1. Augustine Fou
- 1 -
Dr. Augustine Fou
http://linkd.in/augustinefou
May 2013
Investment Thesis
FB

2. Augustine Fou
- 2 -
Executive Summary
THESIS
• FB may have bottomed, but uncertainty lingers about its
ability to monetize mobile and continue to monetize
desktop via display ads.

3. Augustine Fou
- 3 -
Executive Summary
NOW
• The claims of increasing monthly active users is driven by counting
Instagram users as “active” (previously not counted)
• Outside tracking firms all report accelerating declines in metrics such as
visits, pageviews, pages per visit and visits per person monthly which are
critical drivers of ad impressions and therefore FB’s ad supported revenues
• There is continued downward price pressure on CPMs due to “low quality
inventory”
• The shift of users to mobile means fewer pageviews per user session and
far fewer ad impressions per session; higher CPMs for mobile display ads
will not offset the far fewer impressions
• Inserting ads into users’ newsfeeds, including autoplay videos will turn off
users and accelerate the mass exodus of users

4. Augustine Fou
- 4 -
ARPU Decline (1st Datapoint)
Shift to mobile
means fewer
page views per
session and
fewer ads per
page view,
despite higher
CPMs. First
datapoint of
APRU
decrease seen
Q1:13)
Source: KPCB, May 29, 2013

5. Augustine Fou
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Revenue Worldwide
Q1 2013
Source: FB SEC Filings 10Q May 1, 2013
Remains to be seen whether the
drop in revenues is seasonal.

6. Augustine Fou
- 6 -
Mobile vs Desktop Ads
Q1 2013
Source: Business Insider May 1, 2013
Desktop ad
revenue
declined, and
payments
revenue as
well. Mobile
grew but not
enough to
offset the
declines,
resulting in
overall
decline.

7. Augustine Fou
- 7 -
Q1 2013 Update
-30%
Visits/Person
16.6 /mo
Pages/Visit
16.7 /mo
-40%

8. Augustine Fou
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Q1 2013 Update
Pageviews
45.6 billion /mo
Average Stay
18 mins /mo
-23%
-50%

9. Augustine Fou
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Q1 2013 Update
Visitors
165 million /mo
Visits
2.7 billion /mo
-36%

10. Augustine Fou
- 10 -
Related Articles
Meet the Most Suspect Publishers on the Web
By: Mike Shields, March 19, 2013
State of Display Ad Market 2013
By: Augustine Fou, April 17, 2013
Botnet Traffic Clicks Cost Advertisers Millions in Waste
By: Augustine Fou, April 29, 2013
Future of Advertising
By: Augustine Fou, March 15, 2013
Augustine Fou
- 10 -

11. Augustine Fou
- 11 -
Dr. Augustine Fou – Digital Consigliere
“I advise clients on innovating their
business to stay ahead of trends and
reduce their reliance on single forms of
revenue (e.g. display ads in the case of
WebMD).”
FORMER CHIEF DIGITAL OFFICER, HCG (OMNICOM)
MCKINSEY CONSULTANT
CLIENT SIDE / AGENCY SIDE EXPERIENCE
PROFESSOR AND COLUMNIST
ENTREPRENEUR / SMALL BUSINESS OWNER
PHD MATERIALS SCIENCE (MIT '95) AT AGE 23
@acfou
ClickZ Articles: http://bit.ly/augustine-fou-clickz
Slideshares: http://bit.ly/augustine-fou-slideshares
LinkedIn: http://linkd.in/augustinefou

12. Augustine Fou
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Q4 2012 Facebook Ad Benchmarks

13. Augustine Fou
- 13 -
Shifting to Lower CPM Ads
Big Portals Ad Networks Facebook
10’s of dollars 1’s of dollars 10’s of cents
Advertisers are shifting allocation to get more impressions
Large audience
Publisher/portal
has more power
Lots of long-tail
small websites
Advertiser has
more power
Massive number of
impressions
“Junk” quality and
super-low prices
CPM
0.1% 0.01% 0.001%
CTR

14. Augustine Fou
- 14 -
Digital Used for Performance
Source: IAB 2012 Annual Report