Jeremy Liew - Stanford Facebook Class Presentation

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  • 1. Business models on Facebook Stanford Facebook Class Nov 15 th , 2007 Jeremy Liew Partner, Lightspeed Venture Partners [email_address] www.Lightspeedvp.com Lsvp.wordpress.com
  • 2. Its cheaper than ever to start an internet or app company… $ ‘000s Source: Carsonified.com/SXSW Presentation
  • 3. … and cheaper than ever to run an internet company SAMPLE EXPENSE BUDGET
    • Rent, Legal, etc
    $0.20m Other Costs $1.22m TOTAL
    • $15k/month
    $0.18m Infrastructure Costs
    • 7 employees
    • $120k fully loaded
    $0.84m Staff Costs Assumptions Annual Fixed Costs
  • 4. As a result, getting to breakeven isn’t too hard… * Assumes ad sales by an ad network or ad rep firm Illustrative 0% - EBITDA 7% 200 Other Costs 7% 180 Infrastructure Costs 36% 840 Staff Costs 0% - Marketing 50%* 1,220 Cost of Goods 100% 2,440 Revenue % $ '000s Media
  • 5. Advertising RPMs* depend on your ability to deliver a targeted audience $10-40 $1-5 $0.50 - 2 ** Facebook revenue estimate “well over $100m”, Fandango revenue estimated to be “around $50m with half from advertising and half from ticketing” 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 600M 126B 524B Annual US PVs $41.67 50M $25M** Fandango $1.03 12B $150M** Facebook $0.52 44B $271M Myspace RPM March US PVs 2007 Revenue Example
  • 6. Pageview targets get progressively harder as revenue aspirations increase… RPM Annual Revenue Goal Monthly Pageviews needed to hit Revenue Goal 208m 21m 2m $10 833m 83m 8m $2.50 4,167m 417m 42m $0.50 $25m $2.5m $250k
  • 7. …requiring stretch targets for installs RPM Annual Revenue Goal Total app installs needed to hit revenue goal* * Assumes 5% active per day, 3 pageviews per visit 21m installs VS. 46m 5m 0.5m $10 185m 19m 2m $2.50 926m 93m 9m $0.50 $25m $2.5m $250k
  • 8. 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
  • 9. What about digital goods? Purchase rate Annual Revenue Goal Total installs needed to hit Revenue Goal * Assumes 5% active per day, $1 per item 28m 3m 0.3m 5% 139m 14m 1m 1% 1,389m 139m 14m 0.1% $25m $2.5m $250k