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

Its cheaper than ever to start an internet or app company… Source: Carsonified.com/SXSW Presentation

… and cheaper than ever to run an internet company SAMPLE EXPENSE BUDGET 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

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

Advertising RPMs* depend on your ability to deliver a targeted audience Example 2007 Revenue March US PVs Annual RPM Myspace $271M 44B 524B $0.52 Facebook $150M** 12B 126B $1.03 Fandango $25M** 50M 600M $41.67 $0.50 - 2 $1-5 $10-40 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 and half from ticketing”

Monthly Pageviews needed to hit Revenue Goal Pageview targets get progressively harder as revenue aspirations increase… 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 $10 2m 21m 208m RPM

…requiring stretch targets for installs Total app installs needed to hit revenue goal* Annual Revenue Goal $250k $2.5m $25m $0.50 9m 93m 926m $2.50 2m 19m 185m $10 0.5m 5m 46m VS. RPM 21m installs * Assumes 5% active per day, 3 pageviews per visit

Implication for ad models – get big or get expensive Multiple apps Multuple platforms Get expensive (High CPMs) Endemic categories (Movies, Travel, Health, Shopping etc) Standard ad units Targeting

What about digital goods? Total installs needed to hit Revenue Goal Annual Revenue Goal $250k $2.5m $25m 0.1% 14m 139m 1,389m 1% 1m 5% 0.3m 3m 28m Purchase rate * Assumes 5% active per day, $1 per item