Business Models on Facebook

Slide 1: Business models on Facebook Stanford Facebook Class Nov 15th, 2007 Jeremy Liew Partner, Lightspeed Venture Partners jeremy@lightspeedvp.com www.Lightspeedvp.com Lsvp.wordpress.com

Slide 2: Its cheaper than ever to start an internet or app company… Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners COST TO BUILD WEBSITE $ ‘000s 200 70 60 48 20 Wesabe Maya's Mom Mobissimo DropSend Freshbooks 2 Source: Carsonified.com/SXSW Presentation

Slide 3: … and cheaper than ever to run an internet company Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners SAMPLE EXPENSE BUDGET Annual Fixed Costs Assumptions 7 employees Staff Costs $0.84m $120k fully loaded $15k/month Infrastructure Costs $0.18m Rent, Legal, etc Other Costs $0.20m TOTAL $1.22m 3

Slide 4: As a result, getting to breakeven isn’t too hard… Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 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% * Assumes ad sales by an ad network or ad rep firm 4

Slide 5: Advertising RPMs* depend on your ability to deliver a targeted audience Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners March Annual Advertisng RPMs 2007 Example Revenue US PVs US PVs RPM $0.50 - 2 Broad Reach Myspace $271M 44B 524B $0.52 $1-5 Demographic Facebook $150M** 12B 126B $1.03 Endemic $10-40 Fandango $25M** 50M 600M $41.67 Advertising 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 5 and half from ticketing”

Slide 6: Pageview targets get progressively harder as revenue aspirations increase… Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners 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 RPM $10 2m 21m 208m 6

Slide 7: …requiring stretch targets for installs Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Total app installs needed to hit revenue goal* Annual Revenue Goal $250k $2.5m $25m $0.50 9m 93m 926m VS. $2.50 2m 19m 185m RPM 21m installs $10 0.5m 5m 46m * Assumes 5% active per day, 3 pageviews per visit 7

Slide 8: Implication for ad models – get big or get expensive Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners  Get big  Multiple apps  Multuple platforms  Get expensive (High CPMs)  Endemic categories (Movies, Travel, Health, Shopping etc)  Standard ad units  Targeting 8

Slide 9: What about digital goods? Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Total installs needed to hit Revenue Goal Annual Revenue Goal $250k $2.5m $25m 0.1% 14m 139m 1,389m Purchase 1% 1m 14m 139m rate 5% 0.3m 3m 28m * Assumes 5% active per day, $1 per item 9