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Business Model Canvas Examples
Facebook business model.
The Facebook business model is a multisided platform . Although other brands have called themselves “social networks” before, such as MySpace or Orkut, it’s fair to say that the first to turn this digital environment into a successful business model is, no doubt, Facebook. With over 15 years in the market, Facebook now has more than 2 billion users all over the world, and it keeps active and growing.
Also, due to the acquisitions that the company has been taking on brands — and competitors as well —, like Instagram and WhatsApp. In spite of all the speculation about selling users’ data, Mark Zuckerberg, Facebook’s founder, states that this has never been — and never will — the network’s revenue stream. Even because it wouldn’t be financially healthy for its own business. But, if that’s true, then what’s Facebook’s Business Model ? How does Facebook make money? Let’s take a closer look.
More than a social network
According to Zuckerberg , as he was developing Facebook, he wouldn’t have the ambition to build a worldwide enterprise. Unlike that, he would only realize that one “could find almost anything on the internet — music, books, information — except the thing that matters most: people”. Nowadays, Facebook has several other companies under its “umbrella”. Among them, there are Instagram, WhatsApp, Oculus (virtual reality tech), Moves (step counter app), and more.
A brief history of Facebook
Facebook’s history goes back to 2003, when the founders Mark Zuckerberg, Eduardo Saverin, Dustin Moskovitz, and Chris Hughes were studying at Harvard University. It began as an online service where students would judge each other’s appearance, called Facemash — but it was shit down on only two days, for violating some policies. In January of the next year, the four of them developed thefacebok.com, a social network for Harvard students to post photos and personal information.
As its popularity grew, thefacebook.com was open for students from other institutions to join. By the end of 2004, over one million people had registered and, in the same year, companies such as MasterCard offered to pay for advertising on the website.
In 2005, the social network removed the “the” and became only Facebook, and high-schoolers and students from outside the United States were allowed to join. That enabled the website to jump to six million users.
The next year, anyone above 13 years of age would be welcome. In 2008, Facebook surpassed MySpace and, four years later, it became a public company, with its initial IPO raising $16 billion, which lead its valuation to $102.4 billion.
Who Owns Facebook
Facebook is owned since its foundation by Mark Zuckerberg, through its holding group, Facebook Inc. After acquiring Instagram and WhatsApp, Zuckerberg decided it was better to rename the holding group to separate the Facebook social network from the group. So, in October 2021, Facebook Inc. was relabeled to Meta Inc., with Zuckerberg as its CEO and owner of all the companies of the group.
Facebook’s Mission Statement
Facebook’s mission is to give people the power to build community and bring the world closer together.
How Facebook makes money
The great revenue stream of Facebook is the targeted advertisement, due to the benefit that the platform offers, of allowing the advertisers to reach their target audience, through information the network collects from its users. And, according to Zuckerberg, that’s precisely why it wouldn’t make any sense for Facebook to sell its users’ data. It would be cutting its own throat, as the platform would be handing over its greatest differential.
Soon, the advertisers wouldn’t need Facebook anymore. Facebook’s trump card is exactly to permit its advertisers to invest money in the right audience. Within more than 2 billion profiles, the businesses are able to have their products/services viewed only by American 25-30-year-old females, who have a degree and are interested in marriage, for example.
That’s the way advertisement became accounting for 97% to 99% of Facebook’s revenue. The other 3% or less is made up of payments received by games played and products sold on the platform, private social network services to businesses, and other products offered by each of the brands under its umbrella, such as Oculus, a Virtual Reality device.
Facebook’s Business Model Canvas
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Facebook’s Customer Segments
- Users: They are the biggest customer segment of Facebook, and stand for one-third of the world’s population! They are all the people who have their profiles in the network and use them to interact and communicate with friends and other people with similar interests around the globe. They don’t pay Facebook anything and, thus, they are not directly responsible for the business revenue. However, they are the basis that makes Facebook interesting for the ones who do pay;
- Businesses and advertisers: This is the segment involved in Facebook’s revenue. It encompasses all the brands and businesses that advertise on the social network. They pay to have ads for their products and services on the platform, which, from its side, offers a more qualified audience. Due to the information that Facebook collects from its users, the company is able to target advertisements on its platform, allowing brands and businesses to have their ads viewed by its target audience. Anyway, although these are the revenue providers, they will only keep their interest as long as the non-paying user base is wide and qualified;
- Developers : It’s the smallest customer segment, and it includes the ones who develop apps and games through Facebook’s platform.
Facebook’s Value Propositions
As Facebook has three diverse customer segments, each segment will perceive the brand’s value differently. That said, let’s divide the value proposition by segment:
- For users : The greatest benefit is to keep in touch with family and friends, via text and picture posting, and by interactions through comments and direct messages. This is especially relevant for the ones who travel a lot or live far from their loved ones. Another advantage is the availability of entertainment and information. Facebook is useful both for those who want to get entertained by the lives of their acquaintances and for people who use it as a source of news and current affairs;
- For advertisers: The possibility of targeted campaigns, focused on their particular target audience, has been of great value for brands. By achieving greater penetration in its main audience, companies also get greater engagement in their customer segment of interest. Another relevant point, especially for small businesses or young companies is that the tools to advertise on Facebook are quite simple, in the best “do it yourself” style, which reduces the need to hire someone to develop their own advertising content;
- For developers: Facebook is an amazing platform for developing apps and games, and it offers a wide range of views and disclosure. Besides, there is a great network of providers for advertisement services.
Facebook’s Channels
It’s quite clear that the main distribution channels of Facebook are its own website and app, because that’s where users find each other, and advertisers access their audience. Inside that, the channels can be divided into feed, notifications, direct messages, and stories. Other channels include the app stores, other products of the company, e.g. Instagram and WhatsApp, and, of course, word of mouth power.
Facebook’s Customer Relationships
Facebook’s customer relationship is based on its own platform, which is very user-friendly, as it allows users to specify their profile configurations and use them with no hard time. In addition, Facebook has an international sales organization, that works alongside marketing and advertising agencies, to attract advertisers.
Facebook’s Revenue Streams
- Payment revenues (percentage fees)
- Ad revenues (CPM and CPV)
Facebook’s Key Resources
Within Facebook’s key resources , the only tangible one (but essentially digital) is its platform, which demands technological infrastructure. Aside from that, the other key resources are the network users and their content production, and the Facebook brand. The active users are the company’s biggest asset. Because, if there aren’t users, there is no audience to view the ads. And to make them engaged, there must be relevant content, to avoid churn. As for the brand, it’s a very powerful name, still the great synonym for “social network”, indeed.
Facebook’s Key Activities
Above all key activities , it is the platform development and maintenance, in order to ensure a positive experience and avoid negative effects on the social network. Then, besides all the infrastructure that the website demands, to keep it working properly and optimized 24/7, Facebook also needs to invest in good practices and control bad behavior within the network. Furthermore, the company focuses on user acquisition and engagement, data and information storage and security, talent hiring and retaining, and sales and marketing.
Facebook’s Key Partners
- Content developers, e.g. videos, games, texts, etc.
- Developers for compatible operating systems, browsers, and hardware
- Digital influencers
- Businesses and brands that advertise or directly sell on the platform
- Marketing agencies
Facebook’s Cost Structure
The biggest share of Facebook’s cost structure revolves around platform maintenance and its billions of users’ data storage. Besides, there is user CAC (cost of acquisition) by delivering tools that foster user engagement, research and development investment, marketing and advertising, customer support, and all the regular general and administrative expenses of a worldwide company.
