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Facebook finance crunch, flat US growth

Written on
Mar 27, 2009 
Author
Edward Barrera  |
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Facebook finance crunch, flat US growth

facebook_small.jpgADOTAS — Some interesting numbers in a story about how the social network’s popularity is forcing it to look for new financing.

First, what happened to the 180 million user numbers just recently thrown around?  According to Business Week, Facebook has 275 million global users around the world, up from 100 million last February. In the last three months, it added 75 million users, more than its entire audience in the U.S., which has flattened out at 57 million users.

Now there are two concerns, if these numbers are to be believed, which when it comes to data I’ve learned to basically trust no one. First, Facebook, which eMarketer estimated will bring in $230 million this year, has rapidly growing technology and storage costs.

“We’re talking tens of millions of dollars a year,” Frank Gillette, vice-president at market researcher Forrester Research, told Business Week. “It’s safe to say that supporting 275 million users from 100 million means that you’ve effectively had to triple your infrastructure. They are being forced to build at scale with expensive technology.”

But also, with most of the growth coming from outside of the US, Facebook will have a more difficult time securing advertising. (Foreign ad networks have a major opportunity here.) And is the flat growth in the US momentary?

According to BW, Facebook is looking for $100 million in debt financing to help it finance leases for the growing number of computers. Gideon Yu, Facebook’s chief financial officer, has said the company had raised more than $500 million in debt and equity.

Like I said, trust the numbers as far as you can throw them. But Facebook might have to slow down its growth.

– Express your opinion, comment below.





Reader Comments.

The question isn’t growth. The question is, can FB actually monetize and advertise to the 57 million US users alone? Thus far, this has failed. And rumors of FB becoming a paid service has met with growing antagonism from FB users. Already, there are FB users grouping to protest this potential development.

The nature of FB users and their way to consume media as well as how they interface with FB means that FB cannot rely on advertising, nor traditional online advertising.

They need to offer advertising that mirrors FB user behavior – meaning advertising that FB users want or are willing to engage in.

FB, in short, should be proactively reaching out to agencies. Also, FB needs to be concerned with how it measures metrics – so that advertisers can properly gauge ad spend.

Posted by Cryptblade | 12:43 pm on March 27, 2009.

Facebook allows users to post incredible amounts of photos. I’d think they could limit that storage–we don’t need to keep all those party photos forever.
The flattening may be with my fellow baby boomers–many are quite resistant to joining the FB crowd, and they’d be an excellent ad target, even if discretionary income is falling. I try to explain that it doesn’t have to be photos of drunken revelry! I post photos of exhibits and sightseeing, as well as the customary family and friends (non-drunken) photos.

Posted by Diane M. | 2:35 pm on March 27, 2009.

I have been surprised by the number of long-lost contacts I have recently reconnecte with, but agravated by the junk apps. I’m also noticing more of the apps are objectionable. I guess that’s the price one pays for a free service. I’m looking more toward other social networking services that aren’t as intrusive with the junky apps.

Posted by Clay Neves | 5:45 pm on March 27, 2009.

I think Bank of America would be wise to take pause before investing in Facebook. Yes, Facebook has access to an extensive amount of information about an absurd number of people that can be used for marketing purposes. But their recent decisions and comments in regard to people’s reactions to the new design suggests a possibly…reckless(?) or at least not very well thought-out business strategy. (And if facebook users are their product rather than their customers..that makes the issue more rather than less serious perhaps..)

Dr. Tantillo, who has a marketing blog, pointed out that Facebook could have at least done test runs of the newest version of facebook to get feedback beore actually launching it….or take the advantage of free and voluntary labor by allowing users to contribute under a wiki sort of setup. Here’s a link to his full post.

Instead of counting on people to become fans of products and companies, it would make good sense for facebook to do a better job tailoring ads to user’s interests. They definitely have a lot of information at their disposal to target as precisely as possible–as Google has tried to do with its ads (where advertisers only pay if the ads are clicked on), but even better….

If ads were targeted to users, taking into account all the information in a user’s profile, I doubt the consumers would resent the ads… Currently, there’s an option to say you “do” or “don’t” like a certain ad, but since we know we have to see some ads anyway, I think that some of us would be wiling to fill something out indicating the types of ads we would be more interested in seeing. (ex. If my favorite author’s new book just went on sale and there’s a link to buy it on amazon….I wouldn’t mind… I might even be glad for the ad, since it’s something I’d want to spend my money on anyway.)

Posted by sloane | 10:54 am on March 29, 2009.

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