7 ms·

Facebook Hemorrhaging Cash, Runs To Dubai For Money

22 points by jmorin007 18y ago

ErrantX 18y ago
If they can cut jobs rather than raise (too much) more money then they probably should. Spewing money that fast is BAD all round (and no amount of shoring investment will help long term). Either they need 2 or 3 years capital or they need it fixed now... Cut hard and deep now, refocus, reassess and build on current revenue streams. But they wont....
Dilpil 18y ago
Can facebook possibly make as much money as has been invested in them?
- dmix 18y ago
  Sorry for stating the obvious, but they generally have to show that they can make the money back (about 10x) to investors before taking the money... its much harder to comment on whether they can or not when your not involved with the company.
  - jonknee 18y ago
    Sorry for stating the obvious, but VC is a big risk that only rarely pays off. The VC bets on Facebook weren't because of a business model they have, it was on that they will be able to find one that works on a huge scale. Sort of like Google and AdWords. It's all unproven at the moment and the valuations were simply based on the number of users.
  - run4yourlives 18y ago
    That type of thinking led to the first dot-bomb, the housing boom/bust, and hell, even the depression. Lot's of people do very stupid things.
river_styx 18y ago
I realize that Facebook gets enormous amounts of traffic, and so requires the resources for scaling/high availability and all that. But how in the world have they gone through most of $500 million? What the hell are they doing over there?
- maryrosecook 18y ago
  They do have ~700 employees (http://www.crunchbase.com/company/facebook http://www.crunchbase.com/company/facebook)...
  - river_styx 18y ago
    That's sort of what I'm getting at. Why do they need so many resources? I mean, looking at the software and its requirements, I don't see the necessity.
    - tortilla 18y ago
      I bet their revenue projections were based upon insane levels of growth (internal and external). Even if the economy was in better shape it would have been hard to reach profitability.
    - tom_rath 18y ago
      My guess is they're a victim of cargo cult thinking: Hugely successful companies have lots of employees and spiffy offices, right?
      - staunch 18y ago
        Yeah. And Google has done the exact same thing. They're just fortunate that their business model is so much better that it can support their massively inflated head count. At least with Google it kind of makes sense in an evil way: hire every programmer who could be a serious competitor.
        18y ago
vaksel 18y ago
why is it taking these guys so long to come up with a business plan? Why is Zuckerberg promising one in 3 years, and not coming up with one now. Hell they have 700 people, not one of them can figure out how to monetize 1 of the most visited sites in the world?
- ntoshev 18y ago
  Maybe it's a really hard problem that we don't fully understand. EDIT: deleted unnecessary nagging
  - wensing 18y ago
    Or maybe it's a really hard problem that we don't fully understand. The problem seems simple in one sense: uncontrolled growth, no?
    - ntoshev 18y ago
      Their real problem is not the burn rate but that they can't bring in reasonable revenue (for the traffic they have). Here is an interesting article on how other social networks are doing: http://www.usatoday.com/tech/techinvestor/industry/2008-05-11-social-networking_N.htm http://www.usatoday.com/tech/techinvestor/industry/2008-05-1...
- byrneseyeview 18y ago
  I think what they're doing is daring, but it makes sense. Creating a business plan narrows the companies options; as long as they don't have one, they're flexible enough to bring in new users (and keep old users coming back), which could open up more possibilities. If Zuck had monetized when Facebook was at Harvard, Facebook would have been cash-flow positive. And he would have graduated with a few thousand dollars extra in the bank, rather than dropping out and ending up with a billion-something net worth.
  - timr 18y ago
    Paper net worth.
callmeed 18y ago
Apparently Zuckerberg didn't read the Sequoia meeting notes ...
- jmtulloss 18y ago
  Or he did, which is why he's trying to raise money now.
ksvs 18y ago
Rather a spun title.
run4yourlives 18y ago
Hear that? It's the ghost of .com past sneaking up on you... timing might be right too. :-)
bigthboy 18y ago
I've never really understood Facebook from the business side at all. I generally like the service they offer (generally, though it is really lacking interesting and helpful aspects) but I've never understood their thinking on business moves. They've got a very popular software platform, one of the most visited sites in the world and rising, and some how 700 people can't figure out how to make a buck. I agree with most of the other people here... Zuckerberg promises a business plan in 3 years? What the hell? I can see having your product and company out there and be selling things or providing a service and not necessary have the business plan down and taking some time to find one that really does work well, but when you have 700 people, corporate offices, and a widely popular product/service, a business plan seems to me to be something you put at the front of the line. Not: "hmm, we'll get to it later, lets just enjoy the fame!" Most of what goes on at Facebook could be ran by 70 really good people. That's not including investors/shareholders at all. That's 70 people that are just in charge, server/network managers, system engineers, accounting (do they need one?), and marketing. It appears Facebook got the idea that it needed to have its own in-house Microsoft Research or something.
webwright 18y ago
As impressive as Facebook is, I truly think it is ridiculous that they have ~800 employees. How many does Craigslist have? Wikipedia? Granted, FB needs a few more to manage ad sales/delivery, but... 800?
- henning 18y ago
  That's one of the advantages of simplicity: far lower overhead. craigslist is very simple, so they have something like 23 employees.
  - wensing 18y ago
    25 according to CrunchBase.
- liuliu 18y ago
  Wikipedia seems like only have 5 programmers. Am I correct?
- alexandros 18y ago
  Facebook was hell-bent to become the new google and built an organization to match. In fact, the hype was promoting facebook as the successor in the ibm->microsoft->google line. Thing is, google did not begin to be 'the new' anything. And with the downturn setting in, Facebook may have to get its focus back or we may be talking about it as 'remember that website that had tons of users and no revenue' in a few years.
- aston 18y ago
  Lots of Facebook's man power is in customer support (which also involves community moderation). When you have more than a hundred million users worldwide, there's a lot of work to go around in that area. And I guess they're not outsourcing much of it.
  - fallentimes 18y ago
    I wonder who has more customer support problems/issues to deal with: Craigslist vs Wikipedia vs Facebook?
known 18y ago
Someone please tell me what is Facebook's USP?
aswanson 18y ago
They need to hire Paul Bucheit. Hell, he came up with adwords for google, he can do it again.

