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It's hard to believe that you don't see a road to profitability for Facebook. It seems to be more a question of when at this point, and trading that off against

by bdr 18y ago

It's hard to believe that you don't see a road to profitability for Facebook. It seems to be more a question of when at this point, and trading that off against growth. What do you mean "how the internet works"?

brk 18y ago
I'm curious then, what do YOU see as their road to profitability? And at this stage, I would say "profitability" should mean being able to pay a return to the investors in a timely manner and becoming a stand-alone company.
- Retric 18y ago
  Fasebooks long term profitability is based in part on a long term reduction in the cost of bandwidth and computer hardware. The real question is can the survive to that point, and are they going to remain profitable on that time scale. IMO, companies that are experiencing huge growth are better off reinvesting all of their income into the business even if it makes it look like they are not profitable. Granted at some point dumping more money into the company is not going to help growth but maximize growth and then cut costs is a reasonable approach. PS: When you see Facebook cut 5k jobs expect great things on next years balance sheet.
  - brk 18y ago
    But what is their revenue stream? Advertising alone? That doesn't feel, to me, like something that most people would consider to be a reliable revenue stream. Hardware is usually not a significant data center cost, at least not in relationship to the power/cooling/floorspace costs. Wholesale bandwidth has dropped over the last several years from about $100/Mb/Mo to $35/Mb/Mo. I don't know how much lower that can reasonably go. But, let's say it becomes 1/3 the price again (down to $10/Mb/Mo) over the NEXT 5 years. That's a long time to wait when you're losing $20MM/Mo (using the speculative numbers quoted elsewhere for that). And the net cost savings probably don't yield more than a few $MM/mo.
    - Retric 18y ago
      Advertising worked for ABC, NBC, CBS, the New York Times, and Google etc. While it's somewhat cyclical it's actually fairly stable revenue stream. Ok, Facebook and the New York Times have other sources of revenue but advertising is their major source. Anyway, I think they are basically treading water and not just burning 20mill / month at this point in time. So their revenue is 300 million / year and there costs are close to that. Most of there money seems to be spent on infrastructure and people to support said infrastructure. So, if the cost of their infrastructure drops to 1/3 then their total costs should drop by ~1/2 as they still need people, and they would be making ~10million a month which is worth around 1 billion. However, I expect they can increase their revenue though optimizations and growth so they are probably worth in the 2 - 10 billion dollar range. PS: Would need to look at their actual costs to get a better Idea.

by bdr 18y ago

brk 18y ago

I'm curious then, what do YOU see as their road to profitability? And at this stage, I would say "profitability" should mean being able to pay a return to the investors in a timely manner and becoming a stand-alone company.

Retric 18y ago
Fasebooks long term profitability is based in part on a long term reduction in the cost of bandwidth and computer hardware. The real question is can the survive to that point, and are they going to remain profitable on that time scale. IMO, companies that are experiencing huge growth are better off reinvesting all of their income into the business even if it makes it look like they are not profitable. Granted at some point dumping more money into the company is not going to help growth but maximize growth and then cut costs is a reasonable approach. PS: When you see Facebook cut 5k jobs expect great things on next years balance sheet.
- brk 18y ago
  But what is their revenue stream? Advertising alone? That doesn't feel, to me, like something that most people would consider to be a reliable revenue stream. Hardware is usually not a significant data center cost, at least not in relationship to the power/cooling/floorspace costs. Wholesale bandwidth has dropped over the last several years from about $100/Mb/Mo to $35/Mb/Mo. I don't know how much lower that can reasonably go. But, let's say it becomes 1/3 the price again (down to $10/Mb/Mo) over the NEXT 5 years. That's a long time to wait when you're losing $20MM/Mo (using the speculative numbers quoted elsewhere for that). And the net cost savings probably don't yield more than a few $MM/mo.
  - Retric 18y ago
    Advertising worked for ABC, NBC, CBS, the New York Times, and Google etc. While it's somewhat cyclical it's actually fairly stable revenue stream. Ok, Facebook and the New York Times have other sources of revenue but advertising is their major source. Anyway, I think they are basically treading water and not just burning 20mill / month at this point in time. So their revenue is 300 million / year and there costs are close to that. Most of there money seems to be spent on infrastructure and people to support said infrastructure. So, if the cost of their infrastructure drops to 1/3 then their total costs should drop by ~1/2 as they still need people, and they would be making ~10million a month which is worth around 1 billion. However, I expect they can increase their revenue though optimizations and growth so they are probably worth in the 2 - 10 billion dollar range. PS: Would need to look at their actual costs to get a better Idea.