Facebook’s Competitors
- Snap : Photo and video sharing app released in 2011, with 280 million active daily users. It is very popular among kids under 16 because the content disappears in seconds;
- LinkedIn : This professional network was launched in 2003. It aims at linking recruiters, employers, and potential applicants. The site is free to use, but it has some premium features, for its over 600 million registered users;
- Twitter : Free microblogging service founded in 2006. Its 180 million members can post short texts called tweets;
- YouTube : The video-sharing platform allows users to upload, view, and share videos. It was founded in 2005 and accounts for 2 billion regular users, who watch more than one billion hours of videos each day;
- Pinterest : This social networking site is for saving and discovering creative ideas. It was created in 2009, and it has around 480 million active users nowadays;
- TikTok : It is a social media app for creating and sharing videos or for live broadcasting. Founded in 2012, it is the newest one and has more than one billion active users currently.
Facebook’s SWOT Analysis
Below, there is a detailed swot analysis of Facebook:
Facebook’s Strengths
- Brand : Yes, Facebook has already been in the top 5 most valuable brands in the world. Now it is the 13 th one, but that still represents a very strong name, valued at over $35 billion;
- Portfolio : Diversification and acquisitions allow Facebook to protect its financial assets, as it does not put all its investments in only one sector. WhatsApp, Instagram, Messenger, Oculus, Workplace, Portal, and Calibra stand as major strengths for the business;
- Market dominance : Despite its declining user number, Facebook still remains the leader in the social network industry, with more than 2 billion users. And the 3 rd , 4 th , and 6 th places are occupied by WhatsApp, Messenger, and Instagram, respectively, which are part of the company;
- Loyal customer base : Around 30% of the world’s population uses Facebook and its family products (Instagram, WhatsApp, Messenger) putting the company in a very comfortable position;
- Good employer : HR policies put Facebook as one of the best employers in the world, thus attracting and retaining top talent;
- Leader : Mark Zuckerberg is a brand itself nowadays. His visionary leadership provides innovation, stability, and sustainability for the business;
- R&D : Facebook is one of the leaders worldwide in Research and Development investments, focusing almost 20% of its total revenue on innovation;
- Marketing strategy : Facebook is a very powerful marketing tool, as it reaches 2 billion people but enables target advertisement. That is why 97% to t99% of its revenue comes from ads.
Facebook’s Weaknesses
- Privacy: Facebook faces some decline in popularity and a bad reputation due to its lack of protection regarding users’ privacy and data;
- Overdependence on advertising : The business revenue is totally dependent on social media (the other brands of the family are in the same industry) and, as mentioned above, advertisement is basically the source of revenue for the business, leaving no place for other revenue streams;
- Fake news: Facebook has been under huge critics as a result of its incapacity for controlling misleading information.
Facebook’s Opportunities
- Portfolio : Facebook has the potential and resources to diversify its portfolio in order to avoid overdependence on social media and advertising;
- Integration with other applications : Facebook can be open to integration with many types of applications, such as e-commerce, podcasts, games, etc.;
- Different audience : With new features, Facebook can attract other target segments, besides tech-savvy youngsters;
- Acquisitions : Facebook has the potential to keep acquiring other companies, even from different industries.
Facebook’s Threats
- Competition: Facebook’s user number is declining, and much as a result of competition with old platforms as well as new entrants;
- Regulations : There are many new regulations regarding the Internet that can harm Facebook’s business model, such as ones concerning data safety, user privacy, intellectual property, etc.;
- Data breach : Data breaches can affect millions of users, by exposing personal information to the dark web;
- Digital taxation : This new tax is being adopted in the UK and European Union. If this kind of tax is implemented in other countries, it can jeopardize Facebook’s profits;
- Reputation : Data breaches, fake news, hacked and/or false accounts, and other scandals have tainted Facebook’s reputation, thus reducing usage.
Despite all the accusations and controversies, Facebook is still booming. Although many people believe this social network is going to end soon, Facebook’s brand and business are going to certainly remain, investing in new approaches and brand names, as you may have noticed.
Daniel Pereira
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DigitalBizModels
The Best Digital Tech Business Models Today
February 29, 2020
Business Model Canvas Facebook: how to become a giant?
Facebook is social media. They are dominating this category so much, that the CEOs of Twitter , Pinterest and Snapchat are calling themselves something different. I have pointed this out in the linked articles. Facebook is one of a few platform businesses that have proven the theory of platform business models right. The theory always stated – or should we say assumed – that explosive growth would be possible due to the indirect network effects. A review of Twitter’s, Snap Inc’s, Pinterest’s financials would let us wonder if this is true.
A look at Facebook’s financials will convince you that it indeed is possible. How Facebook got there has not been without criticism. It has had great positive but also some grave effects on individuals and communities and the question is whether the platform (and societies were unprepared for some of the ill-effects). I will cover this in great depth because it is so crucial to the trajectory of the business. As always we will be using the business model canvas tool to structure our thoughts.
This articles is structured in line with the elements of the business model canvas:
- Value proposition
- Key partners
- Key activities
- Key resources / assets
- Customer segments
- Customer relationships
- Cost structure
The vision and what they stand for
Mission statement.
Facebook’s mission is to give people the power to build community and bring the world closer together. People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them. Facebook And Give people the power to build community and bring the world closer together.
“Our principles are what we stand for. They are beliefs we hold deeply and make tradeoffs to pursue.
- Give People a Voice: People deserve to be heard and to have a voice — even when that means defending the right of people we disagree with.
- Build Connection and Community: Our services help people connect, and when they’re at their best, they bring people closer together.
- Serve Everyone: We work to make technology accessible to everyone, and our business model is ads so our services can be free.
- Keep People Safe and Protect Privacy: We have a responsibility to promote the best of what people can do together by keeping people safe and preventing harm.
- Promote Economic Opportunity: Our tools level the playing field so businesses grow, create jobs and strengthen the economy.”
Key properties
Facebook’s key properties (ecosystem) are its various platforms which all have separate apps/websites. However, the accounts are linked (unless the user decides to create separate accounts – but Facebook algorithms will still try to identify the same user with different accounts across platforms and for it as one “person” – metrics “daily active person” and “monthly active person”). We will be focussing on the key social platforms:
Facebook: Facebook enables people to connect, share, discover, and communicate with each other on mobile devices and personal computers. There are a number of different ways to engage with people on Facebook, including News Feed which displays an algorithmically-ranked series of stories and advertisements individualized for each person.
Instagram: Instagram brings people closer to the people and things they love. It is a community for sharing photos, videos, and messages, and enables people to discover interests that they care about.
Messenger: Messenger is a simple yet powerful messaging application for people to connect with friends, family, groups and businesses across platforms and devices.
WhatsApp: WhatsApp is a simple, reliable and secure messaging application that is used by people and businesses around the world to communicate in a private way.
I will occasionally mention their other platforms (e.g. Oculus, Workplace, Libra, Calibra, Hobbi, Threads, etc) where it fits into the discussion. But focusing on the above will explain their vast success best. Btw, as always: anything in blue italics is their own words (either from their annual reports or webpages).
Business Model Canvas
We generate substantially all of our revenue from advertising. Our advertising revenue is generated by displaying ad products on Facebook,
- Messenger, and
- third-party affiliated websites or mobile applications.
Marketers pay for ad products either directly or through their relationships with advertising agencies or resellers, based on the number of impressions delivered or the number of actions, such as clicks, taken by users. (1) Advertising Facebook’s payment models fall into the known CPM, CPC, CPA models typically via auctioning mechanisms (which also is standard).
- Cost per link click CPC: Facebook defines a link click (that can point to various types of destinations) as any click on the image or the name of the advertiser, etc (anything that takes the user to the advertiser). But essentially, this is CPC
- Cost per result (CPA): Essentially, this is cost per action (CPA). It is an aggregate result for the campaign that calculates the total amount spent divided by the number of results (defined by the campaign objective and other settings) .
