Techcrunch had the scoop on Yahoo’s proposed acquisition of Facebook. Specifically the internal forecast used to determine a $1.6bn bid.
Most have focused on the top line numbers but it gives incredible insight into what exactly Facebook is doing at the moment. And then as a follow up to that, the state of the online ad industry and the issues facing it.
Facebook did $5m in revenue last year and expected to increase it to $25m this year.
4-5% of their inventory is sold on a direct basis for around $5 CPM.
95-96% of their inventory is sold on a remnant basis for 9-17 cents CPM.
On a $ basis – and because of the discrepancy in CPM – direct sales generate about two thirds of the revenue and remnant one third.
Social networks are a more extreme example of publisher, because of the low quality and high quantity of inventory and secondly because most of them are very new, the monetization levels are tiny compared to more established sites. But the 95/5 does provide a counter-example to a 75/25 rule that I talked about before.
The remnant CPM numbers of 10-20 cents also highlight the economics of the mega deals that Google and MSN have done and Yahoo is trying to do with these hugely popular new properties like Facebook, MySpace and YouTube.
They hinge on the ability to take the current 10-20 cents and improve that to 50 cents or a dollar over time – something Google has proven exceptionally well at doing. Although the whole process doesn’t quite make for the same drama as glitzy TV upfront ad parties with drunken assistant media buyers passing out and crapping their pants.
