Build Engaging Mobile Experiences

Published Date: 02 Nov 2017

Facebook is the largest social network in the world, connecting 2 billion people around the world. While, Facebook has played crucial role in the Arab springs and is has been unpopular for changes to the user interface especially privacy aspects. Following the IPO, Facebook is under the scrutiny to live upto the hype created and the under performance of the shares. This paper examines the current strategies of Facebook and implications for strategic direction to monetize which will lead to alienation. The political climate that can impact the services with regards to data policy and regulations limiting the monetization possibility for Facebook. - Contains a study of the major internal and external factors affecting Facebook Inc. in the form of a SWOT analysis as well as a breakdown and examination of leading product revenue streams of Facebook Inc.

2. Company Background:

Facebook Inc. is the most popular social networking platform in the world founded by Mark Zuckerbergâ€™s at his Harvard dorm room in 2004 (Facebook, 2012). The platform enables its users to share pictures, status updates, thoughts, photos, videos and various life events to their friends and followers (FacebookPress, 2013).

As of October 2012, Facebook has more than One Billion monthly active users of its platform (The Financial, 2013). While, the majority of the revenues come from the United States of America, 81% of the active users are from other countries. Facebook also boasts 584 million daily active users as recorded in the month of September 2012. Facebook also has a strong foothold in the growing mobile products with 604 million monthly active users by the end of Q3 2012 (The Financial, 2013).

The company is headquartered at Menlo Park, California with presence across the world. By the end of the 2011 (FY2011), Facebook recorded revenues of $3,711 million with an increase of 88% over the financial performance of 2010 (FacebookPress, 2013). The company had an operating profit of $1,756 million during FY2011 with an increase of 70.2% over the last year. Also, the company recorded net profit of $668 million in FY2011 with an increase of 79.6% over the financial year of 2010.

Industry Background: Strategic Maneuvers

Social Networking platform on the web have existed since the early 2000, with Myspace as the pioneering company. Facebookâ€™s historic rise to become the largest player in the domain can be attributed to the strategy adopted in its early days. Facebook from the early days of the Harvard dorm rooms was highly selective to few Ivy League schools in the US (MarketingMix, 2012). This allowed users to trust the system and bring their offline experience of friendship online using their real identities. Unlike, MySpace people took their profile seriously and also improved the quality of content. Thus, MySpace and many other social networks lost their market share. With the growing popularity, people preferred to be active of the network where their friends are active.

Facebook has been known to take bold steps to stay ahead of the innovation in the field. The company launched new features rapidly, catching up with the user requirements in the evolution of the industry (Rashid, 2011). Google could not ride of the wave, as they focused on the search and underestimated the market of social networking. With the recent of launch of Google Plus, Google is hoping to catch-up in the race.

4. PESTEL Analysis :

PESTEL (Political â€“ Economic â€“ Social â€“ Technological - Environmental - Legal Factors) Analysis is a tool to study the market positioning, environment and competitiveness of organization; and used in decision-making with a better perspective of future implications (Luthans & Davis, 1993). Also the categories during the analysis of an organization are not mutually exclusive.

4.1 Political Factors

Governments around the world are trying to regulate Internet with Facebook facing significant political challenges for the same. As mentioned previously, Facebook is known to change its privacy policy regularly to keep up with innovation that tends to upset users and many regulators across the world.

One of the key assets of Facebook is the user data, which is critical to deliver the focused advertisements. Changes in the privacy policy regarding the personal data stored in the platform, has lead to several lawsuits and concerns from the governments. While pushing for the innovation is critical, Facebook could face large damage in the range of 10-20 Billion US Dollars if the class action lawsuits are lost. Facebookâ€™s privacy policy will be critical to ensure that the ad revenues are not affected while the users are comfortable with sharing more information.

One of the biggest challenges for Facebook will be the reform in European Data Protection that will limit in the ways they could use the personal data from the users. German Regulators have already warned Facebook following the IPO to allow individual to use the platform as private network and avoid sharing of the data to the third party advertisers.

4.2 Economic Factors

In the era of connectivity and globalization, Facebook is the preferred platform for the creative to small business owners to large companies for expanding their reach online. With the sluggish economy around the world, social media especially search and social networks have been growing exponential.

Facebook being the market leader around the world excluding China, has brought advertisers from traditional media to new media. The long-term brand awareness has transformed the way advertisers engage with their customers providing lock-in revenue for the company. Thus, Facebook will continue to capture the 600 Billion dollar advertising industry.

4.3 Social Factors

Facebook is immensely successful as it adapts to the user requirements and helps users around the world to bring their offline experience of friendship to online platform. Facebook is widely used for connecting with family, and staying in touch with updated life events. The user experience of Facebook allows users to manage their relationships with others.

As the user can find best experience when its had most of its social connections in the platform. The interaction with the friends leads to dependency on the platform for future communications. One of the best examples, itâ€™s the birthday reminders. The Facebook has become the de facto tool to remember friendâ€™s birthday and convenient tool to instantly wish them.

4.4 Technological Factors

Rapid changes in the technology have lead to rise and fall of many platforms in the social networking space. One of the key areas of innovation and technology where Facebook need to focus in the mobile platform. The users are increasingly using mobile and tablets to access the social network. Also the mobility of the device opens up various opportunities to bring localization technologies in the applications.

Facebook has been focusing on the mobile products, as their priority with large M&A deals likes of Instagram for 1 Billion dollars. The IPhone and Android Apps and various mobile service providersâ€™ partnership will play crucial role in the next mile of user acquisition and also market leaderships.

Many new startups and technologies are showcasing the future of social networking. One of the prominent launch is the Google Glass that can transform the entire experience to the level of Augmented Reality. Facebook will need to catch-up on the new technologies.

