I think we’ve known that eMarketer has been using some funny math for a while now, hence their restated revenue projections for both MySpace an Facebook. Despite their questionable methods, Facebook’s revenue estimates for both 2008 and 2009 are still somewhat surprising. Earlier this year Mark Zuckerberg estimated that revenues would be somewhere around $325 million for this year but eMarketer suggests that revenue will actually be closer to $210 million.
While that’s nothing to laugh at, missing the estimates by such a large margin could mean serious repercussions for the company. Missing projections by a little over $110 million; over $360 million raised earlier this year/late last year (see here); rapidly rising server costs as the company fire fights memcached problems … all of this adds up to a new round of funding coming soon. eMarketer suggests that the company will bring in $230 million in advertising dollars next year which accounts for less than 10 percent annual growth.
For a company that is estimated to double in size within the next 10 months, these revenue projections don’t make a lot of sense. Alternatively, perhaps the rationale for such muted growth estimates is that global growth doesn’t really add up to much growth in advertising dollars. While a large portion of revenues come from virtual gifts, if advertising growth remains to be as slow as projected, Facebook may face some serious decisions ahead.
Whatever the rationale for eMarketer’s controversial numbers, one must seriously question where this is all coming from. Every few months the company restates estimates but given the current economic environment, restating estimates is a common occurrence and any research company in the space should be expected to do the same.
Facebook is clearly feeling the pressure of the current economic climate but I must wonder whether or not next years projections are understated. If they aren’t Facebook may end up needing financing earlier than expected. Not everything is clear though when you are basing your reality on a questionable research organization. Feel free to check out the company’s data though and let us know what your thoughts are.
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Zuckerberg (Facebook’s founder/CEO) told me that the company doesn’t reveal numbers and that the estimates he’s seen on the web about Facebook are “low.” I wonder what the real numbers are, but I can’t put too much stock in any of these things because Facebook is a private company and one that doesn’t reveal too much about itself.
Comment by Robert Scoble — December 27, 2008 @ 3:38 am
Nick,
Even if Facebook were to be as progressive as MySpace in their ad sales team, they still couldn’t hit that $325MM figure. In my blog post at dennis-yu.com today, I suggested that a subscription model, however unpopular, would instantly make them a billion dollar business.
Dennis
Comment by Dennis Yu — December 27, 2008 @ 4:03 am
Giant Facebook looks like Google,and it needs own AdSense’s analog.
Comment by Igor Poltavskiy — December 27, 2008 @ 4:16 am
None of it makes sense, it never added up. That’s why it’s a bubble, it’s bursting – and tag, you’re part of it.
Comment by Paul — December 27, 2008 @ 6:24 am
Trying to examine revenue reports and projections is like consulting Tarot cards. I mean, who can accurately guess in this web economy? A correction is underway on line and off line so anything right now has to be reading tea leaves.
Jim
Facebook Tutorials
http://www.answersplus.info/fbindex.htm
Comment by Jim DeSantis — December 27, 2008 @ 3:02 pm