1. Business models on Facebook Stanford Facebook Class Nov 15th, 2007
Jeremy Liew
Partner, Lightspeed Venture Partners
Lsvp.wordpress.com

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

3. … 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

4. 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

5. 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 $
$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”

6. 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

7. …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

8. 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

9. 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