2. Table of Contents
Evolution - Social Networks
Insights, Footprint
Growth & Revenue Split
Platforms & Emerging Networks
Facebook vs Google vs Telco
Threat to Telco's
Horizontal Play – Skype Acquisition
Facebook Success vs Myspace Failure
Enterprise Play
3. Social Web
Perceptual Map
Social
High
Web
Willingness to Share
Web
Low
Low Ability to Share High
Source: The Social Practice - 2011
4. Social Networks
Evolution
97 2000 2002 2004 2006
Six MiGente Friendster, Flickr, Piczo, Mixi, Windows Live,
Degrees.com Six Degree Closes Skyblog Facebook, Twitter, Mychurch
Hyes, Orkut
2003 2005
99 2001
Linkedin, Youtube,
Live Journal, Cyworld,
Myspace, Xanga,
Blackplanet Ryze
Last.fm, Hi5 Bebo,
Ning,
Yahoo!360
Source: HBR Facebook Platform 2010
5. Social Networks
Perceptual Map
High
High
Twitter
Linkedin
Knowledge Updates
Linkedin
Professional
Twitter Facebook
Low
Low
Facebook
Low Personal High Low Personal Updates High
6. Facebook
Insights
• Founded in 2004
• 2000 Employees Ownership Pie
• Market Value - $60B to $70B
• 600 M users (3rd Largest Country)
• 200 M users access via Mobile
• 29 visits/month/user
• 55 minutes/day
• 55% Female Users (US)
• Average Age – 28.2 years
• 2nd Preferred way of sharing content
Why Facebook
• Friends 63%
• Keep in Touch 59%
• Social Life 37%
• Guilty Pleasure 30% Microsoft – 1.6%
Source: Wikipedia, Reface.me – Who Owns Facebook, ExactTarget, Fans & Followers Report
8. Facebook
Revenue Split
Paid for
Virtual
Goods
Brand
Advertising
Self Service
Advertising
Microsoft
Advertising
• Revenue is dominated by advertising & sponsorship (2009)
Source: Stlpartners, Telco2.0 – Facing up to Facebook
9. Facebook
Footprint
Wall Contact Other Email &
Year Photos Likes Name Picture Gender Birthday Friends Networks
Post Info Data Chat
2005
2011
Legend High Medium Low
Source: Facebook InsideOut, 2010
10. Platforms
Social, Mobile, Search
Facebook iPhone/iPad/iTouch
622 M Users 130 M Users
+ 41% Y/Y + 103% Y/Y
550 K Apps 350 K Apps
500 M Downloads 10 B+ Downloads
Google
972 M Users
+ 8% Y/Y
Paid Clicks +18 Y/Y
Source: TOP MOBILE INTERNET TRENDS , KPCB, 2011
11. Platforms
APIs – Billion Club
13 billion API calls / day (May 2011)
10 billion API calls / month (January 2011)
Over 260 billion objects stored in S3 (January 2011)
1.6 billion API-delivered stories / month (October 2010)
5 billion API calls / day (April 2010)
5 billion API calls / day (October 2009)
8 billion API calls / month (Q3 2009)
3 billion API calls / month (March 2009)
Source: Open APIs -State of the Market, 2011, Glue Conference
12. 2 Sided Market
Overview
Revenue Revenue
PLATFORM
Cost
Cost
Customers Customers
Upstream Value Chain Downstream
• Value moves in both direction from Left to Right and Right to Left
• Marginal Revenue and Profit contribution is always increasing as user base grows, Network effect leads
to infinite economies of scale (for information goods only)
Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
14. Emerging Networks
Information, Gaming, Commerce
Twitter Zynga
253 M Users (Farmville on FB)
+ 85% Y/Y
130 M Active Users
+15% Y/Y
Groupon
51 M subscribers
+ 25x Y/Y
Source: TOP MOBILE INTERNET TRENDS , KPCB, 2011
15. Facebook
Commerce
Image Source: F-commerce, Leveraging Facebook to develop – Barry Sweeney,2011
17. Facebook Google
• Users – Communication Mode • Users - Transaction Mode
• Generating Demand • Fulfilling Demand
• Avg Time Spent (week) – 7hrs 7 mins • Avg Time Spent (week) – 1hr 16 mins
• Users 600M • Users – 972M
• Rev/User - $3.3 US • Rev/User - $30.2 US
• Avg Price and CTR are low • CTR – 1.5%, CPM/CPT - $2.5
CTR – 0.1%, CPM/CPT - $0.6
Source: Nielsen monthly time spent November 2010, Telco2.0 – Facing up to Facebook
18. Facebook
Threat to Telcos
Social Networks
Communities
Relationships
Volume
Conversations
Telephony Calls
Rendezvous
Telco
• Communications as core business service, largely synchronous Peer-to-Peer (P2P) communication
• Paid for by the end user
Facebook
• Social Networking (communication) as a core business service, largely asynchronous group comm.
