Business Strategy Analysis on Facebook
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Business Strategy tools used are: 1) SWOT analysis 2) Competitor analysis 3) 5 forces analysis 4) Capabilities analysis 5) Environmental analysis
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Business Strategy Analysis on Facebook
- 1. Facebook is a social networking service launched in February 2004, founded by Mark Zuckerberg with his college roommates and fellow Harvard University students Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes. The name of the service stems from the colloquial name for the book given to students at the start of the academic year by some university administrations in the United States to help students get to know each other. Facebook Brand and Business model: On February 4, 2004, Zuckerberg launched "Thefacebook", originally located at thefacebook.com . It’s mission is to give people the power to share and make the world more open and connected. It received its first fund from Peter Thiel, cofounder of PayPal and managing partner of The Founders Fund who invested $500,000 into Facebook. In May 2005, Accel partners invested $12.7 million in Facebook, and Jim Breyer added $1 million of his own money to the pot. Facebook then received $25 million in funding from Greylock Partners and Meritech Capital, as well as previous investors Accel Partners and Peter Thiel. Late in 2007, Facebook had 100,000 business pages, allowing companies to attract potential customers and tell about themselves. In October 2007, Microsoft invested $240 million into Facebook for 1.6 percent of the company in.This meant a valuation of over $15 billion, making Facebook the 5th most valuable US Internet company. At age 102, Ivy Bean of Bradford, England joined Facebook in 2008, making her one of the oldest people ever on Facebook. In January 2011 receiving a $1.5 billion round, valuing the company at $50 billion.A year later, in February 2012, Facebook announced that it was filing for its long-anticipated initial public offering. The company went public on May 18, 2012, opening on the NASDAQ with shares trading at $42.05.
- 2. In January 2013, the countries with the most Facebook users were: • United States with 168.8 million members • Brazil with 64.6 million members • India with 62.6 million members • Indonesia with 51.4 million members • Mexico with 40.2 million members All of the above total 309 million members or about 38.6 percent of Facebook's 1 billion worldwide members. In regards to Facebook's mobile usage, there are 192 million Android users, 147 million iPhone users, 48 million iPad users and 56 million messenger users. A senior employee, on Facebook’s Business model - “The model for Facebook doesn't exist, we really are building the plane in flight.” Entertainment Weekly included the site on its end-of-the-decade "best-of" list, saying, "How on earth did we stalk our exes, remember our co-workers' birthdays, bug our friends, and play a rousing game of Scrabulous before Facebook?" Media impact: Facebook has now been involved in campaigns for True Blood, American Idol, and Top Gear. In 2012, the beauty pageant Miss Sri Lanka Online was run exclusively using Facebook.
- 3. 1) SWOT ANALYSIS : 2) COMPETITOR ANALYSIS: Performance metrics Capabilities Objectives/values Strategy Facebook -More than 1 billion monthly active users - With more than 1 billion users in database, users can connect in better ways. -Make the world more open and connected. -Facebook markets them as a platform that allows users to connect. Google+ - An estimated 343 million monthly active users. -G+ integrates youtube and android to gain competitive advantage over Facebook. -Organize the world’s information and make it universally accessible and useful. -G+ markets them as an extension to other services(gmail,search,video sharing youtube ,photo sharing - picasa) it provides. So.cl Still in Experimental phase
- 4. 3) ENVIRONMENTAL ANALYSIS : a) Demographic trends : Facebook is free social networking site ,that allows users from age of 13 , to any age to use it. b) Socio - cultural influences : Facebook allows users to continuously stay in touch with friends, relatives and other acquaintances wherever they are in the world, as long as there is access to the Internet and has been known to reunite lost family members and friends because of the widespread reach of its network. One such reunion was between John Watson and the daughter he had been seeking for 20 years. They met after Watson found her Facebook profile. Another father–daughter reunion was between Tony Macnauton and Frances Simpson, who had not seen each other for nearly 48 years. Demographics for Facebook Monthly Active Users and Demography for United States from (May 2012 – March 2013)
- 5. Facebook search Traffic 2012 : Facebook Top regions 2012 :
- 6. Facebook Top cities 2012 : Facebook users by Age ( 2012 ) Remarks- As can be seen Facebook has been highly used in middle East countries(Turkey), European countries(France ,Spain)and South American developing countries (Mexico).As seen majority users are in age group of 45- 54(mature users),and not far behind age groups 34-44,25-34 lies indicating huge amount of people connect to with friends and families via facebook.s
- 7. 4) FIVE FORCE ANALYSIS : a) Threat of new entrants: The threat of new entrants who want to enter the social network industry is very low. As the Facebook is the biggest social networking site with one billion active users per month and it will be very difficult for a new entrants social networking site to get to a place where Facebook has reached. Google+ is the only competitor that’s working hard to come up in the race. b) Threat of substitutes: The threat of substitutes is moderate. Some countries do have their own social networks such as : 1) Wer-kennt-wen (English: “Who-knows-whom”) is a popular German social networking site. 2) Renren Network (English:"Everyone's Website) is a Chinese social networking service that exists as the Chinese remake of Facebook. 3) VK is the largest European social network with more than a 100 million active users. VK is the most visited site in Eastern Europe. However, these networks are mostly only used by the population of the origin country. Facebook, on the other hand has users from all over the world which makes it attractive to people who have international friends. 4)Not the last but Google is one of the biggest competitor of Facebook and they compete with each other at many levels from social networking to advertising. a) Advertising - Google’s Adsense and Facebook ads is the main source of their revenues. They are both into the advising business. They are competing for advertising budget of other companies. Not only Facebook provide a way for advertisers to target their ads to specific demographics and interests of the users but the use of the social graph can potentially create a network effect on sales that Google can only limitedly provide. That is attracting advertisers. The following show Ad revenue of Facebook and Google conducted by eMarketer.com . b) Social Networking - Google’s G+ social networking site that is direct competition to Facebook. G+ allows the same set of features (like Chat messaging, sharing pictures and videos, your interests, your status update ,comments ,video conferencing, likes, etc) and others like communities on G+ similar to groups of Facebook.
