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	<title>Comments on: Facebook Looking for a Bailout from Sovereign Wealth Funds?</title>
	<atom:link href="http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/feed/" rel="self" type="application/rss+xml" />
	<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/</link>
	<description>Keeping Tech Sexy</description>
	<lastBuildDate>Wed, 28 Oct 2009 02:05:44 -0500</lastBuildDate>
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		<title>By: Web 2.0, Revenue Models and Profitability &#171; Baaaaaa&#8217;s Blog</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-58981</link>
		<dc:creator>Web 2.0, Revenue Models and Profitability &#171; Baaaaaa&#8217;s Blog</dc:creator>
		<pubDate>Tue, 13 Jan 2009 02:51:29 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-58981</guid>
		<description>[...] has over 600 employees and has raised over $400 million in capital (and is reportedly still looking for another big capital infusion). Digg has over 70 employees and has raised $40 million in capital. Twitter has somewhere around 25 [...]</description>
		<content:encoded><![CDATA[<p>[...] has over 600 employees and has raised over $400 million in capital (and is reportedly still looking for another big capital infusion). Digg has over 70 employees and has raised $40 million in capital. Twitter has somewhere around 25 [...]</p>
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		<title>By: links for 2008-11-06 &#171; Green Tea Ice Cream</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-41658</link>
		<dc:creator>links for 2008-11-06 &#171; Green Tea Ice Cream</dc:creator>
		<pubDate>Thu, 06 Nov 2008 13:01:14 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-41658</guid>
		<description>[...] Facebook Looking for a Bailout from Sovereign Wealth Funds? : The Drama 2.0 Show 1) We get a fair bit of value out of Facebook. 2) We really must get around to putting an exit strategy together (Careers Tagged of course)&#8230; (tags: facebook Business socialmedia) [...]</description>
		<content:encoded><![CDATA[<p>[...] Facebook Looking for a Bailout from Sovereign Wealth Funds? : The Drama 2.0 Show 1) We get a fair bit of value out of Facebook. 2) We really must get around to putting an exit strategy together (Careers Tagged of course)&#8230; (tags: facebook Business socialmedia) [...]</p>
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		<title>By: Drama 2.0</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-40822</link>
		<dc:creator>Drama 2.0</dc:creator>
		<pubDate>Mon, 03 Nov 2008 14:32:59 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-40822</guid>
		<description>Sutro: &quot;registered users&quot; is an almost meaningless metric beacuse it tells us nothing of concurrent usage and the type of requests that the web servers and database servers have to deal with. Comparing the resource usage of your application to another application is meaningless as well.

According to that link I provided (which was posted in April), Facebook was dealing with more than 50,000 database requests per second and they claim a 95% hit rate on their cache. That&#039;s indicative of a lot of concurrent users (whether or not it&#039;s above or below 4 million users is anyone&#039;s guess).

