Facebook vs Google: The first 8 years

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Summary of Google's and Facebook's financial performance during their first 8 years (2006 for Google, 2011 for Facebook). Google's revenues were 3x of Facebook's, while it was valued at 50% of Facebook.

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Facebook vs Google: The first 8 years

  1. 1. Google, circa 1998 Facebook, circa 2004 Google versus Facebook The first 8 years Ted Sapountzis, May 2012 @sapountzis Blog
  2. 2. “By the time Google was 8 years old, it was3x the size of Facebook, and as of the day of Facebook’s IPO, Facebook’s valuation was >2x that of GoogleThis slide deck is a summary of the key performance metrics of Google and Facebook during their first 8 years, 2002-06 for Google and 2007-11 for Facebook. Please visit this blog post for more details
  3. 3. From ‘humble’ beginnings... Organize the Make the worldMission world’s more open and information connectedFounded on Sep 1998 Feb 2004Founded atFounder(s)age at (25) (20)founding
  4. 4. …to $1B in revenues…Years to 1st $Bin revenues 5 6.5…to an IPO…Funds raisedpre-IPO $25M $2.3BIPO Aug 2004 May 2012Age of companyat IPO (years) 5.9 8.3
  5. 5. …to similar positions by the end of year 8…Compound growthrate years 4-8 122% 122%Non-US shareof revenues 43% 44%Share of adrevenues 99% 85%Net margin 29% 27%
  6. 6. …but, are they really that similar? Or are they?Revenues (yr 8) $10.6B $3.7BFull-timeemployees (yr 8) 10,674 3,200Market Cap (yr 8.3) $142B $104B1P/E Ratio (yr 8.3) 41x 88x11 As of May 18, 2012, Facebook’s first trading day as a public company
  7. 7. Google’s and Facebook’s marginsconverged by year 8 Although Facebook started from a very different place in their year 4 (2007), they were able to increase their efficiency significantly in the following 2 years
  8. 8. Google was 3x the size of Facebook by thetime it was 8 years old While both Google and Facebook grew as the same annual compound growth rate (CAGR) of 122% between their respective years 4-8… …Google was almost 3x the size of Facebook by the end of year 8 ($10.6B vs. $3.7B) Google grew much faster than Facebook in their earlier years (e.g., Google hit $1B in revenues in 5 years, while it took Facebook 6.5 years)
  9. 9. Their operating cost structure variessignificantly Google’s cost of revenues is significantly higher than that of Facebook, accounting for 40% of their revenues (as opposed to Facebook’s 23%). At the same time, Facebook spent 10% of their revenues on Marketing & Sales, as opposed to Google’s 7%. Lastly, Google outspent Facebook on R&D by more than 3.4x, accounting for 9% of their revenues as opposed to Facebook’s 7%.

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