Why Facebook Needs Money: Data Centers

19 Comments

[qi:013] 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.

19 Comments

Unknown

Server infrastructure is approximately $1 million per megawatt. Most large-scale users replace servers every 2-3 years.

Dhiren

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.

Om Malik

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

Keran

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

Tom Carter

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.

anonymous42

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.

Prashant

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 ??

Dhiren

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?

Dhiren

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.

Denis

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

Come on OM...

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!

Chuck

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.

Lou Covey

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.

Free Market Research Report

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!

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