- identify and discussTWOactors in the digital environment (e.g. technological forces, economic forces, social forces, legal forces, consumers) that may contribute to the current business success of Facebook.
- As an investor in a social network such as Facebook, discussTWOrisks/factors that could damage the future growth potential of the social network. Support your answer with examples.
- Imagine you are Facebook's marketing director, suggestONEmarketing strategy/action for the company to grasp growth potential in the next 12 months. Support your answer with examples.
Facebook a Titan of the digital age _ This case is about the social network Facebook. which needs no introduction. When we rst featured it in an ear- lier edition. it was a niche service mainly used in colleges and universities. Then in the rst two years of operation Facebook reached 6 million users. by 2009 there were 360 million (Facebook. 2018) and now there are more than two billion monthly active users. or nearly 40 per cent of the world's population (over 14 years) (Noyes. 2018). The purpose of this case study is to review the success factors. that propelled Facebook into such a successful position that it is able to influence global media. be a dominant player in online advertising and owns so much personal data that it is probably better placed to know who your best friend is than you are yourself. Learning about the success factors is one part of this case. but we also consider the risks associated with becoming one of the world's most successful digital brands. The mission - the big picture When Mark Zuckerberg launched a site call thefacebook. corn in 2004, it was a student directory showcasing pho- tos and basic information. Growth was rapid in the US and then internationally through universities and high schools. But it wasn't until 2006 that FaCebook began to expand its reach to everyone aged 13 and over with an email address. As the membership base grew, the func- tionality of the site developed, enabling the sharing of photos and an opportunity to expand personal social networks. By 2015, the social media giant was riding high and its mission had become less about functionality and more about socially enabling members: \"We want to give you the power to share and to make the world more open and connected'. In 201 7. the mission became more focused on 'bringing the world together; and enabling the plat- form to encourage more connections, through newsfeeds and build \"meaningful communities" to give individuals a voice to share a diverse range of viewpoints and opinions in order to address major societal issues e.g.. poverty,- climate change. terrorism' (Zuckerberg. 2017). Value proposition Consumer When Facebook launched in February 2004. there were just three things users could do on the site: 1) create a prole with their picture and information: 2) view other people's proles: and 3) add people as friends. These are still core to its functionality and translate into core con- sumer benets (as stated by Facebook): 0 Connect and share with your friends. Staying con- nected is the core feature as we would expect, but note the more emotional underpinnings of the other elements of the value proposition. 0 Discover and learn. Facebook references public fig- ures and organisations that interest them - available through Facebook company pages. 0 Express yourself. A fundamental need. Facebook does this through its key features, which it describes as the Timeline, News Feed. Photos and Videos and messaging through Email, Chat and Text. 0 Stay conneewd everywhere. Referencing the impor- tance of mobile use and use on other sites to Face- book's users and business model. people can access Facebook through the website, mobile sites, smart- ' phone apps, and feature phone products. Marketers and businesses Facebook worked hard to monetise its audience. par- ticularly since its initial public offering (lF'O) on 18 May 2012. This was the biggest IPO for an lntemet company, with a peak market capitalisation of over $104 billion. Facebook describes its offer to business as follows: Marketers can engage with more than one billion monthly active users on Facebook or subsets of our users based on information people have chosen to share with us such as their age, location, gender, or business to engage potential buyers at every stage in interests. This offers marketers a unique combination their journey to purchase. of reach, relevance, social context, and engagement . The company continues to grow its digital advertising to enhance the value of their ads. revenue and its strategy for global expansion and Commercial companies or not-for-profit organisations acquisitions also contribute to this revenue stream. e.g. www.facebook.com/joinred) create their own Face- book pages for their company (currently free). Facebook Facebook's strategy users can then express their support by adding them- Facebook describes the key elements of its strategy in selves as a fan, writing on the company Wall, uploading its SEC filing as: photos and joining other fans in