- 8. Since Facebook is essentially a social network that allows users to stay in touch with friends, services like WhatsApp, iMessage and Skype can be a threat. WhatsApp and iMessage are Internet based short messaging services that integrate with a user’s phonebook and allow the user to send short messages using their phone. (iMessage is iOS specific, whereas WhatsApp is multi platform.) Video calling services like Skype and Google Hangout can attract users by allowing video communication over mobile phones and PCs. To counter both these threats ,Facebook has introduced independent text messaging apps and tied up with Skype to offer video calling. Since Facebook has taken steps to realize potential substitutes and neutralize them, the threat of substitutes is low. c) Bargaining power of customers: The advertiser and users are Facebook’s biggest customer. a)The advertiser is the one paying Facebook to use the platform. Revenue for the fourth quarter totaled $1.585 billion, an increase of 40%, compared with $1.13 billion in the fourth quarter of 2011. Revenue from advertising was $1.33 billion, representing 84% of total revenue and a 41% increase from the same quarter last year. Excluding the impact of year-over-year changes in foreign exchange rates, advertising revenue would have increased by 43%. b)The users, are also Facebook’s customers. They are customers because they use the site and its services .Monthly active users (MAUs) were 1.06 billion as of December 31, 2012, an increase of 25% year-over-year.Daily active users (DAUs) were 618 million on average for December 2012, an increase of 28% year-over-year .Mobile MAUs were 680 million as of December 31, 2012, an increase of 57% year-over-year .Mobile DAUs exceeded web DAUs for the first time in the fourth quarter of 2012 . The users supply data to Facebook which are use for advertising purposes within the site. So, their bargaining power is fairly high. Users especially make use of that bargaining power when it comes to privacy issues. They threaten to not use Facebook anymore and delete their account. d) Bargaining power of suppliers: Users also are the suppliers because Facebook would be nothing without its users. The amount of information the users gives to Facebook (by likes, comments, posts, picture uploads, etc) are used by Facebook ad to push advertises to the user’s screen. The bargaining power of user is high as users can switch to G+ but since Facebook has changed the meaning of socializing and most user’s friends are already on Facebook, connect to same people on other platform does not make sense. e) Intensity of competitive rivalry: The intensity of competitive rivalry on social networking market is low as there is no social networking site with more than 1billion monthly users. And most of the social networking sites (like vk.com , renren.com ,etc) are local geographically. G+ on the other hand has 1/10th monthly users in comparison to Facebook but can is considered as serious threat.
- 9. 5) CAPABILITIES ANALYSIS: Resource view of Facebook: Facebook’s biggest resource is the 1 billion users information in the database. Facebook had 1,000,000 business pages, allowing companies to attract potential customers and tell about themselves. Facebook Home(announced on 1st April 2013) is the mobile experience that puts your friends with whom you connect daily are at the heart of your phone. As of now this is only available on Android devices. Facebook teamed with HTC to build “HTC First” first of the smart phones to have Facebook Home by default. Facebook Messenger is a messaging app, the user text his/her friends for free to connect with his/her friends. This is a smart phones app available on iOS and Android devices. Facebook acquired Instagram for $ 1 billion to increase its value. Microsoft has invested in Facebook and are in merger agreement with each other to use Bing Maps with Facebook platform. Also acquired Atlas Advertiser Suite from Microsoft. Facebook bought Face.com a Face Recognition Platform for enabling auto tagging feature on shared pictures. Remark- All above acquisitions and merger allow Facebook to have competitive and technological advantage over its imitators and provide better service to its users. And keep them engaged with Facebook to connect with other users. Conclusion: Facebook tools such as social-plug-ins, messages, News feed, Timeline, Event, Graph Search and now with Facebook Home help people connect to world in better way make world more transparent. In Future Facebook will become a portal for socializing as well as to connect with people with different parts of the world for business, friendships and humanity. It also helps small business to market themselves and grow and connect with their customer and provide services in better ways.