Facebook rejects funding at $4 billion valuation, may not raise more(venturebeat.com)
venturebeat.com
Facebook rejects funding at $4 billion valuation, may not raise more
http://venturebeat.com/2009/04/15/facebook-rejects-funding-at-4-billion-valuation-may-not-raise-more/
27 comments
I don't understand what everyone's so surprised about. Myspace makes nearly $1 billion in revenue, and Facebook is larger, has better technology, has a more affluent audience, of which they have more information about, has multiple revenue streams (billions of CPM ads [I estimate 6B by Quantcast numbers, they also have a lot more space for them since the re-design], tens of thousands of targeted ad campaigns [many of which I've seen, some of which I've clicked], newsfeed insertion partnerships [youtube charges in excess of 200K for front page ads], gifts [obviously not the core of their revenue stream, but I guarantee they pull in a few million], platform [they aren't really monetizing it yet, but developers are making hundreds of thousands to millions a month on it, so I wouldn't be surprised if FB eventually gets in on some of that action]), etc.
I know it's fashionable to hate or doubt Facebook nowadays, but if you look at the numbers instead of your own personal experience with Facebook (which, since your on Hacker News, is probably not very similar with their core user base), I think you'll come to the conclusion that the demise of Facebook is not just around the corner.
I know it's fashionable to hate or doubt Facebook nowadays, but if you look at the numbers instead of your own personal experience with Facebook (which, since your on Hacker News, is probably not very similar with their core user base), I think you'll come to the conclusion that the demise of Facebook is not just around the corner.
"I don't understand what everyone's so surprised about. Myspace makes nearly $1 billion in revenue, and Facebook is larger, has better technology, has a more affluent audience,"
Probably thats the problem. More affluent(generalizing to educated) people and people who use better a network for technology, dont click on ads.
Probably thats the problem. More affluent(generalizing to educated) people and people who use better a network for technology, dont click on ads.
I for one would like to see some proof on that matter, not that I neccesarily disbelieve that statement, but it is an interesting dynamic. Obviously more educated people may stray away from clicking on ads for free iPods or hot local singles dying to meet them, but you could say the same about less affluent people clicking on ads regarding BMW's, high fashion, SaaS's, or a wild excursion on the Serengeti (obviously some these examples are slightly strawman-ish, but the point is there are many products out there that need more exposure, of which advertising is an option, that require money, of which affluent people have more of and are presumably more willing to spend because of that). Rich or poor, educated or uneducated, everyone has needs, everyone.
But of course, that's not even the point, because at the end of the day, you really care about maximizing user value, which for ads is frequency * (CPC or CPM). Now, obviously the CPC rates are higher for a BMW relative to a free iPod and the CPM rates are also higher if you know the audience is affluent, higher still if they are a fan of BMW on FB, higher still if you know their status is 'looking for a new car', etc. LinkedIn has fairly high CPM's from what I hear.
So is my conclusion that more affluent users are more valuable than less affluent ones? No, I don't know that, but that is my hypothesis, and I'd like to see some evidence pointing one way or the other (actual non-anecdotal evidence, and not just Myspace makes more than Facebook, since they run two very different ad systems and since we all know that correlation only goes so far).
But of course, that's not even the point, because at the end of the day, you really care about maximizing user value, which for ads is frequency * (CPC or CPM). Now, obviously the CPC rates are higher for a BMW relative to a free iPod and the CPM rates are also higher if you know the audience is affluent, higher still if they are a fan of BMW on FB, higher still if you know their status is 'looking for a new car', etc. LinkedIn has fairly high CPM's from what I hear.
So is my conclusion that more affluent users are more valuable than less affluent ones? No, I don't know that, but that is my hypothesis, and I'd like to see some evidence pointing one way or the other (actual non-anecdotal evidence, and not just Myspace makes more than Facebook, since they run two very different ad systems and since we all know that correlation only goes so far).
The fact that linkedin has the highest CPM rate of any of the major networks would seem to suggest otherwise.
Why? It's revenue, not profit.
If Facebook is actually "almost profitable", then my little 8-hour iPhone app is more profitable than Facebook.
Think about that. All those people; all that effort; all that busy-work. It's just wealth redistribution.
Now, investors expect that Facebook will scale (financially) better than Jaba's little iPhone app that you've never heard of -- once it starts making money it'll make heaps of money.
Thing is, if they're wrong, it's just a huge misuse of capital. OTOH there is a value to having subsidized geek nirvanas (to the geeks, not the investors).
If Facebook is actually "almost profitable", then my little 8-hour iPhone app is more profitable than Facebook.
Think about that. All those people; all that effort; all that busy-work. It's just wealth redistribution.
Now, investors expect that Facebook will scale (financially) better than Jaba's little iPhone app that you've never heard of -- once it starts making money it'll make heaps of money.
Thing is, if they're wrong, it's just a huge misuse of capital. OTOH there is a value to having subsidized geek nirvanas (to the geeks, not the investors).