Neither of us knows how many servers Facebook could cut down to but under various scenarios but even though I&#039;m not a fan of the company, I&#039;m sure they&#039;ve hired some smart engineers and I doubt that they&#039;ve missed an obvious means to scale effectively using 1/100th the number of servers and at a fraction of the cost they&#039;ve already incurred.</description>
		<content:encoded><![CDATA[<p>Sutro: &#8220;registered users&#8221; is an almost meaningless metric beacuse it tells us nothing of concurrent usage and the type of requests that the web servers and database servers have to deal with. Comparing the resource usage of your application to another application is meaningless as well.</p>
<p>According to that link I provided (which was posted in April), Facebook was dealing with more than 50,000 database requests per second and they claim a 95% hit rate on their cache. That&#8217;s indicative of a lot of concurrent users (whether or not it&#8217;s above or below 4 million users is anyone&#8217;s guess).</p>
<p>Neither of us knows how many servers Facebook could cut down to but under various scenarios but even though I&#8217;m not a fan of the company, I&#8217;m sure they&#8217;ve hired some smart engineers and I doubt that they&#8217;ve missed an obvious means to scale effectively using 1/100th the number of servers and at a fraction of the cost they&#8217;ve already incurred.</p>
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		<title>By: SutroStyle</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-40744</link>
		<dc:creator>SutroStyle</dc:creator>
		<pubDate>Mon, 03 Nov 2008 08:11:42 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-40744</guid>
		<description>PS. Actually, we now have 1 webserver per 280000 signups, I just rechecked. I assumed they have 100m registered users, and I *think* they have no more than 4m concurrent users (i.e. users that have their page open at any given time, which might matter for their IM service for example).</description>
		<content:encoded><![CDATA[<p>PS. Actually, we now have 1 webserver per 280000 signups, I just rechecked. I assumed they have 100m registered users, and I *think* they have no more than 4m concurrent users (i.e. users that have their page open at any given time, which might matter for their IM service for example).</p>
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		<title>By: SutroStyle</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-40742</link>
		<dc:creator>SutroStyle</dc:creator>
		<pubDate>Mon, 03 Nov 2008 08:05:19 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-40742</guid>
		<description>&gt;Sutro: I’d be interested in learning how you come to the conclusion that Facebook “should be able to run 1m users on 5 servers.”

Empirically ;) I mean 5 servers for 1m signups (account creations). Assuming the site we run has similar attrition rates as FB (and it does), it&#039;s the empirical number that you can get, if you highly optimize. We started from 1 webserver per 100,000 signups, and were forced tp optimize to this level, since we had no money. To be honest, I do not know about TBytes of photo storage: we thought we could not afford to store more than a couple downsized pictures per user from the start. 
I can tell you more about the technical details if you are interested. Not really interested in talking to their HR person, since we have our own site to work with.

Regarding that comment with advertizing numbers, what she says makes a lot of sense to me, like the ecpms she quoted- home (or portal) pages versus profiles- I have some similar data here.</description>
		<content:encoded><![CDATA[<p>&gt;Sutro: I’d be interested in learning how you come to the conclusion that Facebook “should be able to run 1m users on 5 servers.”</p>
<p>Empirically <img src='http://www.drama20show.com/wp-includes/images/smilies/icon_wink.gif' alt=';)' class='wp-smiley' />  I mean 5 servers for 1m signups (account creations). Assuming the site we run has similar attrition rates as FB (and it does), it&#8217;s the empirical number that you can get, if you highly optimize. We started from 1 webserver per 100,000 signups, and were forced tp optimize to this level, since we had no money. To be honest, I do not know about TBytes of photo storage: we thought we could not afford to store more than a couple downsized pictures per user from the start.<br />
I can tell you more about the technical details if you are interested. Not really interested in talking to their HR person, since we have our own site to work with.</p>
<p>Regarding that comment with advertizing numbers, what she says makes a lot of sense to me, like the ecpms she quoted- home (or portal) pages versus profiles- I have some similar data here.</p>
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		<title>By: Drama 2.0</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-40727</link>
		<dc:creator>Drama 2.0</dc:creator>
		<pubDate>Mon, 03 Nov 2008 06:28:02 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-40727</guid>
		<description>Sutro: I&#039;d be interested in learning how you come to the conclusion that Facebook &quot;should be able to run 1m users on 5 servers.&quot;

If you&#039;re talking about 1 million *concurrent* users (the figure that reallly matters), I think you&#039;re off by orders of magnitude.

Consider this: when it comes to photo hosting (which is not even the most resource-intensive part of Facebook&#039;s service in terms of processing power), Facebook &lt;a href=&quot;http://www.facebook.com/note.php?note_id=30695603919&quot; rel=&quot;nofollow&quot;&gt;hosts&lt;/a&gt; over 10 billion photos that require over a petabyte of storage. It adds 2-3TB of photos each day and serves over 300,000 photos per second.