- Cost per Impression (CPM): It is the known cost per 1,000 impressions charging model or CPM
- Programmatic: Facebook Audience Network allows advertisers to place ads on Facebook’s participating partners. Websites and apps can run Facebook mediated ads on their properties (app, mobile web and video) via the audience network . Facebook states ads to be converting better when users see (the same) ads across Facebook, Instagram and other sites/apps. Facebook pays participants CPM-type revenues (cost per impression) while they charge advertisers CPM, CPC/CPA.
(2) Payments and other fees:
- These are transaction fee charges for the purchase of virtual/digital goods from 3rd party developers through Facebook. Payments and other fees. Payments revenue is comprised of the net fee we receive from developers using our Payments infrastructure.
- In future, this may incorporate revenue that is linked to Facebook’s upcoming payments system / digital wallet Calibra which is intended to hold their cryptocurrency Libra. The launch is planned for 2020 (but as you know there has been a lot of conflicting messages around this).
(3) Hardware and other
- Consumer hardware devices (e.g. Oculus)
- And then some other revenues Our other fees revenue consists primarily of revenue from the delivery of consumer hardware devices, as well as revenue from various other sources.
Value Proposition
As always with platform business models, we need to think about the value proposition to all sides of our multi-sided platform (well, there are more sides than shown below but these are the most important ones).
Value proposition for users
- Contact with friends and family: This includes posting (incl Facebook Stories and Instagram), reading updates from others. Presenting themselves via photos, envying others. Interacting via the timeline and interacting via direct messages. Within this, viewing photos is frequently surveyed as one of the most frequent activities
- Presenting oneself: While this may not be mentioned very often in surveys, one of the key reasons people are on the platform is to present oneself, their moments and (of course) their best moments. To this end, Facebook (and more so Instagram) allows creation of photo albums that friends (and depending on security settings friends-of-friends and other) can browse, comment on, etc
- Everybody else is there: More true for Facebook than for any other platform is the fact that people join because everybody else is there. This is their true moat
- Personally relevant content and opp: Because everybody else (in one’s circle) is there, they create content that relates to the users. One can chime into conversations and chit-chat . The most benign content / update from friends is for many people more interesting than world news because they can relate to it
- Pass time: Let’s be honest passing time is one of the key value propositions. Instead of or while watching TV, on the go as a short distraction at work, etc. In terms of search cost reduction, scrolling down the news feed to get an interesting tid-bit is easier than zapping on TV
- Get entertainment: One of the most common reasons to use FB is to get entertainment content
- Get news: Unlike Twitter, only 23% state they go to FB for news, but about double that number state that they actually do get news through FB (which is not a contradiction)
- Exploration/discovery: On the left hand side of one’s timeline, there are tons of things to explore. This includes things like friends’ birthdays
- Following friends and VIPs: though more of this happens on Instagram, this is still an important value proposition of FB
- Professional networking: is not a significant reason (11% say they do it for this reason) – there are now other platforms (notably LinkedIn) for this purpose
- Facebook has become a frequent way to log into other sites (too many people don’t know how much data they are revealing of themselves to 3rd parties by doing so) – book this one under transaction cost savings
- Organisation: There are millions of groups that self-organise around topics. This can be very valuable to help each other with tips on topics (e.g. health, parenting, DIY, etc) but can also be misused to spread disinformation
Value proposition for influencers
Influencers are important to Facebook and even more to Instagram (though likely not quite as vital as they are to Twitter). And Facebook is trying to present more content from friends. Though not yet exactly clear what that means, it is likely not good news for influencers (if you look at our Snapchat article, same has happened there where non-friends were moved to a less prominent area in the app)
- Build personal brand / remain top of mind / stay in touch with followers: We are always talking about brands in the context of large companies. But individuals (and groups, organisations, etc) can also build a brand, stay top of mind and show to advertisers their value. They can also see from the reactions (likes, emojis) and responses how their posts and messages fare
- Immediacy: Facebook influencers like the fact that they can have immediate contact with their followers
- Word-of-mouth & organic virality: In the early days, Facebook was a great place to get organic traffic to one’s page or business. But it has started changing from 2014 when Facebook limited displaying updates of businesses / influencers to followers. But it is still a place where word-of-mouth or even virality can occur
Value proposition for businesses / advertisers
Businesses were able to reach a lot of users organically but these times have changed. Now, they have to pay to reach sizeable parts of their audience.
- Targeting/penetration: Of course all platforms that we have looked at provide refined targeting capabilities within their tools. But advertisers look much more favourably at platforms that have achieved high penetration in those segments that they like to target. For Facebook, this holds true pretty much about most segments. Ads on Facebook will always be able to reach sizeable audiences even when quite specific targeting parameters are chosen
- Native integration / ad formats: Facebook’s ad formats are (quite) natively integrated. They have rules around what the ad creative (image, text, video) can and cannot do (very famous is the 20% text rule that aims to avoid low quality ads ). Facebook has recently cut down the number of ad formats from over 25 to reduce confusion on the side of advertisers
- Non-interrupt: On a spectrum from high to low-interruption marketing, Facebook sits somewhere in the middle of the spectrum
- Word-of-mouth: while virality for ads or content marketing content is not as it was in the early years, word-of-mouth can still play a role
- Self-serving business tools: Basically all advertising features can be self-served. Businesses who find the tools too complex can still get their marketing managed through Facebook advertising partners
Value proposition for developers and other groups
- Gaming: Somewhat gone are the days of Farmville. But Zynga and many other game developers are still around. Facebook has a high-spec gaming platform and a “social” gaming platform for more simple games (similar to the early days). Gaming was probably very valuable to get people onto the platform in the early days but they are not quite as omnipresent as they were at the time (this is a subjective impression). A study from 2011 came to the (staggering) conclusion that “ a conservative estimate of the employment impact of developers building apps on the Facebook Platform in the United States in 2011 is 182,744 full time jobs. In other words, at least 182,744 jobs were added to the U.S. economy as a result of the Facebook App Economy. Similarly, these economic models suggest that a conservative estimate of the total employment value of Facebook’s app economy is $12.19 billion. Using more aggressive estimates, the Facebook App Economy created 235,644 jobs , adding a value of $15.71 billion dollars to the U.S. economy.”
- a marketplace / classifieds,
- jobs, apps,
- lots more (see the left hand bar in your account)
- Partnering service providers: Facebook has an extensive network of 3rd party service providers mainly for advertising services
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Key Partners
Facebook is a multi-sided platform with a large ecosystem of partners. Most of them are “just” a partner rather than one “side” of the platform.
- Users: The majority of users are not influencers, VIPs, businesses. The create content that appears in other user’s feeds (which is a key part of the network effects). Messages do not appear on the feeds but are even more targeted and engaging for the recipient (and the sender who is waiting for a response)
- Brands/businesses/advertisers: Brands like RedBull, Starbucks, Walmart, Nike have among the largest account with 30-45m followers. Now, this is still much smaller than the VIPs but nevertheless considerable followerships. But they reach only a fraction of their followers organically and have to pay advertising dollars for more exposure (to followers and non-followers). They can leverage “lookalike” targeting to reach new users
- Micro-influencers, solopreneurs: Facebook/Instagram is also a place for micro-influencers with big followership in their niche
- Websites/blogs: Many websites and blogs share content via Facebook and Instagram – the latter being especially valuable for certain visual businesses. Here we also see considerable competition to Pinterest (though the overall presentation layer is very different
- Sellers: There are many stories of micro-businesses that have made a breakthrough on Facebook & Instagram and changed the way many people shop
- Media partners: includes some of the big media outlets who can monetise through (e.g. in-stream ads)
- Creators / publishers: Facebook for creators allows creation videos where in-stream ads can be placed (directly through Facebook or the Audience Network ) earning a revenue share. This also includes gamers
- Agencies to help businesses on Facebook
- advertising (campaign management, measurement, online/offline conversion),
- selling (including order fulfilment and customer support),
- engagement (e.g. community engagement)
- Artificial Intelligence
- Augmented Reality
- Business Tools
- Open Source
- Social Integrations
- Virtual Reality
- Fact-checking partners: Facebook works with various partners (mostly journalistic background) on fact-checking content on their platform to avoid negative externalities through platform manipulation. Reuters has recently become the 8th such partner
- and more in the advanced stuff
Key Activities
The most important activities for platform business models are to enhance positive network effects and reduce negative ones. Facebook has significant positive network effects for its users but needs to constantly manage and improve these. It is often mentioned that Facebook’s very success is rooted in the fact that they have managed negative network effects more stringently than MySpace who were one of the biggest internet companies (by traffic) before Facebook even existed. Reasons often mentioned are: managing bad behaviours, a more controlled growth with opening the platform gradually to wider users, less aggressive monetisation in the early days.
