facebook business analysis and prognosis

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ESM #4 - Team Facebook – Jennifer & Lloyd

Facebook Software Business Analysis & Prognosis

Jennifer Lloyd

9th October 2014

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History

Founded by Mark Zuckerberg in Harvard

2004 2006 2010 2012

Open for everyone in the world

Launched the Like bu<on

Biggest IPO in tech Market cap 104 B

2004 2005 2006 2007 2008 2009 2010 2011 2012

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Mission

“ give people the power to share and make the world more open and connected”

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Vision

"People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what maIers to them."

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Products & Services

Developer PlaEorm

For thrid party developers to develop their own apps.

Messenger

Send private messages and sLckers, chat with groups,

and make free calls..

Photos & Video

Facebook is the most popular place to share photos on the

web.

Mobile

Over 75% of Facebook’s daily users use it on their mobile

phones.

User base expansion User engagement Content contribuLon & sharing

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•  200 million monthly acLve user

•  Strenghen photo and video sharing

Instagram $1 billion

WhatsApp $19 billion

Oculus $2 billion

Major Acquisitions

•  600 million monthly acLve user

•  Strengthen instant messaging

•  Enable you to experience the impossible

•  New communicaiton plaTorm

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- Prognosis –

In the next two years, Facebook will grow even faster,

with addiLonal revenue streams coming on-‐board.

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Prognosis Inputs

Enternal Market Trends

Internal Strengths

Revenue – Current & Future

PotenLal Risks

Summary of PosiLves and NegaLves

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External - Digital Ads Market

Mobile adverIsing revenue doubled from 2012 to 2013, 3rd year of triple digit growth

25.4

30.1 33.2

35.7

0.6 1.6 3.4

7.1

26

31.7

36.6

42.8

0

5

10

15

20

25

30

35

40

45

2010 2011 2012 2013

Non-‐Mobile Mobile Total

First Ime, online adverIsing passed broadcast TV.

Online adverIsing has 18% overall CAGR from 2010 to 2013

Online video ads takes 7% overall and rapidly growing

Mobile adverIsing revenue takes 17% overall

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External - Internet Ads Landscape

ü Steadily growing in US & global market

ü Rapid growth in mobile ads market

Facebook Google Twi<er

ü Dominate paid search, growing in US & global online ads market

ü Dropping share in mobile ads market

ü RelaLvely small share in US & global online ads market

ü Growing in mobile market, but slow

Others Google Facebook

50% 40% 8% 2%

Twitter

Others Google Facebook

28% 47% 22% 3%

Twitter

Internet Ads Revenue Worldwide -‐ Mobile

Internet Ads Revenue in US

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2005 2006 2007 2008 2009 2010 2011 2012 2013 Q2 2014 Users 6 12 58 145 360 608 845 1056 1228 1317

0

200

400

600

800

1000

1200

1400

Avg Daily Time on Facebook

Highlights

1.317 Billion

Strengths – Large & Engaged User Base

21 minutes

Total Content Items per day

Total Messages per day

> 4.75 Billion

> 4.5 Billion Total Likes per day > 10 Billion

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Strengths – Numerous Ad Verticals Vertical Facebook Google Twitter LinkedIn

Demographics

EducaLon

Professional

ConnecLons

Interests

Real-‐Time LocaLon

One-Stop Shop for all verticals

Highlights Ability to combine different options for targetted marketing

Semi-Monopoly position – able to raise prices if needed

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Revenue – Video Ads Expected to capture 3% of the US TV Ad market by 2016, from 0% today Strong driver for current revenue growth 2013 2014E 2015E 2016E

$ millions $183 $1,095 $1,825 $2,555

$183

$1,095

$1,825

$2,555

$-‐

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Morgan Stanley Video Ads Revenue EsLmates

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200 mil Monthly AcIve

Users

Projected First Year Revenue

$400 mil

Future Revenue Stream - Instagram

76% Surveyed Teens

Usage

Piper Jaffery

Piper Jaffery

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600 mil Monthly AcIve

Users

Current Annual Revenue (Est)

$350 mil

Future Revenue Stream - WhatsApp

$0.99 Annual SubscripIon

per User

Business Insider

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Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

Q2 2014

Q Revenues $1,086 $1,329 $1,245 $1,599 $1,798 $2,344 $2,265 $2,676

$1,086 $1,329 $1,245

$1,599 $1,798

$2,344 $2,265

$2,676

$-‐

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Current Revenues

$400 million +

$350 million +

+

+

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Risks – Youth Fatigue

8 October 2014 Piper Jaffery Survey

21

7

22

21

12

59

76

45

0 10 20 30 40 50 60 70 80

Others Reddit

Pinterest Tumblr Google+ TwiIer

Instagram Facebook

Spring 2014 Fall 2014

Facebook usage among teens dropped to 45%

Instagram usage increased to 76% of

teens

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Risk – Tech Bubble

Risk of drying up of VC funding, to companies who spend it on Social Media Ads.

Industry wide effect. ExperimenLng with diversifying revenue streams.

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Summary of Prognosis Inputs

External Market Trends POSITIVE Growing Online Ad Pie

Internal Strengths POSITIVE Semi-‐Monopoly in Social Ads

Revenue – Video Ads POSITIVE Strong Growth Rate

Future Revenue – Instagram POSITIVE AddiLonal $400m and growing

Future Revenue – WhatsApp POSITIVE AddiLonal $350m and growing

Risk – Youth FaLgue MITIGATED Instagram covers up

Risk – Tech Bubble NEGATIVE Industry wide effect

facebook business analysis and prognosis

Business

facebook highlights

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overall page

connected page

negalves page

nonmobile mobile total

online video ads

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