jeremy liew - stanford facebook class presentation
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Business models on FacebookStanford Facebook ClassNov 15th, 2007
Jeremy LiewPartner, Lightspeed Venture Partnersjeremy@lightspeedvp.comwww.Lightspeedvp.comLsvp.wordpress.com
Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
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Its cheaper than ever to start an internet or app company…
COST TO BUILD WEBSITE
200
70 6048
20
Wesabe Maya's Mom Mobissimo DropSend Freshbooks
$ ‘000s
Source: Carsonified.com/SXSW Presentation
Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners
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… and cheaper than ever to run an internet company
Annual Fixed Costs
Assumptions
Staff Costs $0.84m 7 employees
$120k fully loaded
Infrastructure Costs
$0.18m $15k/month
Other Costs $0.20m Rent, Legal, etc
TOTAL $1.22m
SAMPLE EXPENSE BUDGET
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As a result, getting to breakeven isn’t too hard…
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
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Advertising RPMs* depend on your ability to deliver a targeted audience
Advertisng RPMs
EndemicAdvertising
Demographic
Broad Reach
Example
2007 Revenue
March
US PVs
Annual
US PVs RPM
Myspace
$271M 44B 524B $0.52
$150M**
12B 126B $1.03
Fandango
$25M** 50M 600M $41.67$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
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Pageview targets get progressively harder as revenue aspirations increase…
$250k $2.5m $25m
$0.50 42m 417m 4,167m
$2.50 8m 83m 833m
$10 2m 21m 208m
RPM
Annual Revenue Goal
Monthly Pageviews needed to hit Revenue Goal
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…requiring stretch targets for installs
$250k $2.5m $25m
$0.50 9m 93m 926m
$2.50 2m 19m 185m
$10 0.5m 5m 46m
RPM
Annual Revenue Goal
Total app installs needed to hit revenue goal*
* Assumes 5% active per day, 3 pageviews per visit
21m installs
VS.
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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
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What about digital goods?
$250k $2.5m $25m
0.1% 14m 139m 1,389m
1% 1m 14m 139m
5% 0.3m 3m 28m
Purchase rate
Annual Revenue Goal
Total installs needed to hit Revenue Goal
* Assumes 5% active per day, $1 per item