Microsoft's investment in Facebook (the Seinfeld of the digiverse) works out at $300 per user. This is an interesting number and is helpful in so far as it might inform us non-corporate finance types of where the real value lies. Everyone figures that the value will be derived from advertising revenue so let's do some sums.
Video ads in social networks are impossible to sell at more than a $10 CPM (cost per one thousand impressions) on that basis $300 will buy the advertiser the eyeballs (if not the attention) of 30,000 individuals so do the math...........
If there are 50 million users of Facebook it would (in theory at least) cost $500,000 to reach each of them once with video and MUCH less than that in other formats. The deal values the business at $15 billion so each user would have to be exposed to video advertising 30,000 times each to generate that number in cash.
The reality is that the real number as pricing trends downwards is probably 100,000 ad exposures per visitor ignoring all operating costs of the business. So if you take your community membership seriously you are kindly requested to watch at least one ad on Facebook every day for the next 274 years.
We can conclude from this that Mark Zuckerberg really is just as clever as he seems.
Video ads in social networks are impossible to sell at more than a $10 CPM (cost per one thousand impressions) on that basis $300 will buy the advertiser the eyeballs (if not the attention) of 30,000 individuals so do the math...........
If there are 50 million users of Facebook it would (in theory at least) cost $500,000 to reach each of them once with video and MUCH less than that in other formats. The deal values the business at $15 billion so each user would have to be exposed to video advertising 30,000 times each to generate that number in cash.
The reality is that the real number as pricing trends downwards is probably 100,000 ad exposures per visitor ignoring all operating costs of the business. So if you take your community membership seriously you are kindly requested to watch at least one ad on Facebook every day for the next 274 years.
We can conclude from this that Mark Zuckerberg really is just as clever as he seems.
1 comment:
I herewith support Rob's blog -- in word and deed! I want to throw in some wild cards, though. The analysis assumes all viewership of Facebook ads will be by Facebook members on Facebook. But two phenomena could upend this: syndication (the intentional placement of content, including advertising, in multiple venues); and "decontextualization" (the extraction of content from its primary venue into multiple venues). Syndication is primarily associated these days with networks, while decontextualization is associated with widgets.
In other words, Facebook content (ads included) won't only be seen on Facebook (and the same with other content-hosting sites). If you accept that premise, you also have to accept a corollary: there will be different pricing schemes, based on context. On average, Rob's math may still work out -- although I'd be very cautious about extrapolating from today's CPM's to future pricing schemes, especially as consumers become habituated to some sites and those sites, in turn, are able to charge increasing environmental premiums.
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