Why Facebook Needs Money: Data Centers

Om Malik, Thursday, October 18, 2007 at 9:08 AM PT Comments (18)

It is only a matter of time before Facebook gets some insane amount of money from someone like Microsoft (MSFT), but one thing is clear: it isn’t going to sit in the bank for very long. The company is growing way too fast and it needs a lot of servers and data center space. (OK if they want to be like Google (GOOG), they need to spend like Google.)

Data Center Knowledge blog is reporting that the company just signed a lease for new data center space in Virginia, which is on its way to becoming what seems like the data center capital of the world.

The deal for the 10,000 square feet of space in a new facility built by DuPont Fabros Technology (DFT), known as ACC4, was signed on Monday. It’s not clear when Facebook will start moving gear into the new space. I am keeping close tabs on Facebook’s cap-ex spending and if you have any special insights (or tips), send them my way.

Rating: 38% Thumbs Up Thumbs Down

3 trackbacks so far

October 19th, 2007
5:27 AM PT

[...] Why Facebook needs money: data centres. The snowballing social networing site has taken out a lease on a 10,000sq ft facility to house data servers. [...]

October 24th, 2007
6:52 AM PT

[...] va avoir des besoins de financements très importants à courts. Comme le précise Om Malik le traffic exponentiel constaté sur le site créé des besoin importants en infrastructure [...]

February 19th, 2008
6:54 AM PT

[...] looks like Facebook is expanding to the East Coast. GigaOM posted an entry about Facebook securing 10,000 square feet of data center space in Virginia. If your performance requirements are critical you may still want to consider the move [...]

15 comments so far

October 18th, 2007
9:39 AM PT

Money to manage information and selling and lure advertisers - I don’t see any other business model Mark Zuckerberg has in mind? and love to see him take IPO route and take on Google!

October 18th, 2007
10:22 AM PT
Lou Covey said:

I’m wondering if Facebook is looking into VM Ware virtualization to expand it’s capacity. Might be a better way to meet the demand and stretch out the money.

October 18th, 2007
10:32 AM PT
robinrich said:

All I know is I’ve been waiting to see who is going to buy Facebook so I can jump on the stock!

October 18th, 2007
11:02 AM PT
Chuck said:

Ever wonder why Virginia became the Data Center Capital of the world? One word: Dulles - When you go from 35M to <10M subscribers that you don’t need all of those data centers any more.

October 18th, 2007
11:31 AM PT
Come on OM... said:

OM…Last week they needed money to fight the NY Attorney Generals’ Supenoa and the potential onslaught of claims around their lack of action against reported child predators, this week its data centers…if you throw out any more speculations you are bound to be right eventually…then you can claim you were the first to report…nice work!

October 18th, 2007
11:34 AM PT
Denis said:

DuPont Fabros (DFT) is scheduled to IPO tomorrow (10/19). That might be one way of capitalizing on Facebook’s growth.

October 18th, 2007
11:46 AM PT
Dhiren said:

Facebook can’t be like google..here is why
Facebook is a social network - they come and go all the time.
They opened their door to all applciations —it sounds pretty slick but any smart programmer would design his application to do just that.
They have less substance and more gloss.
History has shown that social networks breath for no more than 3-5 years.

October 18th, 2007
11:48 AM PT
Dhiren said:

Thanks Om…Looks like you did notice my comment as I don’t see any moderation before comments are put out.
I deserve a “thank you” from you, atleast?

October 18th, 2007
12:01 PM PT
Prashant said:

i feel this was a more suitable case for EC2 and S3. AMZ should have gone for this deal . they could not have got any better validation for their technology.
what do you think ??

October 18th, 2007
12:30 PM PT
anonymous42 said:

Thanks for bringing this up Om,

One thing that gets ignored in this web2.0 hype is cost of infrastructure.
1. Cost per page served is increasing.
2. Page served per advertising dollar is increasing.
3. Intelligence of web applications is increasing. More intelligent the application is, more expensive is the infrastructure.
4. search and adwords was the most high margin business to be in. Newer applications like Video, online collaboration and office applications, Interactive Flash/Ajax/AIR applications require higher infrastructure costs.
5. Think about it Google pays $300m in just electricity costs and its increasing 30-40% per year. We are not even talking about cost of facilities, servers and network.

One thing people always miss with Web applications is, Viewership, userbase all grow exponentially and the moment they hit the peak they start declining(Next cool thing takes over). There is no such thing nice steady plateau. But, all valuation models assume a steady plateau.

October 18th, 2007
1:03 PM PT
Tom Carter said:

You can also get a good sense of how things are going by listening in to the conference calls of Equinix and Savvis. The space is prone to boom and bust cycles but we are selectively investing in this space (co-location data centers and hosting) right now.

October 18th, 2007
1:21 PM PT
Keran said:

Don’t forget the much under-hyped “Facebook Phone” any self respecting Tech company has a phone right?

October 18th, 2007
10:36 PM PT
Om Malik said:

Dhiren I don’t understand what you are tlaking about? Can you elaborate so I can answer your question properly - thanks

October 18th, 2007
10:37 PM PT
Om Malik said:

fPhone…. now that’s hot ;-)

October 19th, 2007
6:08 AM PT
Dhiren said:

Hey Om,
Well I left a comment here as to my little suggestions to improve user experience on gigaOM.com. One of the points was to remove moderation on comments and then days later I saw no moderation on comments(the message that your comment will be evaluated before posting), so I thought that maybe my comment got noticed.

Leave a Comment

Get the comments RSS feed, instant notification of new comments

Most Comments

Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble
Om Malik, October 8, 147 comments
We Have Completed $4.5 Million in New Funding
Om Malik, October 6, 96 comments
Inside Details of Sequoia Capital’s Doomsday Meeting With its Companies
Om Malik, October 9, 46 comments
Wholesale Internet Bandwidth Prices Keep Falling
Om Malik, October 7, 20 comments
Obama Campaigning on Xbox 360?
Wagner James Au, October 10, 7 comments

Highest Rated

Inside Details of Sequoia Capital’s Doomsday Meeting With its Companies
Om Malik, October 9, 76%
Why Digg Should Buy StumbleUpon
Om Malik, October 7, 200%
Venture Firms Pull Back, But Not for Long
Stacey Higginbotham, October 9, 75%
Lijit Launches Publisher Ad Network
Om Malik, October 7, 58%
Broadband Bill Needs Signature and Funding
Stacey Higginbotham, October 7, 67%
Close
E-mail It