- Enhancing positive network effects and reducing negative network effects: One of the reasons why Facebook has several other apps (Instagram, Messenger, WhatApps) is that this gives them a way to enhance positive (direct and indirect) network effects in a more targeted way than it would be possible to do this all in one app. The network effects are very closely linked to the key value propositions. E.g. Instagram allows leveraging positive indirect effects between celebs (who are often paid by companies for endorsements) and normal users. In Messenger this would be perceived as a negative network effect where most people want privacy. There are hundreds of larger and smaller details that are driven by network effect considerations. The biggest most recent ones is Facebook’s announcement to separate Social from Media
- Platform health / fake accounts and content: One of the negative externalities are fake news/content posted by fake or ill-intentioned accounts. Like other platforms, the paradigm of growing the user base at all costs has changed to make place for healthy growth and getting rid of many fake and ill-intentioned/behaving accounts. Facebook estimates there to be 5% fake and 11% duplicate accounts (with higher proportions in certain countries) – this is still a very big number (5%=125m, 11%=275m). Information shared around the Coronavirus has become the latest “ infodemic ” example
- Engaging the users is mission-critical for any platform business. But this can mean a lot of things. Some people are more engaged by updates from friends and family and in other situations by updates from VIPs, etc. Having one account across the various apps allows to satisfy a lot of needs under the Facebook umbrella
- Content creation: Facebook has the largest employee base of all companies in the world with over 2 billion employees and they are called users. They duly create content where other companies need to hire staff to do so. Not only that, most of the content that is being created is highly relevant for the recipient (i.e. friend family of the users that post). Even local newspapers can’t compete with creating such targeted and relevant news for their readers
- Professional content creation: and then there is the professional and semi-professional content that is being created (see key partners), some of which is being used for revenue generation
- more in the advanced stuff
Key Resources / Assets
The master resource (or asset) of any platform are its network effects. It is the resource/asset that needs to be built and nurtured. Here is how this translates into more detail.
- Active users Facebook: DAUs >1.6b; MAUs >2.4b
- Active users: Instagram MAU >1b; Messenger >1.3b; WhatsApp >2b
- DAP (Daily Active People across all apps) : 2.3b; MAP (Monthly Active People) : 2.9b
- High engagement, thus usage: 41mins per day per user on FB alone’
- Content shared by users, including likes, emos, replies/comments, shares, etc
- Content shared by users and professional creators, such as photos, videos, images, infographics, links, and other resources, live-streaming events, etc
- The Facebook brand is synonymous with social media. In the renowned Interbrand brand ranking, they fell from the 9th rank to the 14th in 2019 which still is a strong position. No other social media brand is represented, except LinkedIn ranking 98th. Their biggest competitor on digital advertising, Google, however, ranks 2nd
- And many more … you know where …
Customer Segments
With over 2.5b users on the different platforms, the question is not really who they can address (the answer to that is: basically a third of the world population) But the question is which micro-segments they can address. And that boils down to the data users share through the various ways with Facebook. Liking things (on or off Facebook) tells them a lot about you, your profile information (there is a lot users can share), tagging on photos, location check-ins (it will track location even if users don’t “check-in” so long location is not disabled), who people are affiliated with, who they follow, their profile which has education, it gets data from apps that user log-into with their Facebook account, it gets data from pages that install the Facebook Pixel and that use Facebook APIs and so on. But it says that it doesn’t mine your text data (posts, messages, calls, etc).
User segments
- Female: 75%, male: 63%
- Age 25-29: 84%
- No college: 61%; Some college: 74%; College+: 75%
- Female: 43%, male: 31%
- Age 18-29: 67%
- Urban: 46%; rural: 21%
- Hispanic: 42%
- Age 30-49: 31%
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From a technical perspective, their various websites and apps are the most important channels. Most transactions are automated and self-serving. Facebook’s functionality is significantly larger than most other social media apps/sites.
- The news feed is the main user channel to get the user (re)engaged
- Notifications (about 2 dozens of notifications – but can be customised)
- Chat / messages and activity status of friends to stimulate interaction
- And much more – see esp the left sidebar (website) and top bar
- Most transactions on the user side are automated through the app/website. It allows a ton of settings (e.g. security, privacy, tagging, location, and a lot more)
- Help pages, contact, reporting, etc
- Mail, SMS depending on settings
Other interaction channels:
- App stores organic and ads (e.g. responses to reviews)
- Facebook: Facebook, Instagram, Messenger, Whatsapp all have their Facebook pages each of them with tens of millions of likes and followers
- LinkedIn : ~ 5.4m followers, reaching out to users, businesses and talent
- YouTube : ~ 940k subscribers (product updates, behind the scenes, life at Facebook, etc)
- Twitter : 13.4m followers, Facebook, Instagram, WhatsApp have their own accounts with occasional updates. Additionally, there are more targeted accounts (e.g. for developers, for education, for business, newsroom) for updates to these targeted groups
- Pinterest: N/A
- Word-of-mouth : Facebook and Instagram are present organically in many conversations and news articles. You will often see posts from VIPs, influencers shared via Facebook and Instagram
Customer Relationships
(We are looking at this from the lens of the underlying needs, how they are served and the things that affect customer relationships. There is a natural overlap with the value proposition) If you are a regular follower of my blog, you know that this is one of the most important categories for platform business models (in the long run) and in particular for social media (or similar) platforms.
There is obviously a lot of value that users get out of Facebook. But first, we need to understand the risks and negative externalities. Saying this, it is clear that we can only get a glimpse into this complex topic. Negative network effects can bring a platform down before they ever reach potential. Some form of managing negative network effects will be required even in the smallest platform.
Community standards
Some examples that you can find in the community standards are shown below and reading through these standards is a very sobering moment when you realise what platforms (and innovation in general) can be used for.
Election meddling
All hell broke loose after the US election of 2016 and Facebook’s role therein, followed by probes, investigations, congressional hearings and media coverage. Facebook occasionally publishes taking down “coordinated inauthentic behaviours” and accounts in their integrity section.
Twitter was in a similar boat and has released more details. In 2018, Twitter shut down 80 million fake accounts a staggering amount given their ~300m MAUs at the time. In 2019, they have shut down 80,000 linked to an authoritarian regime (who would have thought). In the case of Facebook, there are detailed 3rd party accounts that help us to understand the staggering details behind manipulation through Facebook’s apps. Here is a very lengthy account published about a year after the 2016 election and here is a more recent (even more lengthy) account with even more refined tactics leaving us to wonder what will happen towards the 2020 election.
