Steam
Additional Revenue from Stream
Non-Stream Adopters
Stream Adopters
Revenue of $11.9B in 2017
* In Million $USD
Source: Team Analysis

15. Impact
$26.50
$27.00
$27.50
$28.00
$28.50
$29.00
$29.50
$30.00
$30.50
$31.00
$0.00
$200.00
$400.00
$600.00
$800.00
$1,000.00
$1,200.00
$1,400.00
2013 2014 2015 2016 2017
FacebookStockPrice
AdditionalRevenuefromStream
Facebook Stream will result in $1.26B added
revenue in 2017, achieving a stock price of $30.63
15
bing Royalties
Other Search Engine Royalties
App. Purchases
Advertisements
* In Million $USD
In bing
Royalties
In Other
Search Engine
Royalties
In App.
Purchases
In
Advertisement
Source: Team Analysis; See Financial Appendix

16. Impact
Risk & Mitigation
16
Risk Rating Risk Mitigation Strategy
Rockmelt will not allow
Facebook to acquire
Leverage ability to discontinue
current partnership and pursue
acquisition of similar
companies.
Insufficient customer demand
for Facebook browser
Implement aggressive
marketing campaign to raise
user awareness
Uncertainty surrounding bing
partnership acceptance
Seek partnership with Yahoo!
or other search engine
X
X
Probability
Impact
X
Source: Team Analysis

17. 17
Grow Facebook revenue by expanding into
a social networking web browser
By year 5, exceed analyst-projected revenue by $1.26B to achieve
20% increase in market value
Executive Summary
Acquire
RockMelt
Establish
Strategic Partnerships
Adapt
Stream to Mobile Platform
• Integrate software
• Become first social
network browser
• Partner with bing as
default search engine
• Incorporate apps & ads
to drive revenue
• Engage mobile-only
users
• Enhance experience by
linking detailed user data

18. General
 Introduction to Team A
 Analysis of alternative ideas
Due Diligence - RockMelt
 Key leaders (Management)
 Key Investors
 Milestones
Social Networking
Marketing
 Industry Data
 Facebook Market Share of Social Networks
 Growth Strategies
 LinkedIn Revenue Streams
Search Engine Industry Analysis
 Microsoft Facebook Partnership
 Search Engine Industry Market Shares
 Search Engine Financials (1, 2)
 Web Browser Market Shares
 Advantages of Chrome
Marketing Plan
 Target Market
 Marketing Examples (1, 2)
Finance
 Costs
◦ Developing web browser
◦ Acquiring RockMelt
◦ Conversion costs
 Valuation of RockMelt
 Valuation of Facebook’s Current Stock Price
 Cost vs. Revenue Sensitivity
 Team Income Statement Analysis (1,2)
 Facebook Annual Income Statement
 Advertising Revenue
 Applications Revenue
 Stock Price Growth with Total Revenue
 Royalties from Search Engines
 Comparables
◦ Google Chrome Adoption Rate
◦ Flash Player Adoption Rate
Mobile
 Growth of Facebook Users
 Facebook Ads on Various Media
 Facebook Mobile Only Users

19. 19
Erin
Gibson
• B.S. in Business
Administration
• Double Major in
Spanish
Zack
Hargett
• B.S. in Business
Administration
• Concentration:
Consulting
Reed
Romine
• B.S. in Business
Administration
• Concentration:
Consulting
Mary Catherine
Wilkison
• B.S. in Business
Administration
• Concentration:
Finance and
Consulting
• Minor in French
Lexi
Jankun
• B.S. in Business
Administration
• Concentration:
Consulting
• Double Major in
Spanish

20. 20
Analysis of alternative ideas for increasing market value
Alternative Capital
Investment
Feasibility Long-term
impact
Value to
customers
Value to
users
Buy Twitter
Monetize Mobile
App
Organic browser
development
Create
professional
network
Acquire RockMelt
Source: Team Analysis

21. 21
Eric Vishria, age:48
Chief Executive Officer
Formerly VP of Marketing, Opsware (later acquired
by Hewlett-Packard for $1.65 BB).
B.S., Stanford University
Tim Howes, age:52
Chief Technology Officer
Previously developed Netscape browser; considered
a global leader in software engineering.
Ph.D., University of Michigan
Key members of RockMelt management team ensure company is a
relatively safe investment
Source: RockMelt.com; Crunchbase

