How fast is Facebook growing? It's hardly an academic question. In a conference call today, Microsoft executive Kevin Johnson cited Facebook's growth rate as a justification for investing $240 million in Facebook at a staggering $15 billion valuation. He talked about projections for Facebook's user base, currently 49 million, and revenue per user that gets you there. The problem? Johnson's math may be based on outdated assumptions.
The Facebook growth story, as recounted repeatedly by executives, investors, and spokespeople there, is that the company has been steadily growing at 3 to 3.5 percent a week, a rate supposedly unchanged since Facebook opened its doors to all users. Through the miracle of compounding, that rate should give Facebook 200 million users in nine months.
The first version of Facebook's press release supported that oft-told tale, saying that the social network was adding an average of 250,000 users a day. But then Facebook revised the press release, putting the figure at 200,000 users. Do the math, and you'll see that that translates to a weekly growth rate of 2.8 percent. Still quite impressive — it means that Facebook is now doubling every six months, rather than every 4.5 months. Still, it's below the magic 3 percent number Facebook has been giving out up until now.
Even at 2.8 percent, Facebook will grow rapidly. But the drop in growth calls into question the whole compounding assumption. What if Facebook grows not exponentially but in a straight line from here on out? Will Microsoft's math still stand up? And what will happen to Facebook's plans to double its staff to 700 people by the end of next year? (Chart by Mashable)