Twitter has banned political advertising (but their revenues from this were relatively small). Facebook hasn’t banned it. And reading the above sources, we have to wonder if Facebook is going to face its biggest challenges yet. This topic is super important – but I am trying to keep my articles not much longer than 4,500 words (which is already a lot). Any of my committed readers can get more on this in the advanced stuff.
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Cost Structure
- expenses related to the operation of our data centers , such as facility and server equipment depreciation , salaries, benefits, and share-based compensation for employees on our operations teams, and energy and bandwidth costs .
- costs associated with partner arrangements, including traffic acquisition and content acquisition costs ,
- credit card and other transaction fees related to processing customer transactions, and
- cost of consumer hardware device inventory sold.
- share-based compensation, salaries, and benefits for employees on our engineering and technical teams who are responsible for building new products as well as improving existing products. We expense all of our research and development costs as they are incurred.
- salaries, share-based compensation, and benefits for our employees engaged in sales, sales support, marketing, business development, and customer service functions.
- also include marketing and promotional expenditures , and professional services such as content reviewers .
- salaries, benefits, and share-based compensation for certain of our executives as well as our legal, finance, human resources, corporate communications and policy, and other administrative employees include legal-related costs and professional services.”
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Facebook Business Model | How does Facebook make money?
Company: Facebook, Inc CEO: Mark Zuckerberg Year founded: 2004 Headquarter: Menlo Park, California, USA Number of Employees (June 2020): 52,534 Public or Private: Public Ticker Symbol: FB Market Cap (Nov 2020): $786.63 Billion Annual Revenue (2019): $70.697 Billion Profit |Net income (2019): $ 18.485 Billion
Products & Services: Facebook | Instagram | WhatsApp | Oculus | Facebook Marketplace | Facebook Media | Facebook Messenger | Facebook Ads | Facebook Watch | Facebook Games | Facebook Local | Facebook Business | Competitors: Apple in messaging| Google in advertising | Amazon in advertising | Tencent in social media & messaging | YouTube in video | Twitter | Snapchat | LinkedIn | Pinterest | Quora | Microsoft | Vkontakte |
Facebook has been a pioneer in triggering a social media revolution in the digital hemisphere. Today it has over 2 billion users worldwide, contributing to the globalization process every day. Initially exclusive to Harvard students in 2004, the site grew in popularity enough to inspire its founder Mark Zuckerberg to expand it in the public domain. The world was never the same once it hit the virtual landscape.
Regardless of the nationality, background, continent or location, as long as there is Internet connectivity present, then Facebook is always available for you to access. With the world more connected than ever, it is highly unlikely that people will ever abandon this platform even for alternative sites like Twitter , Snapchat or Instagram.
Table of Contents
Business Model Canvas of Facebook
1. Customers of Facebook
Users – Facebook’s customers mostly comprise its users. Users who wish to communicate with different people and interact with those in the outside world. Facebook is now its own marketplace where users can buy and sell property like clothes and jewelry and even fundraise for their respective causes. Remote workers and colleagues working from home can use Facebook’s new Messenger Rooms that allows up to 50 people to meet virtually in a videoconference. [ 1 ]
Advertisers and Marketers – Brands and advertisers also form a part of its customer base that earns revenue for the company by placing offers and promotional ads.
Developers – The site also has its own App and Game development platform where users can play while the game developers like Zynga and Facebook both benefit.
2. Value Proposition of Facebook
Global Connectivity – Facebook has made it its mission to spread a free medium of communication and connectivity with people across the world regardless of their nationality, religion, culture or background.
Sharing of ideas – It is a platform where different people can interact with each other and expose themselves to different cultures, experiences, and ideas.
Global Communication – Many popular critics have noted the contribution of Facebook is enhancing common understandings and pioneering efforts in the globalization movement.
Brand Publishing – It is a platform where you can showcase your talents as well as play games whenever you want.
Easy Accessibility – There is no time limit where its network is concerned. Whatever you wish to search will be delivered in your domain.
Business Expansion (Marketplace) – It has also become a platform to utilize your business where you can sponsor, sell or buy from either your own company or any other company.
Virtual reality – With the acquisition of Oculus, Facebook is trying its hand in the field of virtual reality hardware.
Payment infrastructure – user can purchase digital goods or applications from developers using Facebook payment services.
Virtual meeting rooms – Messenger Rooms allow users to create virtual meeting rooms and open for up to 50 people to join and interact just like videoconferencing. While in a room, users can swap their background for a virtual one or apply Facebook’s augmented reality filters. [ 2 ]
Remote work tools and groups – Facebook added remote work tools on its app to facilitate collaboration between colleagues and freelancers. It includes Workplace Rooms that offer more features for professional workers to collaborate on the network. As of May 2020, Work Groups had more than 20 million active monthly users and 170,000 active groups. [ 3 ]
Live-streaming – Facebook also expanded its platform with new tools that enable users to live-stream sessions and events like wedding or birthday for friends and family to attend. The live-streaming feature is also used by professionals for remote work. [ 4 ]
3. Channel of Facebook
Internet – The first prerequisite is the Internet for its service; Facebook operates through the Internet via Laptops, Computers, Tablets or Smartphones.
Website & mobile apps – Then, it makes its usage of its website and mobile app to reach more users. Through its site, Facebook allows advertisers to market their products. Many public figures and celebrities have also contributed to its channeling efforts.
Third party developer Tools and APIs – These are used by developers for channeling purposes as well. Other partnerships assist in these purposes in their own distinct ways depending on the agreement.
4. Customer Relationships of Facebook
Self Service platform – Facebook’s network and site are user-friendly and easily accessible for its users. It assists new users through its instructions to form their own accounts and identities. The users gradually get the hang of it and realize how easy it can be utilized.
Self-Taught Site – It is basically a self-learning site. You can expand your online visibility by finding more friends through your new profile owing to Facebook’s community building applications.
Global Salesforce – Facebook has an extensive global sales organization that works directly with Advertising agencies and ad resellers. Sales work to attract, retain and support advertisers.
5. Key Partners of Facebook
Content Creator – Key Content Partners such as Movies, TV Shows, Gaming, Music and News articles. Facebook recently signed several deals for the right to show music videos on the platform. The partnership includes Universal Music Group , Sony Music Entertainment, and Warner Music Group, which are the three largest music houses. [ 5 ]
Third Party – Facebook’s platform continues to create new partners for it as it grows. Mobile operating system developer (iOS, Android), credit card companies (Visa, PayPal ), handset manufacturers ( Apple , Samsung ), and browser developers (Safari, Chrome, Firefox) have collaborated with Facebook.
6. Key Activities of Facebook
Platform development & maintenance – Facebook is a platform that produces a myriad of activities. One of them being its web development alongside App Development and game development.
Data maintenance and security – Invest in user data security and privacy.
Establish partnership & develop new offer – It offers other activities like projects, marketing, software development and other forms of innovation which it has been duly credited for.
Strategic acquisition – such as Instagram, WhatsApp , Oculus. Its most recent acquisition was a Swedish mapping start-up Mapillary that built a street-level imagery platform for creating maps using photos of members of the public. [ 6 ]
Maintaining government regulations – complying with laws in different countries is essential for Facebook operations.
Hire & retain talent
Sales, marketing and operations
- Sustainability – Facebook undertakes a variety of activities to attain its sustainability goals. It has invested heavily in green energy to reduce its greenhouse gas emissions and is now one of the largest buyers of renewable energy in the world. In 2019, 86% of its operations were powered by renewable energy, compared to 75% in 2018. [ 7 ]
7. Key Resources of Facebook
Platform – Facebook utilizes its platform as its primary resource to access more users and advertiser. The more users’ access and log in to its site the more subsidiaries it receives.
Network – Facebook’s network has provided limitless communication opportunities for its users despite their background.