22. 22
Marc Andreessen
Investor
Currently sits on Board of Directors for Facebook.
Ben Howowitz
Investor
Former co-founder and CEO of Opsware (acquired
by HP); VP of Business Technology Optimization for
Software at HP.
RockMelt has solid capital backing, including one current Facebook
Board member
Source: RockMelt.com; Crunchbase

23. 23
November 2010 June 2011 October 2012
Key milestones in RockMelt history indicate its status as an early-
stage, but promising, start-up
Source: RockMelt.com

24. 24
Social Networking industry data
Source: IBISWorld, Social Networking Industry Report

25. 25
Facebook has 60.7% of market share and over 845 million users
Source: IBISWorld, Social Networking Industry Report

26. 26
Growth strategies
Source: IBISWorld, Social Networking Industry Report

27. 27
0
50
100
150
200
250
300
Q3 2011 Q3 2012
MillionsofDollars
Revenue
LinkedIn Revenue from
Monetized Solutions
Premium
Subscriptions
Marketing
Solutions
Talent
Solutions
LinkedIn had 90
million users at
the end of 2011;
the company now
has 187 million
users
Due to an increase in the number of users, LinkedIn has generated
more revenue from monetized solutions
Source: Forbes.com

28. 28
Facebook
Microsoft’s
Bing
• In 2007, Microsoft spent $240 MM for a 1.6% stake in Facebook
• In 2010, Microsoft’s bing and Facebook teamed up for a “social search”
Source: Forbes: Microsoft Adds New Friends to Revamped Bing Search Service
Why Facebook should partner with Microsoft’s Bing

29. 29
Search Engine industry statistics
Source: IBISWorld, Search Engine Industry Report

30. 30
Search engine financials
Source: IBISWorld, Search Engine Industry Report

31. 31
Search engine financial (cont’d)
Source: IBISWorld, Search Engine Industry Report

32. 32
Web Browser market share
Source: 25labs

33. 33
 Able to identify security concerns on
individual tabs and prevent from
spreading elsewhere (Sandboxing-
process isolation)
 Javascript virtual machine
 Effective limiting of memory use
 Use of history to enable quick access to
most visited sites
 Compatible with APPLICATIONS
 PlugIns separated into its own process
Advantages of Chrome
Source: Google Chrome

34. 34
0
50
100
150
200
250
300
350
18-24 25-34 35-44 45-54 55-64 65+
Age Groups
Mean # of friends on
main network
Median # of friends
on main network
Social Network marketing would be most effective if targeted
towards Millennials
Source: Mintel Oxygen: Overview of Social Networking

35. 35
New! Try Facebook
Stream today
310 MM
unique daily visitors
3%
download from home page
9 MM
downloads
Simply placing advertisement on Facebook home page may yield
substantial downloads
Source: Pingdom.com

36. 36
Facebook Stream has arrived! Take this tour to learn about the all
new Facebook oriented web browser, then download the browser
for free!
Worldwide Facebook update will publicize Stream to all 1B Facebook
users
Source: Team Analysis

37. 37
•Effort Applied (E) = ab(KLOC)b
b [man months]
•Development Time (D) = cb(Effort Applied)d
b [months]
•People required (P) = Effort Applied / Development
Time [count]
Basic
Constructive
Cost Model
•Software project (Classified as “semi-detached”)
•ab = 3.0
•bb = 1.12
•cb = 2.5
•Db = 0.35
Assumptions
•Codebase Size: 6,449,950 lines
•Estimated Effort:1,952 person-years
•Average Employee Salary: $65,000
Inputs
Estimated Organic Development Costs:
$127 MM
Estimated cost of developing a web browser…
Source: Team Analysis

38. 38
• $114.29 MM
RockMelt
Valuation
• $1.5 MM in total
acquisition fees
Assumptions
• $5.2 MM
Development/
Conversion
Costs
Estimated Acquisition + Development Costs:
$121 MM
…is more than cost of acquiring RockMelt
Source: Team Analysis

39. 39
160 Employees on project
$60,000 avg. salary
6 month duration of conversion
$5.2 MM
Total Conversion
Cost
Assumptions
Breakdown of conversion costs
Source: Team Analysis

40. 40
$40 MM total
35% sold in equity
$114.29 MM
Assumption
Valuation
VC Funding
raised
Breakdown of RockMelt valuation
Source: Rockmelt.com