22 points by jmorin007 18y ago

If they can cut jobs rather than raise (too much) more money then they probably should. Spewing money that fast is BAD all round (and no amount of shoring investment will help long term). Either they need 2 or 3 years capital or they need it fixed now... Cut hard and deep now, refocus, reassess and build on current revenue streams. But they wont....

Dilpil 18y ago

Can facebook possibly make as much money as has been invested in them?

dmix 18y ago
Sorry for stating the obvious, but they generally have to show that they can make the money back (about 10x) to investors before taking the money... its much harder to comment on whether they can or not when your not involved with the company.
- jonknee 18y ago
  Sorry for stating the obvious, but VC is a big risk that only rarely pays off. The VC bets on Facebook weren't because of a business model they have, it was on that they will be able to find one that works on a huge scale. Sort of like Google and AdWords. It's all unproven at the moment and the valuations were simply based on the number of users.
- run4yourlives 18y ago
  That type of thinking led to the first dot-bomb, the housing boom/bust, and hell, even the depression. Lot's of people do very stupid things.

river_styx 18y ago

I realize that Facebook gets enormous amounts of traffic, and so requires the resources for scaling/high availability and all that. But how in the world have they gone through most of $500 million? What the hell are they doing over there?

maryrosecook 18y ago
They do have ~700 employees (http://www.crunchbase.com/company/facebook http://www.crunchbase.com/company/facebook)...
- river_styx 18y ago
  That's sort of what I'm getting at. Why do they need so many resources? I mean, looking at the software and its requirements, I don't see the necessity.
  - tortilla 18y ago
    I bet their revenue projections were based upon insane levels of growth (internal and external). Even if the economy was in better shape it would have been hard to reach profitability.
  - tom_rath 18y ago
    My guess is they're a victim of cargo cult thinking: Hugely successful companies have lots of employees and spiffy offices, right?
    - staunch 18y ago
      Yeah. And Google has done the exact same thing. They're just fortunate that their business model is so much better that it can support their massively inflated head count. At least with Google it kind of makes sense in an evil way: hire every programmer who could be a serious competitor.
      - 18y ago

vaksel 18y ago

why is it taking these guys so long to come up with a business plan? Why is Zuckerberg promising one in 3 years, and not coming up with one now. Hell they have 700 people, not one of them can figure out how to monetize 1 of the most visited sites in the world?