Technology talent – Facebook takes immense pride in its technology and pool of talented employees. It was able to hire and retain. Thanks to its brand value.
8. Cost Structure of Facebook
Platform – Majority of the costs incurred by Facebook are directed in its platform that amasses millions of users worldwide.
Data Maintenance – Facebook incurs considerable costs from its Data Maintenance owing to how it manages, stores and protects its data, including the cost of data centers maintenance, equipment purchases, and upgrades.
Content acquisition cost – Facebook license and pay to content producers to increase user engagement.
Research and Development – Facebook focuses much of its time in the growth of its platform which demands costly investments.
Marketing & advertising – Facebook’s marketing strategy revolves around the audience and how it can expand that base. This tends to cost them exponentially.
Customer Service – Facebook values the feedback of its customers. It invests substantially in providing its services to customers who are new or require assistance in managing their accounts.
At a high level, according to Facebook’s 2018 annual report, here is a breakdown of its cost:
*Cost of revenue includes Operations expense, Datacenter, traffic and content acquisition cost, partner payment, and credit processing fees, etc.
*General & Administrative cost includes employees compensation and salaries, office maintenance, legal, HR, finance and administrative expense.
9. Revenue Stream of Facebook
How does facebook make money .
Let’s see how does Facebook make money?
The most vital money making system for Facebook is in its advertising program. Most of its revenue (99%) is generated from advertising alone. It has always supported itself by its ads and will most definitely continue down this path. In Q3 2020, Facebook’s quarterly ad revenue was $21.2 billion , up by 22.1% compared to Q3 2019. [ 8 ]
Many have begun to spread conspiracy theories that Facebook will someday begin charging its users for utilizing or accessing their site. But these have been dismissed as mere rumors and fake news.
Self-Serve Advertising
- With Facebook’s self-serve platform for advertising, you simply have to seek out Facebook’s “Following” page and create your own campaign of advertising.
- These advertisements can be shown on sidebars such as events, groups, profile pages, and other applications on Facebook.
- Facebook uses its advertising strictly for a target audience, which is diverse according to age, gender, and relationship lines.
- It also relies heavily on restaurants, doctors, lawyers, and many small businesses or professionals to utilize its self-service advertising to generate its revenue.
Engagement Ads
- Apart from their self-serve advertisements, Facebook claims additional revenue from their “Engagement Ads” as well.
- These engagement ads are placed on Facebook’s homepage and are considered as key solutions for large advertising brands.
- All user has to do is log in, and he can interact with some of these ads on the right side of the site’s homepage.
- Facebook has been working to increase its recruitment of brand advertisers.
- Some of the work has been created in the form of the Brand Lift. This product encourages large brands to test their advertising campaigns in terms of their effectiveness.
- Through this, more advertisers can utilize the product and adopt Facebook as their main campaigner.
Payment Revenue
It’s the fees that Facebook receives from the developer community or wholesalers for utilizing Facebook’s payment infrastructure . Facebook charges a fee for any business transaction on its platform, whether it be :
- Marketplace featured deals
- Sale of digital products like Zynga poker chips,
- Sale of apps from developers,
- Money transfer to friends,
- Fund Raiser’s transaction fees etc.
Sale of Oculus
Facebook sells “ Oculus ” Virtual Reality (VR) products and makes a small portion of revenue from its sale. It introduced Oculus Go in 2018, starting at $199 that relied on the user’s smartphone for computing, and then later launched a more powerful all-in-one headset Oculus Quest, Oculus Rift, and Rift S, all going for $399 Quest.
In Q1 2020, Facebook shipped 55,000 units of Oculus Go , 141,000 Quest units, and a combined 87,000 units of the Rift and Rift S headsets. Oculus sales contributed to the revenue of $297 million from its non-advertising businesses. It announced that it stop the sale of Oculus Go in 2020 after demand declined in subsequent quarters. [ 9 ]
Future Revenue possibilities
WhatsApp, a giant social messaging platform, is still not monetized successfully to its full potential. Facebook can potentially make a huge amount of revenue from Whatsapp in the near future. Another potential revenue stream is its Libra cryptocurrency that was launched in 2019 but has faced pushback by lawmakers from countries across the world based on the company’s history of scandals. If the Libra project is successful, Facebook can become the biggest player in digital payments in the world as an alternative global transaction system. [ 10 ]
Read: How does WhatsApp make money?
In Conclusion
Facebook is a gift that just keeps on giving. It has continued to handle controversies and competition at a safe place without losing too much in terms of revenue or public image. Although many social media platforms have risen since its establishment, they are not as commonly used as Facebook.
Many sites like Twitter and Instagram have managed to provide adequate competition, but others like SnapChat, Pinterest, Tumblr and others continue to struggle in the hopes of catching up to their competitors.
All in all, Facebook is the one that will remain constant in the long run.
References & more information
- Bond, S. (2020, April 24). Facebook Launches Rival To Video-Meeting App Zoom . NPR
- Newton, C. (2020, Apr 24). Messenger Rooms are Facebook’s answer to Zoom and Houseparty for the pandemic . The Verge
- Hutchinson, A. (2020, May 21). Facebook Announces New Collaboration Tools for Workplace, Including First Steps into VR Offices . Social Media Today
- Perino, M. (2020, May 19). How to find live videos on Facebook on a computer or mobile device . Business Insider
- Wagner, K. (2020, July 31). Facebook Is Set to Finally Get the Rights to Show Music Videos . Bloomberg
- Shead, S. (2020, June 19). Facebook buys start-up in the latest push to take on Apple and Google at street-level mapping . CNBC
- Pierce, D. (2020, July 7). Facebook’s closer to its sustainability goals, but not quite there . Protocol
- Johnston, M. (2020, Nov 5). How Facebook Makes Money . Investopedia
- Rodriguez, S. (2020, June 23). Facebook cancels its cheapest VR headset to focus on pricier, more powerful models . CNBC
- Feiner, L. (2020, April 16). Facebook’s vision for a new cryptocurrency gets watered down as it attempts to woo regulators . CNBC
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Why facebook's business model is so successful.
Facebook business model canvas
Facebook’s Company Overview
Facebook, Inc. builds products that enable people to connect and share through mobile devices and personal computers. The company enables people to share their opinions, ideas, photos and videos, and other activities. Its products include Facebook, Instagram, Messenger, WhatsApp, and Oculus. Facebook is a mobile application and website that enables people to connect, share, discover and communicate with each other on mobile devices and personal computers. Instagram is a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them to friends. Messenger is a messaging application available for mobile and the Web on various platforms and devices. WhatsApp Messenger is a mobile messaging application that is used by people around the world. Oculus virtual reality technology and content platform allow people to play games, consume content and connect with others.
Country: California
Foundations date: 2004
Type: Public
Sector: Information & Media
Categories: Internet
Facebook’s Customer Needs
Social impact: self-transcendence
Life changing: provides hope, self-actualization, affiliation/belonging
Emotional: rewards me, badge value, fun/entertainment, attractiveness, provides access, design/aesthetics
Functional: organizes, connects, variety, informs, integrates, organizes, saves time, avoids hassles, sensory appeal, makes money
Facebook’s Related Competitors
Facebook’s business operations.
Curated retail:
Curated retail guarantees focused shopping and product relevance; it presents a consumer with the most appropriate options based on past purchases, interactions, and established preferences. It may be provided via human guidance, algorithmic recommendations, or a combination of the two.
Channel aggregation:
Consolidating numerous distribution routes into one to achieve greater economic efficiency. A business model for internet commerce in which a company (that does not manufacture or warehouse any item) gathers (aggregates) information about products and services from many competing sources and displays it on its website. The firm's strength is in its power to create an 'environment' that attracts users to its website and develop a system that facilitates pricing and specification matching.
