Social Media Platform Financial Model | Startup Financial Models 101

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.
✅ Download the Excel template: bit.ly/socnetw...
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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

[@eric_andrews]

Questions? Let me know in the comments happy to discuss. 🚀 Also, if you want to learn how to systematically scale your startup without ending up as one of the 90% of startups that fail, check out my free training webinar ⇒ www.ericandrewsstartups.com/financeforstartups

[@idontchaseiattract7546]

man this is so awesome! for once in my life....KZbin algorithm worked in favor of me...immediately subscribed.

[@eric_andrews]

Awesome, thank you Happy cloud, really appreciate it!

[@tanmaysahni2167]

This is an excellent template and guide. I used this as a base to build a financial model for an interview process and it turned out great. Thank you Eric and good luck!

[@eric_andrews]

I love to hear that, cheers!

[@AskDomThat]

Awesome video and detail

[@eric_andrews]

Thanks!!

[@pandurangansatish2973]

Hi Eric Thanks for the link, I have previewed them, but the startup I am planning is a high end digital postproduction setup. Once again thanks in advance

[@eric_andrews]

Sure. Any business is built on the same fundamentals. Just need to figure out how your marketing works, how your sales work, and how your COGS work - and then add the fixed costs on. Just give it a try!

[@theconnectedathletepodcast]

Outstanding and useful information! Exactly what my team and I are looking for as we are at the phase of getting our MVP to market by the end of this year. You have a new follower and fan in me. Again, thank you so much!

[@eric_andrews]

My pleasure glad it was what you needed 🙌

[@pasqualemarino9608]

Thank you very much, Eric! This is really valuable content and rare to find - I would suggest creating a new version for the new gen of social networks based on a subscription business model perhaps. Keep up the good work 💪

[@ifeanyiibeanu7765]

Good day sir. Why is accounts receivable subtracted from net income in a cashflow statement if it doesn't affect operational cash?

[@prateeksingh631]

Where is the cash flow and Balance Sheet? How to determine how much money we need to raise and breakeven analysis?

[@mumair975]

would love to see a model around social commerce

[@eric_andrews]

That's a great suggestion and such a fascinating space. Will put it on my list thanks for the suggestion Muhammad!

[@stanleymwangi9050]

To say thank you is an understatement. You boosted my career soo much. 2 questions, please. Should I indicate cash spent on developers of the software platform as capital expenses or a normal expense? I asked because now the more software is developed the value grows. The second one is a suggestion, not a question. Would you consider building a real estate financial model, typically for an investor considering building/buying apartments and sell/rent them out to make a good return. Typically an investor wants to assess the viability of the project given prevailing market rates for rent/selling price. Thank you. I loooooove your videos alot.

[@eric_andrews]

Hey stanley - really great to hear that feedback from you, it really means a lot and I'm so happy to have helped you in your career 😃. So - that's a great question and one that comes up a lot. While in the past a lot of companies capitalized the payroll from developers, what is now becoming more common is to just expense their salaries as a normal expense. Software changes so quickly that just expensing their salaries ends up being more accurate and cleaner than capitalizing them. I generally avoid capitalizing when I'm working with startups. Hey in terms of the real estate - I will think about if I could make an interesting video. I'm not really a real estate expert but I could probably come up with something, will put it on my list....thanks for the suggestion and appreciate the support!

[@realside_aashish]

How can I get another company balance sheet from any platform

[@jojealenazi]

thank you Eric, as always simple and straightforward I really appreciate your efforts! Have a question, I’m building a financial model for social media platform, and yours is very helpful but my concern is that as first year they didn’t do any advertisements and all users come from the word of mouth. What should we do in this situation?

[@eric_andrews]

Just create a projection where you have users coming in unpaid. You can just create hard-coded assumptions for that, so maybe you starting month you have 500 users. You can have some logic that shows how new users are growing (let's say X% per month growth off the prior month) and also with the user drop-off. That would be the only difference in the model, everything else is the same.

[@ryz177]

Great Content! Thank You!

[@FaizanAhmad-eo3oe]

Thank you eric, looking forward to your future videos. 👍

[@eric_andrews]

Hey Faizan ! Appreciate it - comments like this keep me motivated to keep going!!! Cheers

[@mumair975]

why no tax/EBITDA considerations in the model?

[@stephenpolsinelli5279]

Eric -- would you recommend using the average users between the end of the current month and the end of the last month to calculate revenue?

[@azhard7399]

Wonderful content sir !

[@eric_andrews]

Thanks Azhar - glad you're finding it valuable!!

[@kishorbalaful]

Most underrated video. Thanks Eric.

[@tylerjackson8393]

Love these videos man, keep it up.

[@eric_andrews]

Thanks Tyler - glad you like them! Will be publishing a lot this year....so many ideas. Appreciate the comment!

[@natural2]

Thanks so much!

[@eric_andrews]

You got it!

[@mumair975]

amazing content! Thank you for sharing.

[@marwandeeb6416]

Eric let me tell u that ur a superstar and what u doing is so amazing, really thank you for your full explanation and efforts 😃

[@eric_andrews]

You are very welcome 😎

[@camcashmoney]

This is amazing! Thanks for sharing!

[@mumair975]

and if I may suggest command + Shift + right arrow instead of shift + right arrow only :)

[@eric_andrews]

Thanks 😊 always trying to improve!

[@tarunaggarwal2511]

Thanks Eric

[@eric_andrews]

You're welcome!

[@shanevictor9885]

Wow thank you so much. I am building a social network startup and this has been immensely helpful🔥

[@eric_andrews]

You are very welcome, good luck!

[@OKOKOFFICIAL_]

Hi victor... I would like to connect with you

[@ChristopherTorres-ce9bh]

Thanks Eric for this incredibly helpful video!

[@eric_andrews]

You are very welcome

[@RoshanLal-xj5ku]

Hello sir. Maybe I get the question in excel form

[@eric_andrews]

Hi - not sure I understand the question, but I'm happy to help. Cheers

[@manthanadmane7812]

Incredible content! Subbed :) All the best ahead

[@eric_andrews]

Cheers manthan!!

[@justinching9317]

Thanks for sharing!

[@eric_andrews]

My pleasure thanks for checking it out Justin!