41. 41
Valuation of Facebook’s current Stock Price
Source: Yahoo! Finance, Google Finance; M&A Valuation Model; SEC Facebook Inc. Form 10-Q

42. 42
Cost vs. Revenue Sensitivity test to gain 20% increase in stock
price
Projected 5 year Revenue according to current Yahoo! Analyst
estimates
Revenue with added 2% increase over analyst estimates
2012 2013 2014 2015 2016 2017
4,756.7 5,804.8 6,916.6 8,093.4 9,335.9 10,645.0
2012 2013 2014 2015 2016 2017
4,756.7 6,025.9 7,315.6 8,721.7 10,250.5 11,908.4
Source: Yahoo! Finance, Google Finance, M&A Valuation Model

43. 43
Current Profit & Loss of Facebook
2013 2014 2015 2016 2017
Revenue
Zynga $696.58 $830.00 $971.20 $1,120.31 $1,277.40
Advertisements $5,108.24 $6,086.64 $7,122.16 $8,215.62 $9,367.58
Total Revenue $5,805 $6,917 $8,093 $9,336 $10,645
Cost & Expenses
Cost of revenue 860.00$ 1,032.00$ 1,238.40$ 1,486.08$ 1,783.30$
R&D 388.00$ 504.40$ 655.72$ 852.44$ 1,108.17$
General and administrative 707.00$ 777.70$ 855.47$ 941.02$ 1,035.12$
Total costs & expenses 1,955.00$ 2,314.10$ 2,749.59$ 3,279.53$ 3,926.58$
Gross Profit $3,849.82 $4,602.53 $5,343.77 $6,056.40 $6,718.40
Addl. Profit & Loss from Stream
millions 2013 2014 2015 2016 2017
Addl. Revenue
Bing Royalties $105.00 $111.43 $128.57 $167.14 $190.71
Other Search Engine Royalties $18.53 $19.60 $22.21 $27.34 $30.72
App. Purchases $13.27 $27.93 $50.27 $73.17 $101.07
Advertisements $84.32 $239.99 $427.28 $646.97 $940.89
Total Revenue $221 $399 $628 $915 $1,263
Income Statement for Current Yahoo! Analyst estimates and addl.
Revenue
Source: Yahoo! Finance, Google Finance; M&A Valuation Model; SEC Facebook Inc. Form 10-Q

44. 44
Total Profit & Loss of Facebook with Stream Browser
2013 2014 2015 2016 2017
Revenue
Zynga $696.58 $830.00 $971.20 $1,120.31 $1,277.40
Bing Royalties $105.00 $111.43 $128.57 $167.14 $190.71
Other Search Engine Royalties $18.53 $19.60 $22.21 $27.34 $30.72
App. Purchases $13.27 $27.93 $50.27 $73.17 $101.07
Advertisements $5,192.56 $5,036.99 $6,143.32 $7,333.73 $8,650.65
Total Revenue $6,026 $7,316 $8,722 $10,251 $11,908
Cost & Expenses
Cost of revenue 860.00$ 1,032.00$ 1,238.40$ 1,486.08$ 1,783.30$
R&D 388.00$ 504.40$ 655.72$ 852.44$ 1,108.17$
General and administrative 707.00$ 777.70$ 855.47$ 941.02$ 1,035.12$
Total costs & expenses 1,955.00$ 2,314.10$ 2,749.59$ 3,279.53$ 3,926.58$
Gross Profit $4,070.94 $5,001.48 $5,972.10 $6,971.01 $7,981.78
Percent Growth over last year 23% 19% 17% 14%
Income Statement for Facebook with addition of Stream
Source: Yahoo! Finance, Google Finance; M&A Valuation Model; SEC Facebook Inc. Form 10-Q