They're subsidzing the training of several programmers who otherwise might not have had to deal with such huge databases and systems. This is valuable because whenever Facebook dies or when the programmers leave, other companies will be the richer for it. So not a completely huge misue of capital if you're thinking about the whole of society, but definitely a misuse if you're an investor in Facebook heh.
It's revenue, not profit.
Yes, the distinction between revenue and earnings is what makes all the difference. Investors invest to end up with more money than they put into a business enterprise.
Yes, the distinction between revenue and earnings is what makes all the difference. Investors invest to end up with more money than they put into a business enterprise.
What are they making money off? I have never heard of anyone clicking an ad on facebook. (conversely I have met few Internet users who have NOT clicked a Google ad)
They could be selling data/information. If so, I hope it's anonymized.
They could be selling data/information. If so, I hope it's anonymized.
full disclosure: I build/make money from facebook apps
Facebook made under $300 million last year, was a little shy of breaking even...
Why is this surprising to so many? There are dozens of developers that are netting 100k+ a month (yes i actually talk to one of them quite often), and at least half of this is from ads. Facebook is the largest social network in the world and growing at about 1 million users a day; why is it a surprise that they are actually almost break even?
Facebook made under $300 million last year, was a little shy of breaking even...
Why is this surprising to so many? There are dozens of developers that are netting 100k+ a month (yes i actually talk to one of them quite often), and at least half of this is from ads. Facebook is the largest social network in the world and growing at about 1 million users a day; why is it a surprise that they are actually almost break even?
My surprise is largely based on the recently published articles suggesting their burn rate was something insane like $200M / year. On the other hand if there are developers making $100k+ a month based on ads, I guess I am just the wrong demographic for facebook ads.
Good for you! It's not so great for Facebook's investors, though.
FB: Hi, we're a conduit that funnels small sums of money from millions of people into a smaller number of developer's pockets.
Investors: So, how much of that do we get?
FB: Um. Almost 0, but we're working on that.
Investors: ...
FB: Hi, we're a conduit that funnels small sums of money from millions of people into a smaller number of developer's pockets.
Investors: So, how much of that do we get?
FB: Um. Almost 0, but we're working on that.
Investors: ...
Surely the same could be said of Google. Their revenue is some tiny fraction of 1% of the value they create for users.
Google makes more money than it spends. Facebook does not (yet). This is a crucial difference.
> Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
-- Charles Dickens
> Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.
-- Charles Dickens
> and at least half of this is from ads
What is the other half from? Do facebook users pay for applications? Are users buying services? (I can see a travel agent service.)
What is the other half from? Do facebook users pay for applications? Are users buying services? (I can see a travel agent service.)
i have clicked on facebook ads, when at times they are actually really interesting to me. not often, but a few times. i probably click on google ads about the same amount (rarely) and otherwise never click on other ads across the web.
Like I said elsewhere, I may just not be in the right demographic of facebook ad clickers. (Just another way of saying maybe I am getting old :)
or you might not have run into a very well targeted ad yet. i've run into a few ads related to some of my very niche interests and musical tastes that have definitely caught my eye.
I have the same experience: I've clicked on facebook and google ads at about the same rate (maybe 5ish times each) in the last year.
Facebook apps and ads appeal to a market very far away from us tech guys so it can be hard to think of how it works. Think of things as random as bored at home fat housewives and Swedish people as your money makers. Also facebook ads can be hyper local, because people in facebook tend to actually put accurate information in! Imagine local businesses and organizations advertising their cancer runs, concerts or what not.
Hmm, yes and no. Facebook ads are generally well targeted, I think. I get ads mainly for diving and snowboarding (which I have followed), dating (I am single and looking, not quite ready to take the plunge into online dating yet tho') and fitness (and I know those "get a six pack" ads are all scams, but showing them to me is a reasonable decision by the algorithm). I also get "become a fan of X" as sponsored ads which is just plain stupid.
Google's ads seem to be simple keyword matches and are context-free, I think Facebook could have the edge here, but they really do need to get rid of the scammers and actually pay attention to feedback (e.g. if I flag an ad as uninteresting, FB is wasting my time and its advertiser's money by showing it to me ever again).
Google's ads seem to be simple keyword matches and are context-free, I think Facebook could have the edge here, but they really do need to get rid of the scammers and actually pay attention to feedback (e.g. if I flag an ad as uninteresting, FB is wasting my time and its advertiser's money by showing it to me ever again).
I'm a little puzzled by the skepticism about Facebook's utility. I don't know about you guys, but losing touch with old friends is something I feel bad about all the time. Facebook let's you keep informed in a shallow way about people who you don't meet often (enough). That's certainly better than being uninformed.
I would actually pay a small amount for something like Facebook.
If you build something with utility, usually it's possible to derive value.
I would actually pay a small amount for something like Facebook.
If you build something with utility, usually it's possible to derive value.
Interesting...does this mean that Facebook will only accept funding for nothing less than $15 billion?
Facebook made under $300 million last year...
How?!
How?!
If that's true, it's remarkable.