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Business models onFacebook

Stanford Facebook ClassNov 15th, 2007

Jeremy LiewPartner, Lightspeed Venture Partners

jeremy@lightspeedvp.comwww.Lightspeedvp.comLsvp.wordpress.com

8/14/2019 Stanford Facebook Class Presentation

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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

Its cheaper than ever to start an internet or appcompany

COST TO BUILD WEBSITE

200

7060

48

20

Wesabe Maya's Mom Mobissimo DropSend Freshbooks

$ 000s

Source: Carsonified.com/SXSW Presentation

8/14/2019 Stanford Facebook Class Presentation

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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

and cheaper than ever to run an internet company

Rent, Legal, etc$0.20mOther Costs

$1.22mTOTAL

$15k/month$0.18mInfrastructure Costs

7 employees$120k fully loaded

$0.84mStaff Costs

AssumptionsAnnual Fixed Costs

SAMPLE EXPENSE BUDGET

8/14/2019 Stanford Facebook Class Presentation

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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

As a result, getting to breakeven isnt too hard

0%-EBITDA

7%200Other Costs

7%180InfrastructureCosts

36%840Staff Costs

0%-Marketing

50%*1,220Cost of Goods

100%2,440Revenue

%$ '000s

Media

* Assumes ad sales by an ad network or ad rep firm

8/14/2019 Stanford Facebook Class Presentation

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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

Advertising RPMs* depend on your ability to deliver atargeted audience

Advertisng RPMs

Endemic

Advertising

Demographic

Broad Reach

600M

126B

524B

Annual

US PVs

$41.6750M$25M**Fandango

$1.0312B$150M**Facebook

$0.5244B$271MMyspace

RPM

March

US PVs2007RevenueExample

$10-40

$1-5

$0.50 - 2

** Facebook revenue estimate well over $100m, Fandango revenue estimated to be around $50m with half fromadvertising 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 g

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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

Pageview targets get progressively harder as revenueaspirations increase

208m21m2m$10

833m83m8m$2.50

4,167m417m42m$0.50

$25m$2.5m$250k

RPM

Annual Revenue Goal

Monthly Pageviews needed to hit Revenue Goal

8/14/2019 Stanford Facebook Class Presentation

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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

requiring stretch targets for installs

46m5m0.5m$10

185m19m2m$2.50

926m93m9m$0.50

$25m$2.5m$250k

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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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

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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Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners

What about digital goods?

28m3m0.3m5%

139m14m1m1%

1,389m139m14m0.1%

$25m$2.5m$250k

Purchase

rate

Annual Revenue Goal

Total installs needed to hit Revenue Goal

* Assumes 5% active per day, $1 per item