Facebook is growing fast.. maybe too fast!

As I have said before, I always enjoy looking into numbers for some companies because they are usually so impressive, they sometimes sound unbelievable.  Techcrunch has an article about the speedy growth of Facebook and increasingly huge requirements to operate their site.

Last year, Facebook had a reported $450 million of funding to expand and operate.  That money was raised from various sources and their CEO said that they should be able to run on that amount for a couple of years, even if they didn’t go public until 2009.  It seems that the incredible numbers generated by the Facebook Phenomenon costs much more than they had anticipated.  There’s no doubt that Facebook is growing at a breathtaking pace. A year ago, according to Comscore, they had just 74 million unique monthly visitors and 35 billion page views. Today those numbers have grown by 118% and 74%, respectively, to 161 million unique visitors and 61 billion page views per month.

The hardware that is required to respond to such a huge amount of requests is pretty impressive.  At this rate, they are spending an estimated $100 million a year on about 50,000 servers just for growth absorption.  Then, there are the regular operations costs, such as facilities and electricity.  Their electricity bill is probably somewhere near the $1 million a month according to experts and the bandwidth costs should be near $500,000/month.  Facilities (office space and datacenter) are close to $15 million per year and if we add up their 750 employees, payroll is at least $10 million per month.

Revenue, on the other hand, was about $265 million last year.  This could have been enough if the userbase remained stable, but at the rate it’s growing right now, that won’t nearly be enough for the years to come.  There are a couple of problems with the way things are right now:

  • The user base is growing very quickly because Facebook is now translated by users to many languages and because the site is now accessible by international users.  The problem with those users is that they are not an added value for advertisers.  The reality is that more users, does not mean more ad revenue for Facebook.  There are currently 3 international users for every US-based user on Facebook.  If the international users keep growing and Facebook cannot monetize them, then costs will surpass revenue in the very short-term.
  • The economy isn’t helping either.  If Facebook wants to get more funding from investors, they will probably have to start looking for it right now because there might not be any investors interested in them later.
  • The US-Based users are not growing as fast as they should.  MySpace is holding many of those users and at the currect growth rate, it would take 18 years for Facebook to overtake MySpace.

I’m not too worried about it right now, but if things remain the way they are now, Facebook might have to take drastic measures to stay alive.  If it becomes a pay-site, it certainly won’t be as popular.  Idealy, they will need to find a way to monetize all of their international users.  This would balance out the rapid growth dictated by those users and allow Facebook to maintain its expansion as it is going right now.

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