Cross-selling:
Cross-selling is a business strategy in which additional services or goods are offered to the primary offering to attract new consumers and retain existing ones. Numerous businesses are increasingly diversifying their product lines with items that have little resemblance to their primary offerings. Walmart is one such example; they used to offer everything but food. They want their stores to function as one-stop shops. Thus, companies mitigate their reliance on particular items and increase overall sustainability by providing other goods and services.
Advertising:
This approach generated money by sending promotional marketing messages from other businesses to customers. When you establish a for-profit company, one of the most critical aspects of your strategy is determining how to generate income. Many companies sell either products or services or a mix of the two. However, advertisers are frequently the source of the majority of all of the revenue for online businesses and media organizations. This is referred to as an ad-based income model.
Culture is brand:
It requires workers to live brand values to solve issues, make internal choices, and provide a branded consumer. Developing a distinctive and enduring cultural brand is the advertising industry's holy grail. Utilizing the hazy combination of time, attitude, and emotion to identify and replicate an ideology is near to marketing magic.
Blue ocean strategy:
The blue ocean approach is predicated on the premise that market limits and industry structure are not predetermined and may be reconfigured via the actions and attitudes of industry participants. This is referred to as the reconstructionist perspective by the writers. Assuming that structure and market boundaries exist solely in managers' thoughts, practitioners who subscribe to this perspective avoid being constrained by actual market structures. To them, more demand exists, primarily untapped. The core of the issue is determining how to produce it.
Benchmarking services:
Benchmarking is a technique for evaluating performance and gaining insights via data analytics. It may be used to conduct internal research on your firm or compare it to other businesses to enhance business processes and performance indicators following best practices. Typically, three dimensions are measured: quality, time, and cost. In this manner, they may ascertain the targets' performance and, more significantly, the business processes that contribute to these companies' success. The digital transformation era has spawned a slew of data analysis-focused software businesses.
Collaborative production:
Producing goods in collaboration with customers based on their input, comments, naming, and price. It represents a new form of the socioeconomic output in which enormous individuals collaborate (usually over the internet). In general, initiatives based on the commons have less rigid hierarchical structures than those found on more conventional commercial models. However, sometimes not always?commons-based enterprises are structured so that contributors are not compensated financially.
Digitization:
This pattern is based on the capacity to convert current goods or services into digital versions, which have several benefits over intangible products, including increased accessibility and speed of distribution. In an ideal world, the digitalization of a product or service would occur without compromising the consumer value proposition. In other words, efficiency and multiplication achieved via digitalization do not detract from the consumer's perceived value. Being digitally sustainable encompasses all aspects of sustaining the institutional framework for developing and maintaining digital objects and resources and ensuring their long-term survival.
Affiliation:
Commissions are used in the affiliate revenue model example. Essentially, you resell goods from other merchants or businesses on your website or in your physical store. You are then compensated for referring new consumers to the company offering the goods or services. Affiliates often use a pay-per-sale or pay-per-display model. As a result, the business can access a more diversified prospective client base without extra active sales or marketing efforts. Affiliate marketing is a popular internet business strategy with significant potential for growth. When a client purchases via a referral link, the affiliate gets a portion of the transaction's cost.
The aikido business model is often characterized as using a competitor's strength to get an edge over them. This is accomplished through finding weaknesses in a competitor's strategic position. In addition, it adds to marketing sustainability by exposing rivals' flaws, finding internal and external areas for development, and attracting consumers via specific product offers that deviate from the norm.
Customer data:
It primarily offers free services to users, stores their personal information, and acts as a platform for users to interact with one another. Additional value is generated by gathering and processing consumer data in advantageous ways for internal use or transfer to interested third parties. Revenue is produced by either directly selling the data to outsiders or by leveraging it for internal reasons, such as increasing the efficacy of advertising. Thus, innovative, sustainable Big Data business models are as prevalent and desired as they are elusive (i.e., data is the new oil).
A digital strategy is a strategic management and a business reaction or solution to a digital issue, which is often best handled as part of a broader company plan. A digital strategy is frequently defined by the application of new technologies to existing business activities and a focus on enabling new digital skills for their company (such as those formed by the Information Age and frequently as a result of advances in digital technologies such as computers, data, telecommunication services, and the World wide web, to name a few).
Community-funded:
The critical resource in this business strategy is a community's intellect. Three distinct consumer groups comprise this multifaceted business model: believers, suppliers, and purchasers. First, believers join the online community platform and contribute to the production of goods by vendors. Second, buyers purchase these goods, which may be visual, aural, or literary in nature. Finally, believers may be purchasers or providers, and vice versa.
Conversational commerce:
It is a reference to the nexus between chat applications and business. That is the trend toward engaging with organizations through messaging and chat applications such as Facebook Messenger, WhatsApp, Talk, and WeChat, or via speech technologies like Amazon's Echo, allowing users to engage with businesses via voice commands.
Cross-subsidiary:
When products and goods and products and services are integrated, they form a subsidiary side and a money side, maximizing the overall revenue impact. A subsidiary is a firm owned entirely or in part by another business, referred to as the parent company or holding company. A parent company with subsidiaries is a kind of conglomerate, a corporation that consists of several distinct companies; sometimes, the national or worldwide dispersion of the offices necessitates the establishment of subsidiaries.
Combining data within and across industries:
How can data from other sources be integrated to generate additional value? The science of big data, combined with emerging IT standards that enable improved data integration, enables new information coordination across businesses or sectors. As a result, intelligent executives across industries will see big data for what it is: a revolution in management. However, as with any other significant organizational transformation, the difficulties associated with becoming a big data-enabled company may be tremendous and require hands-on?or, in some instances, hands-off?leadership.
Corporate innovation:
Innovation is the outcome of collaborative creativity in turning an idea into a feasible concept, accompanied by a collaborative effort to bring that concept to life as a product, service, or process improvement. The digital era has created an environment conducive to business model innovation since technology has transformed how businesses operate and provide services to consumers.
Data as a Service (DaaS):
Data as a Service (DaaS) is a relative of Software as a Service in computing (SaaS). As with other members of the as a service (aaS) family, DaaS is based on the idea that the product (in this instance, data) may be delivered to the user on-demand independent of the provider's geographic or organizational isolation from the customer. Additionally, with the advent[when?] of service-oriented architecture (SOA), the platform on which the data sits has become unimportant. This progression paved the way for the relatively recent new idea of DaaS to arise.
Online lead generation is the technique of gathering or gaining a user's information ? often in return for an item, service, or information ? and then reselling that information to businesses interested in advertising to or selling to those gathering leads.
Disruptive banking:
The banking industry's disruptors are changing the norms that have been in place for decades. These new regulations, however, will only be effective until the next round of disruption occurs. Banks and credit unions must thus be nimble and responsive. We need audacious tactics. 'Disruptive Innovation' is a term that refers to the process whereby a product or service establishes a foothold at the bottom of a market and then persistently climbs up the value chain, ultimately replacing existing rivals.
Reputation builders:
Reputation builders is an innovative software platform that enables companies to create, collect, and manage positive internet reviews. It was a pioneer in the utilization of user-generated material. The website services are provided for free to users, who supply the majority of the content, and the websites of related businesses are monetized via advertising.
Unlimited niches:
Online retailers provide specialized content to various niche client groups via continuing mass-customized customer relationships. The sector of technical content providers is a second client segment. Combining these two factors may result in an infinite number of niches. New material is produced and distributed through online channels, which implies that online retailers must prioritize platform maintenance and marketing in addition to service delivery.