discussion groups. When users become fans, they can optionally agree to 1 Expand global community. Facebook names spe- be kept up-to-date about developments, which then cific 'relatively less-penetrated, large markets' such appear in their news feeds. as Brazil, India, Mexico and Japan. So, in order to To encourage companies to advertise, Facebook expand its reach Facebook looked for potential uses an algorithm known as EdgeRank Checker, which acquisitions and in 2012 purchased Instagram, which determines the percentage of company status updates has developed as a separate brand, providing greater that appear in a user's newsfeed and a suite of per- reach for both platforms through the sharing of formance measures to test and optimise businesses' images. Similarly, What's AppTM the mobile messag creative content. ing service, was purchased in 2014, giving Facebook access to millions of active users in a diverse range Revenue model of global locations (Olson, 2014). Facebook has a targeted ad-based revenue model, 2 Develop social products to provide the most which is slightly different to its rival Google, which uses compelling user experience. As with many SEC a model based around keyword searches. Facebook's filings of successful Internet businesses, there is a approach utilises personal data (anonymised) to provide clear commitment to user experience. Facebook's advertisers with lists of potential customers to target. approach is based on Facebook Insights: Some of the features of Facebook Ads (www.facebook. com/ads) include: To provide the most compelling user experience, we continue to develop products and technologies targeting by age, gender, location, interests, politics, focussed on optimising our social distribution religion and more; channels to deliver the most useful content to each alternative payment models: cost-per-click (CPC) or user by analysing and organising vast amounts of impression-based (CPM). information in real time. 'Trusted Referrals' or 'Social Ads' - ads can also be shown to users whose friends have recently engaged Smart Insights (2012) quotes Andrew (Boz) Bosworth, with a company's Facebook page or engaged with the then director of engineering at Facebook, as saying: company website. Every day, we run hundreds of tests on Facebook, At the time of the launch of Ads, the Facebook blog most of which are rolled out to a random sample made these comments, which indicate the delicate bal- of people to test their impact. For example, you ance between advertising revenue and user experience. may have seen a small test for saving news feed They said, first of all, 'what's not changing': stories last week. Facebook will always stay clutter-free and clean. Other products might require network effects to be Facebook will never sell any of your information. properly tested, so in those cases we launch to eve- You will always have control over your information and ryone in a specific market, like a whole country. your Facebook experience. 3 Mobile products. Facebook is seeking to make these You will not see any more ads than you did before this. more engaging and more easily available. In April 2014 Facebook passed 1 billion million average monthly users And what is changing: of mobile services. The acquisition of photo-sharing app . You now have a way to connect with products, busi- Instagram in August 2012 was part of this strategy. nesses, bands, celebrities and more on Facebook. 4 Facebook Platform. Facebook notes the importance Ads should be getting more relevant and more mean- of developing an open system through apps and web- ingful to you. Facebook Ads offers opportunities for sites built by developers using the Facebook Platform, including API (Application Programming Interfaces)and Social Plugins to help integration with other ser- Facebook states that: 'Trust is a cornerstone of our vices such as websites. The Facebook Platform was business' and it now dedicates significant resources to introduced in 2007 and by January 2008 over 18,000 the goal of building user trust through developing and applications had been built on Facebook Platform with implementing programs designed to protect user pri- 140 new applications added per day. More than 95 per vacy, promote a safe environment and assure the secu- cent of Facebook members have used at least one rity of user data. Facebook has to some extent learnt this application built on Facebook Platform. lesson from early mistakes, insofar as the importance of 5 Improve ad products. With the IPO this is a vital aim representing the business's core values. Mark Zuckerberg for Facebook, but it has to be balanced against the is seeking to refocus efforts on community connections. other elements of the strategy, particularly 2: Develop Changes to Facebook's newsfeeds algorithm in 2018, social products Facebook states: 'Our advertising has shifted the focus away from business promotion strategy centres on the belief that ad products that towards social and personal communication. The risks are social, relevant, and well-integrated with other are the effect