Facebook’s Platform Costs

Nov 23, 2007 – 21:18 by Ryan

In a previous post we analyzed the market value of the 3rd party applications on Facebook. Now, we’re looking at Facebook’s platform costs for 3rd party applications. We could go into a lot more detail when doing an estimate of this type but we’re looking for a rough estimate. We don’t have any inside information from Facebook so we had to make one or two assumptions :-)

Page Views
This post is based on 1.5 billion 3rd party application page views per month (via Compete).

Bandwidth
This is tough to estimate so we looked at the global distribution of their user base, estimated a peak-to-mean ratio based on the global distribution and then investigated the average size of 3rd party application pages. After all this research, our guesstimate is that they’re consuming a peak of approximately 1 Gbps for 3rd party applications (static video and image hosting not included in estimates). We’re going to take a stab in the dark and estimate that they’re paying $15 / Mb for this large commit and this brings us to an annual bandwidth bill of $184,320. Once again, this does NOT include any content delivery, this is merely an estimate of the 3rd party application bandwidth.

Hardware
The Facebook platform requires a lot of HTTP connections to and from external application servers so this reduces the overall number of requests per second each server can support. Additionally, to make an application like this scale you must keep most of your data in core. We’re going to make the assumption that each user profile has about 500 KB of data. If we assume each server has 4 GB of memory they would need ~ 5,000 servers to cache the 19 TB of profile data. Assuming they’re using commodity hardware, this is roughly $5,000,000 worth of hardware. We’re not going to discuss the hardware amortization in this post. Fortunately, these servers can also serve requests/content.

Hosting
If we assume Facebook has approximately 5,000 servers and each rack has enough power for 30 commodity servers, then Facebook would need an estimated 167 racks. Let’s say they’re paying $500 per rack per month (including power costs); if so, they would see a bill from Level 3 for ~ $1,000,000 per year to host their servers (bandwidth excluded).

Staff
People are usually the most substantial cost for a company and Facebook is no exception. For this post we’re going to estimate Facebook has one hundred people dedicated to their platform (engineers, sys admins, managers, marketing, etc.). Salaries are hard to guess but we’re going to say the average salary is $80,000 per year. Each employee has a lot of loaded overhead as well. In this post we’ll assume Facebook has $100,000 per employee per year in loaded costs (medical benefits, hr, office space, training, vacation, etc.). This brings the average cost per employee to approximately $180,000 or $18,000,000 per year for the platform. We didn’t consider the value of the option grants, but we’re sure they are significant.

Year One Costs
The purpose of this post is to try an estimate what Facebook’s platform costs are for one year. Since we don’t have any inside information from Faceboook, our year one guesstimate is:

Bandwidth:       184,320
Hardware:      5,000,000
Hosting:       1,000,000
Staff:        18,000,000
------------------------
             $24,184,320

Advertising
Facebook places an ad banner on most application pages under the left navigation. Looking at the numbers above, it’s important for them to monetize this space in order to keep the platform free for developers. Since Facebook is able to derive ad revenue from 3rd party applications there is nothing that leads us to believe they will start charging applications for access; however, we do think that they will eventually start charging for promotion in their application directory.