Facebook Spends $1 Million/month On Electiricty: Burnrate Suggests Need For More Funding

Imagine if your startup had a burn rate of over $1 million dollars alone on electricity each month...and that's just the start of it.

Facebook's growth hasn't slowed as they continue to expand rapidly across the globe offering their platform in different languages and taking other social networks head on. Even in the past year, Facebook has grown around 118% with 161 million unique visitors and 61 billion page views per month up from 74 million unique visitors and 35 billion page views according to comscore. Only 1 in 4 users actually come from the United States.

But, with roughly $500 million dollars raised, they should be fine right? TechCrunch seem's to think otherwise and reports that their CFO has started looking for new cash sooner than they had expected since there is no IPO in sight and a questionable amount of money left to take them beyond the next year. According to the same article, here is a list of their expenditures broken down by item:

Electricity - $1 million/month
Bandwith - $500,000/month
Servers - $100 million for 50,000 this year and next
Storage - $8 million/month
Datacenter Rent - $15 million/year
750 Employees - $10 million/month
Capital Expenditures ~ $100 million/year

Total Per Month: ~ $28 million

Total Per Year: ~ $226 million

They will be forced to bring down their previous valuation of $15 billion to bring in investors, otherwise it will be too hard for them to receive a reasonable ROI. Even though eMarketer predicts revenues of around $265 million dollars in revenue this year (up from around $150 million last year), they are still losing money. So, the big question is what would their new valuation be?

If we use LinkedIn as a rough comparable, we can estimate that valuation. Last May, LinkedIn was pitching a valuation of $1 billion and will be expecting around $100 million in revenues this year. If we use those numbers, a fair valuation might be $2.65 billion dollars. Obviously, this is over simplified and my finance professors would probably be scolding me right now for not paying attention more at BC. But hell, instead of sitting around crunching numbers and creating spreadsheets for a couple of days, this 15 second calculation gives a decent indication.

As a result of the article and attack on Facebook, VentureBeat reported that the company reacted with the following official statement:

"As a matter of policy, we don’t comment on market speculation or rumor about our finances. Facebook is well-positioned both financially and within the market and any thoughtful attempt to model our business should reflect that. Our advertising business has great depth and breadth. While no ad business can ever be 100% recession proof, the breadth of our advertiser base and the innovative products we offer bolster our position in the current cycle. We’ve also been closely managing the business so we can continue to hire great people and scale. While we’ve achieved certain milestones, we are deeply committed to even greater business success in the future."

There is always the question of whether any of these numbers are close to accurate. Eitherway, it makes sense that they will need more money sometime soon. I think they will have to rely on other revenue streams besides advertising to really bring in massive revenue. MySpace is expected to bring in $1 billion dollars for the fiscal 2008 year. But, if Facebook is really looking to take over the world, and we can only assume this is Mark's goal, then they are probably aiming at multi billions of dollars in . Definitely not any time soon with the likely downturn of advertising spending in this economy.