I certainly wouldn&#039;t be surprised to learn that Facebook&#039;s architecture has some significant inefficiencies but realistically, an application like theirs that&#039;s used by millions of people daily is not going to be 100% efficient. It&#039;s just not realistic.

Earlier this year, GigaOm &lt;a href=&quot;http://gigaom.com/2008/04/25/facebooks-insatiable-hunger-for-hardware/&quot; rel=&quot;nofollow&quot;&gt;cited&lt;/a&gt; reports that Facebook was running 10,000 web servers. When it entered into a $100 million deal with TriplePoint Capital, BusinessWeek &lt;a href=&quot;http://www.businessweek.com/technology/content/may2008/tc2008059_855064.htm&quot; rel=&quot;nofollow&quot;&gt;reported&lt;/a&gt; that it may be purchasing up to 50,000 more.

The bottom line is that Facebook is &lt;em&gt;not&lt;/em&gt; getting by with 500 servers. If you think you can get them down that number, you&#039;re talking to the wrong person. :) You should be in touch with Facebook HR, although I certainly wouldn&#039;t be too excited about the stock options.

For what it&#039;s worth, Facebook is already using horizontal partitioning, along with the rest of the kitchen sink:

http://venublog.com/2008/04/17/notes-from-social-graph-and-the-database/

As for &quot;Arianna&#039;s&quot; comment, she doesn&#039;t know what the fuck she&#039;s talking about. She&#039;s pulling the revenue breakdown for MySpace out of thin air. She then goes on to assume that since Facebook&#039;s US metrics are approximately half of MySpace&#039;s, we can just cut in half her estimates for MySpace revenues to arrive at Facebook&#039;s revenues. Uninformed estimates on top of uninformed estimates.