45. 45
Facebook Annual Income Statement and expense assumptions
In Millions of USD (except for per share items)
12 months
ending 2011-
12-31
12
months
ending
2010-12-
31
12 months
ending 2009-
12-31
12
months
ending
2008-12-
31
Asssumed
Growth
Revenue 3,711.00 1,974.00 777 272
Other Revenue, Total - - - -
Total Revenue 3,711.00 1,974.00 777 272
Cost of Revenue, Total 860 493 223 124
Percentage growth 74.44% 121.08% 79.84% 20.00%
Gross Profit 2,851.00 1,481.00 554 148
Selling/General/Admin. Expenses, Total 707 305 205 156
Percentage growth 132% 49% 31% 10.00%
Research & Development 388 144 87 47
Percentage growth 169.44% 65.52% 85.11% 30.00%
Depreciation/Amortization - - - -
Interest Expense(Income) - Net Operating - - - -
Unusual Expense (Income) - - - -
Other Operating Expenses, Total - - - -
Total Operating Expense 1,955.00 942 515 327
Operating Income 1,756.00 1,032.00 262 -55
Interest Income(Expense), Net Non-Operating - - - -
Gain (Loss) on Sale of Assets - - - -
Other, Net 10 -1 2 -1
Income Before Tax 1,695.00 1,008.00 254 -56
Source: Yahoo! Finance, Google Finance; M&A Valuation Model; SEC Facebook Inc. Form 10-Q

46. 46
Google
2012 2013 2014 2015 2016 2017 2018
Revenue $8,580 10,733.58$ 11,701.75$ 12,757.25$ 13,907.95$ 15,162.45$ 16,530.10$
Advertisements $8,323 $10,412 $11,351 $12,375 $13,491 $14,708 $16,034
Facebook
2012 2013 2014 2015 2016 2017 2018
Revenue $5,804.82 7,546.27$ 8,323.53$ 9,180.86$ 10,126.48$ 11,169.51$ 12,319.97$
Advertisements* $4,934.10 $6,414.33 $7,075.00 $7,803.73 $8,607.51 $9,494.09 $10,471.98
Stream
2012 2013 2014 2015 2016 2017
Revenue $221.12 $398.94 $628.33 $914.62 $1,263.39
Advertisements $84.32 $239.99 $427.28 $646.97 $940.89 0
Percent Revenue from Ad. 38% 60% 68% 71% 74%
Revenue growth based on yahoo! Estimates
Advertising Revenue
Source: The Verge

47. 47
* three months ended September 30, 2012
Google
2012 2013 2014 2015 2016 2017 2018
Revenue 11,526.00$ 14,419.03$ 15,719.62$ 17,137.53$ 18,683.34$ 20,368.57$ 22,205.82$
Applications $173 $216 $236 $257 $280 $306 $333
Stream
2012 2013 2014 2015 2016 2017
Revenue $221.12 $398.94 $628.33 $914.62 $1,263.39
Application $13.27 $27.93 $50.27 $73.17 $101.07 *based on Google chrom
Percent Total Revenue 6% 7% 8% 8% 8%
Revenue growth based on yahoo! Estimates
Next Year Next 5 Years
Google 25.10% 9.02%
Facebook 30% 10.30%
Applications Revenue
*based on Google chrome, account for time taken to
penetrate market
Source: Yahoo! Finance, Google Finance; M&A Valuation Model; SEC Facebook Inc. Form 10-Q

48. 48
Stock Price Growth with Total Revenue
$23.00
$24.00
$25.00
$26.00
$27.00
$28.00
$29.00
$30.00
$31.00
$32.00
0
2000
4000
6000
8000
10000
12000
14000
2012 2013 2014 2015 2016 2017
Revenue
Stock Price
Source: M&A Valuation Model; Team Analysis

49. 49
Revenue 2012 2013 2014 2015 2016 2017
Bing $105 111.43$ 128.57$ 167.14$ 190.71$ 225.00$
Other Search Engines $18.53 19.59842 22.21154 27.33728 30.71604 35.39658
Royalties from Search Engines
Mozilla Revenue from Search Royalties
2005 2006 2007 2008 2009 2010 2011
Revenue from Google Search Royalties $49 $52 $60 $78 $89 $105 $138
Growth From Previous Year 6.12% 15.38% 30.00% 14.10% 17.98% 31.05%
Revenue from other search engines $57.65 $61.18 $70.59 $91.76 $104.71 $123.53 $161.88
Growth From Previous Year 5.77% 13.33% 23.08% 12.36% 15.24% 23.69%
Stream Revenue
Based on Mozilla Revenue
Source: Computer World

50. 50
Source: The developer’s guide to browser adoption rates
Google Chrome adoption rate

51. 51
Source: The developer’s guide to browser adoption rates
Flash Player adoption rate

52. 52
Current growth rate: 5.54%
Source: 1 Billion Facebook Users: Now or Later, Technorati
Growth of Facebook users

53. 53
Source: Tech Crunch
Facebook Advertisements on various media

54. 54
Assumption on number of Facebook mobile-only users
Source: Team Analysis