The otherwise very very smart Don Dodge posted this gem that gets some bits right:

I talked to a Facebook App developer at the ReMix conference. He told me his app is generating 300 million page views per month. Wow! Then I asked what kind of CPM (Cost Per Thousand) ad rates he was getting. He shrugged and said somewhere between $0.02 and $0.05 per thousand. That pencils out to between $6K and $15K of advertising revenue per month for those 300 million page views. Pretty good for a couple of young hacker/coders with very low overhead, but not the kind of business that commands million/billion dollar valuations.

Basic Assumptions

What I don't know about Facebook could fill Wembly Stadium with just enough room for a Flock reunion, so let's assume:

• This is app is at the median of the top 50 Facebook apps
• The actual income is at the top range of $15K/month
• The top app earns 10X what the bottom app earns and it's a smooth distribution

So, the total revenue for all 50 companies is around $12M a year.

No Money In the Ecosystem

Take these three data points:

• I have a friend who runs a three person shop that supports Cisco routers for a fairly large school system. He billed $3M last year. That is $600K/person.
• We work with a small Oracle outsourcing shop (5 guys in the US and 25 in India) that billed $7M last year. That is $230K/person, but if you cost average that by salary dollar the number is $700K/person.
• There was a local business paper article about a 12 person company that does custom Microsoft VP/Apps/whatever programming and just broke $7M in total revenue or $580K/person.

What's the point?

There is a LOT of money in the Cisco, Oracle, and Microsoft ecosytems. I'm sure all three of these remora companies are too small to even barely come to the notice of Microsoft/Oracle/Cisco.

If any of them were doing Facebook work they'd be #1 with a bullet.

But I bet the 25th largest Facebook Widget Maker can get some 1:1 time with whomever they choose.

Let's review: $12M/year in the Facebook ecosystem and, what, a couple billion for each of the big three? Hmm, well, there may be a network effect from the users of Facebook, but the outside world is starving to death.

Wiser Words

Let's parse one particular part:

Pretty good [$15K/month] for a couple of young hacker/coders with very low overhead, but...

It may sound good to make $15K/month, but that is only a buck eighty a year. Take 50% out to pay for taxes and basic health insurance and you're making $90K. Hope you don't have any hosting or other costs....

So, really, it's krep income, even when you come near the top.

Valuations

The next bit is even more interesting:

... not the kind of business that commands million/billion dollar valuations.

Good lord, Facebook is "worth" $15B to Microsoft and a host of other people and it's certainly going through money like this bubble will never pop.

Let's look at the valuations of our ecosystem companies for a second:

• Oracle - Market Cap=$112B, Rev=$20B, Operating Margin=34%
• Microsoft - Market Cap=$280B, Rev=$58B, Operating Margin=40%
  
• Cisco - Market Cap=146B, Rev=37B, Operating Margin=25%

(By the way, if you aren't impressed with a HARDWARE company like Cisco having a 25% operating margin, you should be.)

So, Facebook is worth 10% of Cisco or Oracle and 5% of Cisco? I think we know that is crazy talk. But if that is the talk, then why is Dan dissing the 300M page views of a Facebook widget maker? Isn't Facebook just a bigger aggregator of page views?

Do Some More Facebook Math

What did Zuckerberg have to say about Facebook revenue on a con call in January of this year:

Revenue for Facebook for 2007 will be $150 million, as has been widely reported. But for 2008, Zuckerberg projected revenue to be increased to $300 million to $350 million.

Currently they have 450 employees, so this year their revenue was $333K/employee, which is not bad.

Next year they plan to have 1,000 employees ... yes that keeps their revenue/employee pretty much flat.

Remember the 25th most popular widget maker pulling in $180K gross/year? He's not looking too stupid, relatively.

How does this math work again?

Summary

There aren't very many people making money adding value to Facebook, it monetizes it's users poorly, and management plans to ramp staff and keep revenue/employee flat this year.