Facebook isn&#039;t in a position to cut 80% of its expenses. At this stage of the game, that&#039;s kind of like saying that if Henry Paulson could get rid of 80% of bad mortgage debt by next week, the global economy would start to perk up. Nice idea, not going to happen.</description>
		<content:encoded><![CDATA[<p>Sutro: I&#8217;d be interested in learning how you come to the conclusion that Facebook &#8220;should be able to run 1m users on 5 servers.&#8221;</p>
<p>If you&#8217;re talking about 1 million *concurrent* users (the figure that reallly matters), I think you&#8217;re off by orders of magnitude.</p>
<p>Consider this: when it comes to photo hosting (which is not even the most resource-intensive part of Facebook&#8217;s service in terms of processing power), Facebook <a href="http://www.facebook.com/note.php?note_id=30695603919" rel="nofollow">hosts</a> over 10 billion photos that require over a petabyte of storage. It adds 2-3TB of photos each day and serves over 300,000 photos per second.</p>
<p>I certainly wouldn&#8217;t be surprised to learn that Facebook&#8217;s architecture has some significant inefficiencies but realistically, an application like theirs that&#8217;s used by millions of people daily is not going to be 100% efficient. It&#8217;s just not realistic.</p>
<p>Earlier this year, GigaOm <a href="http://gigaom.com/2008/04/25/facebooks-insatiable-hunger-for-hardware/" rel="nofollow">cited</a> reports that Facebook was running 10,000 web servers. When it entered into a $100 million deal with TriplePoint Capital, BusinessWeek <a href="http://www.businessweek.com/technology/content/may2008/tc2008059_855064.htm" rel="nofollow">reported</a> that it may be purchasing up to 50,000 more.</p>
<p>The bottom line is that Facebook is <em>not</em> getting by with 500 servers. If you think you can get them down that number, you&#8217;re talking to the wrong person. <img src='http://www.drama20show.com/wp-includes/images/smilies/icon_smile.gif' alt=':)' class='wp-smiley' />  You should be in touch with Facebook HR, although I certainly wouldn&#8217;t be too excited about the stock options.</p>
<p>For what it&#8217;s worth, Facebook is already using horizontal partitioning, along with the rest of the kitchen sink:</p>
<p><a href="http://venublog.com/2008/04/17/notes-from-social-graph-and-the-database/" rel="nofollow">http://venublog.com/2008/04/17/notes-from-social-graph-and-the-database/</a></p>
<p>As for &#8220;Arianna&#8217;s&#8221; comment, she doesn&#8217;t know what the fuck she&#8217;s talking about. She&#8217;s pulling the revenue breakdown for MySpace out of thin air. She then goes on to assume that since Facebook&#8217;s US metrics are approximately half of MySpace&#8217;s, we can just cut in half her estimates for MySpace revenues to arrive at Facebook&#8217;s revenues. Uninformed estimates on top of uninformed estimates.</p>
<p>Facebook isn&#8217;t in a position to cut 80% of its expenses. At this stage of the game, that&#8217;s kind of like saying that if Henry Paulson could get rid of 80% of bad mortgage debt by next week, the global economy would start to perk up. Nice idea, not going to happen.</p>
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		<title>By: SutroStyle</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-40715</link>
		<dc:creator>SutroStyle</dc:creator>
		<pubDate>Mon, 03 Nov 2008 04:33:29 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-40715</guid>
		<description>PS. sorry for my spelling &quot;exagerrated etc&quot;- I type fast, and I am not a native speaker ;)</description>
		<content:encoded><![CDATA[<p>PS. sorry for my spelling &#8220;exagerrated etc&#8221;- I type fast, and I am not a native speaker <img src='http://www.drama20show.com/wp-includes/images/smilies/icon_wink.gif' alt=';)' class='wp-smiley' /> </p>
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		<title>By: SutroStyle</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-40714</link>
		<dc:creator>SutroStyle</dc:creator>
		<pubDate>Mon, 03 Nov 2008 04:31:01 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-40714</guid>
		<description>Speaking from experience, the server costs are exagerrated- they probably have either very uncreative programmers, or orally fixated salivating sysadmins, that like good hardware a bit too much. 
A site like this should be able to run 1m users on 5 servers, that cost about $2000/each (front end servers may even cost less, like $1500; DB servers cost more, perhaps $2700, and this is a bulk price). Clever sharding of users allows to scale the ration of users to the number of servers almost linearly. So if they have even 100m users, they should be able to handle it with 500 servers, or $10m. Assume it&#039;s $50m.
The fixed MSFT revenue component has been quoted in this comment: http://www.techcrunch.com/2008/10/31/facebooks-growing-problem/#comment-2520213

I think this person knows what she is talking about. So I still stand by my statement that if they cut everything by 80%, they can still grow and operate. But that&#039;s a big IF of course.</description>
		<content:encoded><![CDATA[<p>Speaking from experience, the server costs are exagerrated- they probably have either very uncreative programmers, or orally fixated salivating sysadmins, that like good hardware a bit too much.<br />
A site like this should be able to run 1m users on 5 servers, that cost about $2000/each (front end servers may even cost less, like $1500; DB servers cost more, perhaps $2700, and this is a bulk price). Clever sharding of users allows to scale the ration of users to the number of servers almost linearly. So if they have even 100m users, they should be able to handle it with 500 servers, or $10m. Assume it&#8217;s $50m.<br />
The fixed MSFT revenue component has been quoted in this comment: <a href="http://www.techcrunch.com/2008/10/31/facebooks-growing-problem/#comment-2520213" rel="nofollow">http://www.techcrunch.com/2008/10/31/facebooks-growing-problem/#comment-2520213</a></p>
<p>I think this person knows what she is talking about. So I still stand by my statement that if they cut everything by 80%, they can still grow and operate. But that&#8217;s a big IF of course.</p>
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		<title>By: Drama 2.0</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-40712</link>
		<dc:creator>Drama 2.0</dc:creator>
		<pubDate>Mon, 03 Nov 2008 03:57:37 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-40712</guid>
		<description>Sutro: while I agree that a lot of costs can be cut (headcount could probably be reduced by at least 75%), I do believe the servers and infrastructure are a real bitch and I don&#039;t think Facebook is in a position to cut costs very much in this area while maintaining a reliable service that is growing usage much faster than it is growing revenue.

