We learn how to build a social network financial model in Excel from A-Z, from acquiring & monetizing users, to projecting financials and raising capital. Downloadable template included.
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In this video we learn how to build a startup financial model for a social media platform - aka a social network business - acquiring millions of users, monetizing them with ads, and raising venture capital rounds to fuel massive growth to a multi-billion dollar valuation.
We walk through every step of the financial model in this video - it is a lot of fun and if you watch the whole thing you will learn a tremendous amount about technology businesses that monetize users with advertising.
We forecast the full engineering & broader teams we need to build our platform followed by three years of heavy user acquisition, ballooning revenue, huge burn rates, and venture capital fundraising to fuel our growth. By year four we hit a multi-billion dollar valuation - the dream of any social network business model.
A CHANGING LANDSCAPE: AD-BASED SOCIAL MEDIA BUSINESS MODELS
Social media businesses have historically been advertising businesses. They are SaaS business models that build both a marketplace for social networking, but also a secondary marketplace for selling ads through auctions. They are very complicated businesses, but when they succeed, they can have some of the most powerful network effects of any business model ever created, with insane profit margins.
The typical social network business plan has in the past been to gather user data and then monetize the platform by showing ads to those users. While that is the same across most companies, the revenue share with creators varies widely (Facebook shares none, while youtube shares 55%). The content formats vary widely, and these days the type of monetization is even begging to vary (many platforms are monetizing with users paying rather than with ads now).
I think as traditional media is upended and decentralized, social media will be facing similar questions around the decentralization of power, the role of censorship, the rights of creators, and the ethics around user data collection & privacy. Future social media platforms will very likely look different from today's giants.
SECTIONS:
0:21 overview of social media business sector
4:41 building our user acquisition model (paid & organic app downloads)
10:18 forecast churn rate and total monthly active users (MAU)
14:22 forecasting advertising revenue: user activity, average session time, ad load, CPMs
23:59 starting the income statement for our social media financial model
27:22 assumptions for forecasting the COGS: creator revenue share, support & content review team, hosting
36:27 finalizing cost of sales & calculating the gross margin
43:09 forecasting operating expenses: payroll, marketing, other
53:38 calculating operating profit (burn rates) & venture capital fundraising rounds
1:02:09 discussion around valuation for our social network business
By the end of this video, you will know how to build financial models for social networks and social media platforms - I guarantee it!
If you have questions - leave a comment below and I'll try to help. Cheers!
#sociamediafinancialmodel #financialmodeling #startups