ntoshev 18y ago
Maybe it's a really hard problem that we don't fully understand. EDIT: deleted unnecessary nagging
- wensing 18y ago
  Or maybe it's a really hard problem that we don't fully understand. The problem seems simple in one sense: uncontrolled growth, no?
  - ntoshev 18y ago
    Their real problem is not the burn rate but that they can't bring in reasonable revenue (for the traffic they have). Here is an interesting article on how other social networks are doing: http://www.usatoday.com/tech/techinvestor/industry/2008-05-11-social-networking_N.htm http://www.usatoday.com/tech/techinvestor/industry/2008-05-1...
byrneseyeview 18y ago
I think what they're doing is daring, but it makes sense. Creating a business plan narrows the companies options; as long as they don't have one, they're flexible enough to bring in new users (and keep old users coming back), which could open up more possibilities. If Zuck had monetized when Facebook was at Harvard, Facebook would have been cash-flow positive. And he would have graduated with a few thousand dollars extra in the bank, rather than dropping out and ending up with a billion-something net worth.
- timr 18y ago
  Paper net worth.

callmeed 18y ago

Apparently Zuckerberg didn't read the Sequoia meeting notes ...

jmtulloss 18y ago
Or he did, which is why he's trying to raise money now.

ksvs 18y ago

Rather a spun title.

run4yourlives 18y ago

Hear that? It's the ghost of .com past sneaking up on you... timing might be right too. :-)

bigthboy 18y ago

I've never really understood Facebook from the business side at all. I generally like the service they offer (generally, though it is really lacking interesting and helpful aspects) but I've never understood their thinking on business moves. They've got a very popular software platform, one of the most visited sites in the world and rising, and some how 700 people can't figure out how to make a buck. I agree with most of the other people here... Zuckerberg promises a business plan in 3 years? What the hell? I can see having your product and company out there and be selling things or providing a service and not necessary have the business plan down and taking some time to find one that really does work well, but when you have 700 people, corporate offices, and a widely popular product/service, a business plan seems to me to be something you put at the front of the line. Not: "hmm, we'll get to it later, lets just enjoy the fame!" Most of what goes on at Facebook could be ran by 70 really good people. That's not including investors/shareholders at all. That's 70 people that are just in charge, server/network managers, system engineers, accounting (do they need one?), and marketing. It appears Facebook got the idea that it needed to have its own in-house Microsoft Research or something.

webwright 18y ago

As impressive as Facebook is, I truly think it is ridiculous that they have ~800 employees. How many does Craigslist have? Wikipedia? Granted, FB needs a few more to manage ad sales/delivery, but... 800?

henning 18y ago
That's one of the advantages of simplicity: far lower overhead. craigslist is very simple, so they have something like 23 employees.
- wensing 18y ago
  25 according to CrunchBase.
liuliu 18y ago
Wikipedia seems like only have 5 programmers. Am I correct?
alexandros 18y ago
Facebook was hell-bent to become the new google and built an organization to match. In fact, the hype was promoting facebook as the successor in the ibm->microsoft->google line. Thing is, google did not begin to be 'the new' anything. And with the downturn setting in, Facebook may have to get its focus back or we may be talking about it as 'remember that website that had tons of users and no revenue' in a few years.
aston 18y ago
Lots of Facebook's man power is in customer support (which also involves community moderation). When you have more than a hundred million users worldwide, there's a lot of work to go around in that area. And I guess they're not outsourcing much of it.
- fallentimes 18y ago
  I wonder who has more customer support problems/issues to deal with: Craigslist vs Wikipedia vs Facebook?

known 18y ago

Someone please tell me what is Facebook's USP?

aswanson 18y ago

They need to hire Paul Bucheit. Hell, he came up with adwords for google, he can do it again.