As for revenue, it&#039;s worth keeping in mind the following:

&lt;ul&gt;
&lt;li&gt;From what I understand, a fairly substantial chunk of Facebook&#039;s revenue is guaranteed by Microsoft. A deal like this cannot be relied upon over the long term.&lt;/li&gt;
&lt;li&gt;The fact that ads on social networks don&#039;t produce an ROI for the vast majority of advertisers is well known and after four years, Facebook hasn&#039;t been able to find a solution to the social network ad puzzle. Its potential in this area is therefore decaying every day, especially now that many advertisers are fleeing to quality due to the economy.&lt;/li&gt;
&lt;/ul&gt;

I suppose the real problem is that companies like Facebook reach a point where they don&#039;t have anywhere to go. Investors have &quot;dressed&quot; them for &quot;jobs&quot; that they&#039;re not in the running for.</description>
		<content:encoded><![CDATA[<p>Sutro: while I agree that a lot of costs can be cut (headcount could probably be reduced by at least 75%), I do believe the servers and infrastructure are a real bitch and I don&#8217;t think Facebook is in a position to cut costs very much in this area while maintaining a reliable service that is growing usage much faster than it is growing revenue.</p>
<p>As for revenue, it&#8217;s worth keeping in mind the following:</p>
<ul>
<li>From what I understand, a fairly substantial chunk of Facebook&#8217;s revenue is guaranteed by Microsoft. A deal like this cannot be relied upon over the long term.</li>
<li>The fact that ads on social networks don&#8217;t produce an ROI for the vast majority of advertisers is well known and after four years, Facebook hasn&#8217;t been able to find a solution to the social network ad puzzle. Its potential in this area is therefore decaying every day, especially now that many advertisers are fleeing to quality due to the economy.</li>
</ul>
<p>I suppose the real problem is that companies like Facebook reach a point where they don&#8217;t have anywhere to go. Investors have &#8220;dressed&#8221; them for &#8220;jobs&#8221; that they&#8217;re not in the running for.</p>
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		<title>By: SutroStyle</title>
		<link>http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/comment-page-1/#comment-40708</link>
		<dc:creator>SutroStyle</dc:creator>
		<pubDate>Mon, 03 Nov 2008 02:55:25 +0000</pubDate>
		<guid isPermaLink="false">http://www.drama20show.com/2008/11/02/facebook-looking-for-a-bailout-from-sovereign-wealth-funds/#comment-40708</guid>
		<description>FB can actually survive- if they have at least 200M in revenue, they can cut costs. The true operational cost of running the site of this type and size is about $10m / month for the both infrastructure and salaries. 
I think as long as they are making at least $150M/yr they would be OK if their popularity stays high.
The difficulty I think may be in sustainability: I think FB is still in the pyramidal expansion stage, when the main driver for usage is accumulation of friends. Once that pyramid has burnt through the whole population, I am not sure if the dynamics would be any different from the TV shows- popular for a few seasons, and then abandoned. As I mentioned before, TV producers are smarter than this: they do not incorporate a company with a dedicated stuff around one particular TV show that may just run for a few seasons.</description>
		<content:encoded><![CDATA[<p>FB can actually survive- if they have at least 200M in revenue, they can cut costs. The true operational cost of running the site of this type and size is about $10m / month for the both infrastructure and salaries.<br />
I think as long as they are making at least $150M/yr they would be OK if their popularity stays high.<br />
The difficulty I think may be in sustainability: I think FB is still in the pyramidal expansion stage, when the main driver for usage is accumulation of friends. Once that pyramid has burnt through the whole population, I am not sure if the dynamics would be any different from the TV shows- popular for a few seasons, and then abandoned. As I mentioned before, TV producers are smarter than this: they do not incorporate a company with a dedicated stuff around one particular TV show that may just run for a few seasons.</p>
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