• Subsidised (free) to the end user and funded by advertisers
• 200 M users on Mobile
Source: Google, Microsoft.com, Cisco.com, Telco2research.com, STL Partners
19. Facebook
1st 9 Years Revenue
Rev Mkt Cap Users Rev/User Value/User
Company Value/Rev
(Mill, USD) (Mill, USD) (in Mill) (USD) (USD)
30.3
Facebook 2,000 60,000 600 3.3 100
(x6 Google)
Google 29,321 171,200 972 30.2 176.1 5.85
Vodafone 72,089 145,000 300 240.3 483.3 2.01
Source: Wikipedia, Google Finance, Telco2.0 – Facing upto Facebook
20. Facebook
Horizontal Play - Skype
Skype
• Users - 663M, (only 8.8 M paid)
• Rev - $860Mill (Y/Y 20%), Ops Profit 20.8 M, Net Loss (7M)
• eBay – Bought in 2005 for 2.5B, sold 70% in 2009 for 2.75B
• Collaboration - Others (Google & Cisco )
Microsoft
• Acquired Skype 2011 – 8.5B (cash)
• Every PC to Mac, Linux, all flavors of Smart Phone (Strategic Shift)
• Xbox to Office
Rev Net Profit Rev/User Acquisition
Company Users Value/Rev
(Mill, USD) (Mill, USD) (USD) Price
663M
Skype (2011) 860M (7 M)
(8.8 M paid)
1.3 8.5B 9.9
Webex (2007) 380M 47 M 2.2M (paid) 172.7 3.2B 8.4
Source: Google, Microsoft.com, Cisco.com, Telco2research.com
21. MySpace vs Facebook
Myspace Failure – Old Media Model
• Identified an opportunity with Myspace (Social Media), but couldn’t leverage it
• Turned out to be a losing bet, in discussions to sell for $100M
Revenue
Upstream Downstream
Only 1 MYSPACE Customers
Cost
Customer Content Distribution
(Advertisers) Platform (Subsidised)
Reason
• Applied Old Media Model
• Locked in Advertisers (via Google Search) on Upstream Side, and let the Customers Create Content
(primarily blogs). Didn’t let/opened Upstream Side to other Customers
• Networks effects on Downstream side are not leveraged on Upstream side – leading deterioration in asset
and momentum shifting towards other platform (Facebook)
Source: Google, Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
22. MySpace vs Facebook
Facebook Success – New Media Model
Revenue Revenue
Upstream Downstream
Various FACEBOOK Customers
Cost
Cost
Content Distribution Paid Data
Customers Platform Research
Revenue
Reason
• Applied New Media Model in a 2 a Sided Market
• Opened Platform for various Upstream Customers – Hosted Content from various players, Ads, 3rd
Party Application Developers
• Opened Platform for various Downstream Customers – Market Research Companies
• Networks effects on Downstream side are leveraged on Upstream side – built mass and momentum
Source: Google, Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
23. Competitive Growth
Internet Companies – Information Goods
• No Diseconomies of Scale
Source: http://blogs.wsj.com/venturecapital/2011/02/26/facebook-groupon-zynga-off-the-chart-revenue/
24. Enterprise Play
Social Stack - Top Down
Social Networks
(Facebook, Twitter, Foursquare, Linkedin)
Monitoring & Analytics
(Brand Monitoring, Insights)
Infrastructure
Services
Aggregation Publication
(Identity Brokers, Aggregators) (Apps, Management)
Social Platforms
(Community, Collaboration, Blogging, Innovation, Social
Commerce )
Source: Altimeter Group, Business Stack
25. Summary
• Social Web has evolved and players like Facebook is driving the growth
• Facebook’s current business model is not sustainable, need to integrate horizontally, (Skype missed
opportunity)
• Digital Goods company have enormous potential to grow leveraging 2 sided model, doesn't suffer from
diseconomies of scale
• Early days in Facebook's journey, long way to go
26. Questions
World Map
Thank you
Source: Facebook World Map – All thingsD
