Facebook Inc: from Student Directory to Tech Titan

The social media site, Facebook (FB), was established in February 2004, from Mark Zuckerberg’s desire to provide an Internet based school student directory. The reception of the site by fellow students was so well received, that Mark opened memberships to other schools, universities and colleges. With the expansion of site usage, he began receiving investment monies from those who believed in the site and its capabilities. From there the site blossomed and became an instant success because it provided users the ability to post pictures of themselves and other activity photos as well as have chat capability, and the ability to “Like” someone’s picture or post, and ecommerce, just to name a few activities.

Mark Zuckerberg never touted himself as being a business man, he has said more than once, in various way, that his goal and desire was to provide a site for social interaction and to connect people from all over the world. This he did, with great success; however, because he was not a business man, making money was not his top priority and his company suffered for a short period after its initial public offering (IPO). As we see in this case study, and thankfully for all the billions of Facebook users, he placed the company into the capable hands of those who knew how to run a company so it would make money and would provide Mark and his developers the tools needed to keep Facebook a viable and dominate social media company.

The SWOT Analysis for Facebook shows that their strength is in recruiting quality talent that allows for the development of tools and services on their website to keep users engaged and keep them continuously competitive in the social media industry. Some of the tools they use track monthly active users (MAU) and daily active users (DAU); by keeping their MAU and DAU high each month, and growing each year, it not only shows a major achievement for this social media site, but the pursuit to keep their users engaged. When the Chief Operating Officer (COO), Sheryl Sandberg, who is very familiar with digital advertising, joined Facebook she turned things around; so much so, that in 2014 “the company generated 92 percent of its revenue through third-party advertising services…” (3). They are now forward thinkers when it comes to digital advertising; continuously developing ways to capture marketers, getting their products in the face of FB users, along with keeping the users engaged and actively participating to some degree with the ads.

Weaknesses include Zuckerberg’s restrictive view on the monetary aspect of the company. Money is the lifeblood of any company, while it is true that the tools and services they provide for their users is vital, he needed to realize that he would not be able to develop these items without an influx of money to support company growth or pay employees. Two additional weaknesses include; a) lack of control users tend to have in the application over viewing content and, b) organizing their friends; and the company has shown that they can be a little slow on some aspects of technology changes. For example, they almost fell behind on mobilizing FB, which could have caused major financial issues and the loss of users.

Finishing up the analysis I looked at the opportunities and threats. The opportunities for FB include; adding more countries to their user base, expanding coverage and increased use of mobile devices. They could also branch out and add variety to their product portfolio outside of the Facebook application, this way all offerings are not bundled within FB (Example: Google has YouTube, Chrome, etc.). The existing partnership with Microsoft could be enhanced to really compete with Google+ and continue developing their mobile advertising. The visible threats include; FB users fear of data privacy, other social media sites in other countries, especially those countries where penetration is low; their competitors: Google+, LinkedIn, Twitter, YouTube, etc. and development and implementation of new applications and features on competitor websites.

When performing the PESTEL analysis: from the political factors viewpoint, because the Internet is not necessarily monitored or controlled by the government; Facebook would still have to be on the lookout for and become involved with any type of legislation the government would try to develop as it pertains to censorship, monitoring, and/or controlling users’ ability to socialize on sites such as this. Also, FB must be sensitive and respect governments in other countries. Although they want to expand into other countries, they realize that they must abide by the rules and regulations of these countries. The economic factors for FB comes into play from the perspective of the employees they pay, interest rates on long- or short-term loans and what they charge gaming developers and advertisers to the site. The cost to be a member on Facebook is free to users, they only pay for anything they purchase on or through the site. The sociocultural factors related to Facebook is neutral and provide services to all persons. Users are encouraged to complete the demographic profile, which primarily helps users to find one another, allows for some user control features for what is displayed in their news feed and is specifically used for target marketing. Technological factors show that developers are continuously striving to enhance site products and a platform that allows marketers to assess what ads have made an impact and caused a viewer to do more than just view the ad, it links user interactions to the advertisement (12). Because Facebook is an Internet website, the ecological factors related to this company would come directly from their existence in a community and how well and effectively they are managing resources, actively taking part to preserve natural resources and the ability and influence they are having in and outside of the community to promote positive influence and change in others. Legal factors can directly affect Facebook from the perspective of Internet regulations that could be imposed by the United States or from other countries. Monitoring such things are essential to the livelihood of this and other companies that provide Internet based services.

In evaluating the core competencies of Facebook, we must first look at their resources. Facebook resources from a tangible perspective includes physical buildings for their employees, servers to host their website, experienced executive management and highly skilled developers, programmers and other strategic and key employees. Facebook is truly rich with intangibles, which include such things as: unique and complex algorithms for both marketing and news feed compilations. The marketing algorithms allow marketers to target specific demographic identified users; while the news feed algorithms a user aware of the latest items of interest for the day. They also have developer platforms (tools and application interfaces), 1.39 billion users as of 2014 (16), company acquisitions (example: WhatsApp and Instagram (13)), partnerships (Microsoft (18)) and a company value of $36 million in 2014. All the intangibles identified thus far satisfy the VRIO framework, the resources are valuable and rare they add to the richness of the company and make it costly for their competitors to imitate. They are organized to capture the value of the organization to keep them moving forward in the right direction.

Many of their capabilities include a strong executive management team comprised of Mark Zuckerberg (CEO), Sheryl Sandberg (COO) and David Eberman (CFO), a board of directors that helps to ensure executive management keeps priorities, visions and goals in mind, and the remaining managers at Facebook that keeps the strong team of workers on task and pursuing opportunities for company growth. The resources and capabilities of Facebook make up their core competencies which demonstrates why they have been a leading company in the social media industry for over 10 years. Their core competencies outline a strong executive and IT staff that is dedicated not only to the financial success of the company, but also user success. The highly skilled IT staff develops and continuously enhances a large social media application; enhanced by the sophistication to develop algorithms that can customize marketing ads and user news feeds.

Findings:

Management along with providing a superior social media application that transforms itself based on current trends and demands. They are also a leader in creating new technological opportunities that advances the site and creates unique competitive advantage. Although Mark Zuckerberg is the CEO, he primarily focuses on technology and users; thankfully he brought on Sheryl Sandberg the financial brain and life blood of the organization, she significantly increased the revenue from marketing advertisement, which increased their overall company value; together they are a dynamic duo.

Marketing Facebook developed effective methods to monetize users, by creating proprietary and complex algorithms to customize marketing ads to specific demographics. Also by adding a feature in the news feed that makes a video play when it is within a certain part of the viewing window no interaction required by the user. They also created a bidding system for marketers so they can bid on specific user demographic to focus their marketing campaign on via the site.

Finance David Eberman and the underwriters orchestrated the initial public offering of Facebook at $38 per share. At the initial offering, the stock was in line with NASDAQ 100 index, but by 5/11/2012 the stock price began to decline and hit a low price in September 2012 of $17.73, by July 2013 it was back up to the IPO price (9). In the meantime, since the IPO and decline of stock value, Zuckerberg started seriously evaluating monetizing users and how to increase advertising revenue. By challenging his employees, they turned around the mobile advertising space and increased revenue; the results were shown in the stock price of $83.42 in the first quarter of 2015 (9).

Accounting Maintained the financial records for the company, kept track of investment money, collected revenue from marketers and platform developers and created internal reports which helped the Finance department assist executive and department managers with monthly and annual budgeting to help determine projects to undertake. They also created and provided the financial statements required for the IPO, the investigations that took place by the SEC (7) and development of financial statements for board member reviews.

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