Facebook to lose $150M next year.

Decieving headline,   facebook is going to invest 150M in servers next year  creating huge fixed costs and a headache in 2 or 3 years time.

Revenue:  
2007:    $150 million (Same number that was given in August–i.e., no upside)
2008:    $300-$350 million, up 100%+

Revenue for Facebook for 2007 will be $150 million, as has been widely reported. But for 2008, Zuckerberg projected revenue to be increased to $300 million to $350 million.

More interesting was the news that Facebook would spend $200 million next year on capital expenditures, which is a whole lot of servers.

By the way, more expenses, noted chatty Mark, those employee levels would rise to more than 1,000 in 2008 from 450 now.

And Zuckerberg also said the company’s EBITDA–earnings before interest, taxes, depreciation and amortization and a number widely used by Wall Street as an indication of operating performance–would be $50 million in 2008.

That means the company would have a negative cash flow of about $150 million (EBITDA minus CapEx), rather than break even, as it does now.

12 Responses to “Facebook to lose $150M next year.”

  1. DG Says:

    $150M-200M for servers? Ouch. Plus operating/staffing/HR costs on top of that? Double ouch. I visit this blog for Markus’ posts on the efficiency of the MS technology platform, and this just confirms it. Compete.com says Facebook does 10x the volume of POF, so if POF had comparable operating costs that would be a $15M investment for POF servers. M’s posts imply that POF spends < $0.15M on servers, so just wow.

    More technology posts, please!

  2. Callum Says:

    Facebook is doing significantly more than 10x the volume of PlentOfFish.com in terms of server load. The application is immensely more complex and they have over 68 million users active in the last 30 days (that figure is probably a good chunk higher already), of which 50% are on the site *every day*.

    They’re dealing with scalability issues and other challenges on a whole scale that eclipses PoF. For example, more photos are uploaded to Facebook than to the top 3 photo sharing sites combined. That alone is an outrageous amount of data.

    To compare PoF and Facebook is not apples with apples.

    Not to take away from the success of PoF. Of the two businesses, personally, I’d rather own PoF. They’re completely different animals.

  3. Ross Williams Says:

    What a joke – as business as internationally recognised and large as Facebook is not able to generate a significant profit!??

    Facebook picked up from MySpace but is surely vulnerable as people tire of novelty of the site – they should be making hay while the sun is still shining for them.

    Ross

  4. Mayo Says:

    Facebook by people count: 31MM vs. 2.5MM is cca 15x + avg page view is 52 vs 29 so that is 2x x 15x = 30x. The basic stuff of facebook plugins is good on one side and extremely bad on the other.. All those refreshing requests on facebook makes me hate entire site, it is so slow it is just a turn out and the problem will get more worse and worse due to further bureaucratization of the company.

  5. Nimble startups suffering from Amazon S3 irony | Michael Gracie Says:

    […] on a quarter rack of servers (i.e. “scaling the bank account”), notes that Facebook is making heavy capital investments and coming up heavily cash flow negative as a […]

  6. ViralKing Says:

    Callum is 100% and I too would rather own PoF to Facebook. (although, If i owned facebook I could sell out for a few hundred million, which I doubt Markus could do at this point

  7. Brian Breslin Says:

    to say you would rather “own” PoF over Facebook seems absurd. You are of course entitled to your opinion on that. But also comparing the two is absurd.
    Facebook has the most complete social graph data on the planet. This is the key to banking billions in 2009. PoF will never be able to scale to the same level even if Marcus is unbelievably good at scaling on his own (can’t compare growth rates on distinct markets).

  8. kim bjorkland Says:

    I’m still trying to understand markus’ assertion that:

    Cashflow = ebitda – Capex

    Is this what you really think Markus?

    Also – is facebook really making 150mil in revenue? Or is that guaranteed revenue from microsoft advertising division?

    That’s what I never understood about this ms investment crap. Ms isn’t really valuing fb at such a high valuation, there’s probably countless warrants and handcuffs related to advertising there…

  9. The Insider Says:

    Ho ho! The corporates strike again! There are bad things afoot in the Facebook Empire, some internal rebels think that the slow death of the site stems directly from the proliferation of sponsored widgets and the collection of personal data and usage. Big Brother IS actually watching you. Joe Public knows and is voting with their feet.

    $150m on servers? I’d love to have been in the board room to hear that one. I presume it happened when they were still growing. Rumour has it there’s a lot of head scratching going on in Palo Alto.

    The corporates are killing another golden goose.

  10. Creating Forms Says:

    Do not believe that social network sites will ever make any money. I have experienced it before.

    When u let the increasing number of useless users (teenagers without credit cards) conecting with each other with new widgets in the facebook platform… there you go… exponentially

    Traffic cost will go up the stratosphere. There will be no way they can offset the cost by whatever revenue they are planning.

    The only exit point for facebook (or myspace for that matter) is to be bought by Google God or Almighty Bill Gates for xxx gazzilion USD.

    The cost of traffic will then be offset by selling real softwares (like Windows 7) to the registered users.

  11. CraigsIdea Says:

    ViralKing… A few hundred million??? Facebook would crack the Big B. In fact, I think a 5 Billion dollar offer was already unsolicitedly offered to facebook. Markus could prob. sellout for a few hundy himself soon, if not later! Hell, myspace soldout about 3 years ago for 580 million. Imagine today’s value.
    And yes, Markus may have less of a headache running POF than he would facebook, but no one man is attempting to run facebook. The have split the headache amongst several Markus’s and they have received the funds to invest in assets that are in the game plan for massive future growth.
    The difference in POF and FB is called VENTURE CAPITAL or a lack there of.
    Markus is simply content doing it his way (not the corporate way), whereas FB is ran by the direction of VC firms who are not here to hope people will come so they can scale up… rather, they are here to buy the people, buy the equipment, buy the business, and capitalize as much as they can in their market so they can grow their valuation fast!
    Me personally?? thats out of my league and if I were in Markus’s shoes, I am sure I would appreciate what I have going and just keep on keepin on too.

  12. kel Says:

    I want to meet some friends

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