Facebook appears to be spending $20 million to $25 million a year for the data center space that houses its servers, according to an analysis of the company's data center infrastructure. The company's costs will rise later this year, when it adds a new data center in Virginia. While that's a lot of money, it's far less than Microsoft or Google spend building their data centers, and less than many enterprise companies spend on facilities.
Facebook's extraordinary growth has forced the company to invest in rapidly expanding its infrastructure. The social network recently crossed the 200 million user barrier, prompting reports that Facebook must raise new capital to pay for servers and data centers. Other sources say the estimates of Facebook's burn rate are overstated, and the company has enough cash to operate for several years.
As its growth has accelerated in the past two years, Facebook has managed its infrastructure costs through its relationships with the two largest "wholesale" data center landlords, the real estate investment trusts Digital Realty Trust and DuPont Fabros Technologies. Here's what we know about Facebook's spending on its major data center commitments:
- Facebook is paying $10.9 million a year for 114,168 square feet of space in two Silicon Valley data centers it is leasing from Digital Realty (DLR), according to data from the landlord's quarterly report to investors.
- The social network is also leasing data center space in Ashburn, Virginia from DuPont Fabros (DFT). Although the landlord has not published the details of Facebook's lease, Rackspace (RAX) recently said in an SEC filing that it is paying about $5 million a year for a similar amount of space in the same Ashburn data center used by Facebook (known as ACC4).
- Facebook also hosts equipment in a Santa Clara, Calif. data center operated by Terremark Worldwide (TMRK), a Palo Alto, Calif. facility operated by Switch & Data (SDXC) and at least one European data center operated by Telecity. These are believed to be substantially smaller footprints than the company's leases with Digital Realty and DuPont Fabros.
That adds up to an estimated $16 million for the leases with the two data center REITs. When you add in the cost of space for housing equipment at Terremark, Switch and Data, Telecity and other peering arrangements to distribute content, we arrive at an estimate of between $20 million and $25 million in annual data center costs for Facebook.
That's just for the facilities, and doesn't include Facebook's investments in server and storage hardware, which is substantial. Some reports say the company spent $30 million on servers in 2007 and another $60 million in 2009. There's also the cost of electricity to power the servers, which is not included in the data center lease.
Facebook's costs are a fraction of what some other large cloud builders are paying for their data center infrastructure. Google spent $2.3 billion on its custom data center infrastructure in 2008, while Microsoft invests $500 million in each of its new data centers. Those numbers include the facilities and servers.
Facebook's requirements don't yet match the scale required by Microsoft and Google. But its costs are also lower because it has opted to lease wholesale data center space, rather than build its own facilities. Wholesale providers build the data center, including the raised-floor rechnical space and the power and cooling infrastructure, and then lease the completed facility. The tenant pays a significant premium over typical leases for office space, but is spared the capital investment to construct the data center.
Wholesale Model Means Savings
In the wholesale model, users can also occupy their data center space in about five months, rather than the one to two years needed to build an enterprise data center. This has positioned Facebook to continue growing without having to build its own facilities.
The relationship has benefits for the data center REITS as well. Facebook gives DuPont Fabros and Digital Realty a fast-growing marquee client to serve as an anchor tenant, which can make it easier for them to finance new data center construction in a tight capital market.
That's a trend that was seen in the social network's recent lease in a DuPont Fabros facility in Virginia. The huge new data center in Ashburn, known as ACC5, had been on hold since November as DuPont Fabros struggled to find financing to complete construction. Facebook made a commitment for a large chunk of space in ACC5, which helped DuPont Fabros line up a $30 million loan to restart construction on the project.
Costs Will Rise in Late 2009
The lease in ACC5 won't commence until the facility is finished in the third quarter of 2009. Facebook's data center in ACC5 will be significantly larger than its presence in ACC4, so lease costs will probably be higher as well.
It remains to be seen whether Facebook will eventually feel the need to build its own data center facilities. The company reportedly considered the possibility in early 2008, but for now appears to be sticking to its wholesale approach.