on business referrals. content on Facebook can enhance the user experi- ence while providing an attractive return.' Facebook lists some of its other key risk factors as: 6 Build a scalable infrastructure. Facebook describes users increasingly engage with other social media its investment in software and hardware infrastruc platforms, products and activities; ture, which enables its aim to provide a 'unique, per- users feel that their Facebook experience is dimin- sonalised experience to each of our users around the ished with respect to the frequency, prominence, and world'. To do this Facebook explains its technology size of ads, which detract from user core benefits; investments as focusing on analytics and develop- users adopt new technologies where Facebook may ment in areas including content optimisation and not be featured or otherwise available. delivery, graph query, media storage and serving, In 2018, Facebook's strategy and its exposure to risk has large-scale data management and software been tested and as a result its trusted position seriously performance. questioned. Mark Zuckerberg has had to face the US 7 Using Al to control content. Fakenews and the congress and answer questions regarding selling adver- legitimacy of content on Facebook's Platform has tising to unscrupulous propagandists and facilitating the become a major political concern. To address this growth of fake news. This global exposure of the com- and maintain validity of postings in line with the latest pany's activities has seriously impacted on the business mission of building meaningful communities, the use and highlighted the 'fragility of Facebook's standing in of Al is being explored to find ways to differentiate both the markets and public perception' (Lapowsky, from "news stories about terrorism and actual terrorist 2018). This situation arose due to how personal data was propaganda". Facebook wants to have the capacity being handled and the company was accused of allow- to quickly remove content that is detrimental to its ing this private data to be used inappropriately for poten- societal values (Solon, 2017). tial political gain. This situation affected the valuation of Facebook and consumer trust, but potentially more sig- Risk factors nificant is this could lead to tighter regulations on the use Although it seems curious to think of a company as large of personal data. as Facebook having competitors, it has new global rivals and local rivals. Globally, the competitive market chal- The future for Facebook lenges for Facebook are in part its business markets; it Mark Zuckerberg is taking responsibility for the future needs to develop business in emerging markets. But many direction of Facebook and looking to new technology, advertisers are not based in the US, and in China, and such as augmented reality, to deliver new applications. India South America, where emerging markets are devel- Messenger is Facebook's second-biggest product and oping, Facebook does not dominate (MacBride, 2017). it appears to be taking inspiration from the Chinese Locally, Instagram is an internal competitor, owned by WeChat by introducing chatbots and other features to Facebook but this social media platform is growing fast introduce more 'fun' and stimulate more traffic. and attracting advertiser revenue. Linkedin is capturing Many companies are moving away from the original business-to-business traffic and while much smaller than Facebook Platform, for example Vice, Mashable and Facebook, has a strong business client base. Twitter and BuzzFeed, as they are receiving a growing number of Google are also competitors. There is an intensity to the referrals from Pintrest and Instagram (Chaykowski, rivalry of these firms, based on the ability of the firm to 2018). Business referrals have been slowing for the last attract the largest audience. two years, creating opportunities for competitors suchas Google, and there have been the trust issues over potentially inappropriate use of personal data. . Wired Beyond Facebook (https://www.wired.com/ Key sources for the latest information on Facebook: story/beyond-facebook-its-high-time-for-stronger- privacy-laws/), an article in Wired magazine. All Facebook (www.allfacebook.com) and Inside Face- book (www.insidefacebook.com) are sites specialising Heath (2017). Sources: Abram (2006); Phillips (2007); Facebook (2018); Noyes, (2018); in reporting on developments at Facebook. o Key Facts - updated quarterly at close of year (http:// newsroom.fb.com/Key-Facts). o SEC updates - Security and Exchange Commission annual report filings give great insights into how Face- book positions itself and what it sees as its risk fac- tors (http://investor.fb.com/). . Smart Insights Facebook updates and advice (www. smartinsights.com/social-media-marketing/facebook- marketing/) cover the major developments that mar- keters need to be aware of. o Socialbakers (www.socialbakers.com/facebook-statis- tics/) Facebook statistics by country and brand popularity. Wikipedia pages for Facebook (http://en.wikipedia. org/wiki/Facebook)
