Quo Vadis Facebook?

The social networking company is looking for money – lots of money. How many do they really need and what then?

2007 estimated headcount 450

2008 estimated headcount 800
2008 estimated cash flow negative $150MM
Above numbers reported by TechCrunch

2009 estimated headcount 1,200
That translates to a cost structure of roughly $200,000,000 (200MM)
With revenues (I don’t see more than 100MM) this is $100MM under.
Now add the enormous cost of data centers that need to stream the videos, the photos and the rest of the application.

The clock is ticking. So what options has Facebook?
1) Cut Cost / Layoff
Either cut staff in half to get to break even
That’s possible but hard to do. But better saving 50% than losing all.
It would also mean the company is getting profitable and may do an IPO in a year or two.
2) Double revenue
But with advertising? That’s so much harder when even advertising machine Google admits that ad revenue is flat – meaning it’s probably going down. After all, the world is beginning to realize that the advertising model is not a business model after all.
3) Additional Funding
Get $500 Million to survive 5 more years, freeze hiring and use the time to develop a product/service value based business model – probably the hardest but still possible. In MHO the only way to keep current investors happy. Remember Jack Walsh: “Shareholder value is the dumbest thing in the world:”
4) Sell
OK then there is the option to sell the whole package – better now than never. Maybe for a billion or two – again remember Jack Welsh.

Then there is competition (possible acquirer):
1) Google with $16B cash in the bank has some nice little wiggle room
2) Less aggressive but more stable LinkedIn could weak up (I know hard to believe) and with just a few smart tactical moves get really dangerous.
3) MySpace – don’t underestimate those guys. They are less strategic more like a news paper driven network – but they have 3 things: a) Huge momentum, b) Financial backing c) the option to break into business (they are just a bid sleepy in that regard)
4) Microsoft? Not really. No vision, totally a-social DNA, no momentum… just money and then we could list any other company with money.
5) The SAP / Oracle world. Hmm interesting. Unlike Microsoft, they haven’t burned their name in social media yet. Just two massive companies but may become an interesting contender in the game in the next two years.

Disclosure: The above numbers are just rough estimates.
But you get the idea

@AxelS