Business models on Facebook Stanford Facebook Class Nov

Business models on Facebook Stanford Facebook Class Nov 15 th, 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… Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners $ ‘ 000 s Source: Carsonified. com/SXSW Presentation 2

… and cheaper than ever to run an internet company Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners SAMPLE EXPENSE BUDGET Annual Fixed Costs Staff Costs $0. 84 m Assumptions § 7 employees §$120 k fully loaded Infrastructure Costs $0. 18 m §$15 k/month Other Costs $0. 20 m §Rent, Legal, etc TOTAL $1. 22 m 3

As a result, getting to breakeven isn’t too hard… Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Media $ '000 s Revenue Cost of Goods % 2, 440 100% 1, 220 50%* Marketing - 0% Staff Costs 840 36% Infrastructure Costs 180 7% Other Costs 200 7% * Assumes ad sales by an ad network or ad rep firm 4

Advertising RPMs* depend on your ability to deliver a targeted audience Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners March Annual US PVs Example 2007 Revenue $0. 50 - 2 Myspace $271 M 44 B 524 B $0. 52 $1 -5 Facebook $150 M** 12 B 126 B $1. 03 Fandango $25 M** 50 M 600 M $41. 67 $10 -40 RPM 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 $100 m”, Fandango revenue estimated to be “around $50 m with half from 5 advertising and half from ticketing”

Pageview targets get progressively harder as revenue aspirations increase… Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Monthly Pageviews needed to hit Revenue Goal Annual Revenue Goal RPM $250 k $2. 5 m $25 m $0. 50 42 m 417 m 4, 167 m $2. 50 8 m 833 m $10 2 m 21 m 208 m 6

…requiring stretch targets for installs Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Total app installs needed to hit revenue goal* Annual Revenue Goal $0. 50 $250 k $2. 5 m $25 m 9 m 93 m 926 m VS. RPM $2. 50 2 m 19 m 185 m 21 m installs $10 0. 5 m * Assumes 5% active per day, 3 pageviews per visit 5 m 46 m 7

Implication for ad models – get big or get expensive Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners § Get big Multiple apps Multuple platforms § Get expensive (High CPMs) Endemic categories (Movies, Travel, Health, Shopping etc) Standard ad units Targeting 8

What about digital goods? Lightspeed Confidential - Not to be copied, distributed or referred to without the prior written consent of Lightspeed Venture Partners Total installs needed to hit Revenue Goal Annual Revenue Goal Purchase rate $250 k $2. 5 m $25 m 0. 1% 14 m 139 m 1, 389 m 1% 1 m 14 m 139 m 5% 0. 3 m 3 m 28 m * Assumes 5% active per day, $1 per item 9