4.5 Environment Factors

Facebook as one of the largest Internet companies need to focus on making its huge data centers to be more environmental friendly. Google has pioneered green servers, Facebook can follow-up the footsteps to ensure that the growth is inline with a responsible environmental approach.

4.6 Legal Factors

Facebook faces large number of the class action lawsuits with regards to the privacy policy changes and the use the personal data for the third party adventisers.

4.7 Summary

The PESTEL Analysis of the Facebook Inc, shows that the company despite of the political and legal challenges has exponential growth in revenue and market share. The monetization of the user data using ananomization and better public communication is critical to bring trust among the Facebook users. The analysis also shows that Facebook could major obstacles if the governments impose regulations leading to non-commercial usable of the user data. This scenario is not very likely, as the ecosystem of the free service to connect users will be impacted if the advertisers donâ€™t pay for it. Alternative revenues like payments can significantly improve the strategic positioning of Facebook to be able to take more user oriented privacy policy, as its dependency on the advertisers revenues will be reduced. The technological challenge still exists with Google glass as disruptive innovation in the space.

5. SWOT Analysis

5.1 Strengths

Facebook is the largest social network in the world with highest number of active monthly users and also by the time spend on the website daily.

Following the launch of the Facebook platform and the ecosystem of the "LIKE" button, most web services have integrated bringing personalized experience to the Facebook users across various services on the internet.

The gaming and social apps ecosystem has spun off billion dollar companies like Zynga that in return contribute to the revenues.

With the immense wealth of personal data, Facebook has the most extensive granular ad targeting features allowing advertisers to create focused ad campaigns bringing high conversions.

Facebook is one of the most coveted technologies to work for with some of the brightest minds on the team of around 4000 employees.

The recent integration with Skype enables Facebook to bring the experience of Video chat right into the platform making it very easy to chat with friends.

5.2 Weakness

Many people who are adopted to the current features find it annoying to find the entire user interface change frequently.

Opportunities

Facebook can enter China to access the 1.3 billion users who are not yet on the platform due to the restrictions from the Chinese Governments.

It can start various features for the users to sell produce on the platform like ebay or amazon to their friend making facbeook the largest peer-to-peet market place to add additional untapped revenue stream for facebook.

Facebook could replace the current requirement of contact book or features to compete with LinkedIn by providing special services like jobs search and professional profile. It can also charge for premium profile and high ranking on the results like that of LinkedIn.

Facebook start online deals for ecommerce or creative promotions for business to increase their footfall. Facebook mobile can take advantage of the check-in-features to gamify the experience.

Mobile will be the next big oppurnity for facbeook driving ads based on the location or improving the targeted ads based on the nearest advertisers. Facebook could reinvent the way adventisers reached to passers by replacing billiboard with QR code based offers.

5.4 Threat

One of the main threats for Facebook is data portability regulation i.e. possibility of transferring data from their platform to other networks like Google Plus or MySpace.

Any further changes in data privacy policies could lead to users shifting to platforms will user-friendly data privacy policies

Google Glass, 3D avatar-based social networking platform or Augmented Reality apps could drive away the users to the next wave of social networking.

The potential damages for the class action lawsuits filed against Facebook are upto 15 billion dollars that can seriously affect the company and possibility of going bankrupt.

With various governments working on regulating internet, Facebook might face temporary disruption in certain countries or limitation of commercial opportunities.

The European legislators have stringent requirements to manage the data services inside the region that can lead to large expenses to operate in the region.

Any security breaches leading to leakage of data or photos could result in lawsuits and related expenses.

Significant drop in user retention could lead to reduced engagements among the users of Facebook platform, negatively affecting the financial performance.

Limitation of mobile products to display ads can effect the bottom-line of the company as users are moving away from computer platform to their mobile devices.

5.5 Summary

Thus, following the SWOT Analysis we find that Facebook is at the best strategic position as the market leader focusing on growth areas like Mobile. The recent IPO brings monetization and revenue growth as the key priority as the stocks are underperforming.

6. Conclusion

The Strategic analysis for the social networking giant Facebook Inc, highlights the successful companyâ€™s exponetial growth. Even with the underperforming stocks, facebook has created an example where the user data gives it the leverage to undermine any competitions.

The PESTEL Analysis shows that the monetization of the user data using ananomization and better public communication is critical to bring trust among the Facebook users. The analysis also shows that Facebook could major obstacles if the governments impose regulations leading to non-commercial usable of the user data.

7. Recommendations

Focus on Growth Markets: Facebook has captured the American and European Markets. The next growth in the user community is in the markets like Russia, India, Brazil, South Korea and Japan. Facebook should focus on acquiring new users and better local apps along with marketing efforts for brand awareness. Also, they should focus on new advertisers from these markets to strengthen their revenues.

Government Affairs and Communication Efforts: Facebook should focus to bring experts in government affairs to ensure that their voice is heard during regulations efforts in the area of personal data and privacy. This is critical as any unexpected move by the government could lead to significant damages to the company. They should also have better communication efforts to educate regulators, politicians and press about their efforts to safeguard the interest of its users especially in the protection of personal data. Facebook should also work together with the government help them combat issues such as trafficking and under age prostitution.

Product Innovation: Innovation is the key to the future of Facebookâ€™s dominance in the social networking space. They need to invest in the areas of innovation for the users and as well as advertisers to better connect with their customers. Facebook should continue to invest in the best talents in the research and development to upgrade its current offering in photos, status updates, timeline, video calling, messages and applications.

Personalization and Power of Big Data: Facebook should focus on the improving the experience of its users using the huge datasets collected over time. The power of Big Data can provide the users with personalization streams of updates, news and stories according to their relevance. Big Data can also improve the advertisers efforts to find the exact time for improving conversion of their ads and targeting users in a serendipities manner.