Markets are conversations:
For professional services firms, the difference will be made by converting non-engaged customers into engaged customers. Product development will be obsolete. Customer relations and conversations will replace it. By sharing modular and beta products and services with your current and future customers, companies and their customers interact and collaborate in ongoing conversations. Not only will customers find and follow companies in online social networks, but it will also be the other way around as well.
A business ecosystem is a collection of related entities ? suppliers, distributors, customers, rivals, and government agencies ? collaborating and providing a particular product or service. The concept is that each entity in the ecosystem influences and is impacted by the others, resulting in an ever-changing connection. Therefore, each entity must be adaptive and flexible to live, much like a biological ecosystem. These connections are often backed by a shared technical platform and are based on the flow of information, resources, and artifacts in the software ecosystem.
Mobile first behavior:
It is intended to mean that as a company thinks about its website or its other digital means of communications, it should be thinking critically about the mobile experience and how customers and employees will interact with it from their many devices. The term is “mobile first,” and it is intended to mean that as a company thinks about its website or its other digital means of communications, it should be thinking critically about the mobile experience and how customers and employees will interact with it from their many devices.
The long tail is a strategy that allows businesses to realize significant profit out of selling low volumes of hard-to-find items to many customers instead of only selling large volumes of a reduced number of popular items. The term was coined in 2004 by Chris Anderson, who argued that products in low demand or with low sales volume can collectively make up market share that rivals or exceeds the relatively few current bestsellers and blockbusters but only if the store or distribution channel is large enough.
This method allows the modification of current structures via the use of cutting-edge technology, as shown by growing political unrest, a crisis in representation and governance, and upstart companies upending established sectors. Nevertheless, the nature of this transition is often exaggerated or severely underestimated. As a result, some cling to delirious fantasies of a new techno-utopia in which greater connection results in direct democracy and wealth.
Virtual reality:
AR/VR is the fourth significant platform change (after PC, web, and mobile). First, CEOs must choose how to play. Business models are determined by installed bases, use cases, and unit economics; there is no one-size-fits-all answer; each situation is unique, and developers must do market research and analysis before making a choice. Relying on advertising-income is a handy strategy for unknown businesses or newcomers to the market. It allows them to use their prior expertise with mobile and online ad campaigns.
Tag management:
Tag management refers to the capability of the collaborative software to handle both your own and user-generated tags. Marketers use various third-party solutions to enhance their websites, video content, and mobile applications. Web analytics, campaign analytics, audience measurement, customization, A/B testing, ad servers, retargeting, and conversion tracking are examples of such systems. At its most fundamental level, tag management enables new methods for your business model to use data.
Trading data:
Combining disparate data sets enables businesses to develop a variety of new offerings for complementary companies. Robustness is a property that describes a model's, test's, or system's ability to perform effectively when its variables or assumptions are changed, ensuring that a robust concept operates without fail under various conditions. In general, robustness refers to a system's capacity to deal with unpredictability while remaining practical.
Self-service:
A retail business model in which consumers self-serve the goods they want to buy. Self-service business concepts include self-service food buffets, self-service petrol stations, and self-service markets. Self-service is available through phone, online, and email to automate customer support interactions. Self-service Software and self-service applications (for example, online banking apps, shopping portals, and self-service check-in at airports) are becoming more prevalent.
Two-sided market:
Two-sided marketplaces, also called two-sided networks, are commercial platforms featuring two different user groups that mutually profit from the web. A multi-sided platform is an organization that generates value mainly via the facilitation of direct contacts between two (or more) distinct kinds of connected consumers (MSP). A two-sided market enables interactions between many interdependent consumer groups. The platform's value grows as more groups or individual members of each group use it. For example, eBay is a marketplace that links buyers and sellers. Google connects advertising and searchers. Social media platforms such as Twitter and Facebook are also bidirectional, linking consumers and marketers.
Fast fashion:
Fast fashion is a phrase fashion retailers use to describe how designs travel rapidly from the catwalk to catch current fashion trends. The emphasis is on optimizing specific supply chain components to enable these trends to be developed and produced quickly and affordably, allowing the mainstream customer to purchase current apparel designs at a reduced price.
Featured listings:
A highlighted listing is more important and noticeable than a regular listing, providing maximum exposure for your workplace to consumers searching in your region. In addition, customers are attracted to these premium listings because they include more pictures of your home ? and its excellent location.
Referral marketing is a technique for acquiring new consumers by advertising goods or services through recommendations or ordinary word of mouth. While these recommendations often occur spontaneously, companies may influence this via the use of suitable tactics. Referral marketing is a technique for increasing referrals through word of mouth, arguably the oldest and most trusted kind of marketing. This may be done by incentivizing and rewarding consumers. A diverse range of other contacts to suggest goods and services from consumer and business-to-business companies, both online and offline.
Skunkworks project:
A skunkworks project is one that is created by a small, loosely organized group of individuals who study and develop a project with the primary goal of radical innovation. The terminology arose during World War II with Lockheed's Skunk Works project. However, since its inception with Skunk Works, the phrase has been used to refer to comparable high-priority research and development initiatives at other big companies that include a small team operating outside of their regular working environment and free of managerial restrictions. Typically, the phrase alludes to semi-secretive technological initiatives, such as Google X Lab.
Technology trends:
New technologies that are now being created or produced in the next five to ten years will significantly change the economic and social landscape. These include but are not limited to information technology, wireless data transmission, human-machine connection, on-demand printing, biotechnology, and sophisticated robotics.
User design:
A client is both the manufacturer and the consumer in user manufacturing. For instance, an online platform could offer the client the tools required to create and market the product, such as product design software, manufacturing services, or an online store to sell the goods. In addition, numerous software solutions enable users to create and customize their products to respond to changing consumer requirements seamlessly.
Disruptive trends:
A disruptive technology supplants an existing technology and fundamentally alters an industry or a game-changing innovation that establishes an altogether new industry. Disruptive innovation is defined as an invention that shows a new market and value network and ultimately disrupts an established market and value network, replacing incumbent market-leading companies, products, and alliances.
Network builders:
This pattern is used to connecting individuals. It offers essential services for free but charges for extra services. The network effect is a paradox that occurs when more people utilize a product or service, the more valuable it becomes.
Sponsorship:
In most instances, support is not intended to be philanthropic; instead, it is a mutually beneficial commercial relationship. In the highly competitive sponsorship climate of sport, a business aligning its brand with a mark seeks a variety of economic, public relations, and product placement benefits. Sponsors also seek to establish public trust, acceptability, or alignment with the perceived image a sport has built or acquired by leveraging their connection with an athlete, team, league, or the sport itself.
This model collects data and connects it to others; it is suggested to investigate the impact of advertising on consumer purchase dynamics by explicitly linking the distribution of exposures from a brand's media schedule to the brand purchase incidence behavior patterns over time. The danger is that we may be unable to react productively and cost-effectively to technological and market changes.
Hidden revenue:
A hidden revenue business model is a revenue-generating strategy that excludes consumers from the equation, preventing them from paying for the service or product provided. For example, users of Google do not pay for the search engine. Rather than that, income streams are generated via advertising dollars spent by companies bidding on keywords.
Infomediary:
An infomediary acts as a personal agent for customers, assisting them to regain control over the information collected about them for marketing and advertising purposes. Infomediaries operate on the premise that personal data belongs to the individual represented, not necessarily the person who manages it.
Take the wheel:
Historically, the fundamental principles for generating and extracting economic value were rigorous. Businesses attempted to implement the same business concepts more effectively than their rivals. New sources of sustained competitive advantage are often only accessible via business model reinvention driven by disruptive innovation rather than incremental change or continuous improvement.
Product innovation:
Product innovation is the process of developing and introducing a new or better version of an existing product or service. This is a broader definition of innovation than the generally recognized definition, which includes creating new goods that are considered innovative in this context. For example, Apple launched a succession of successful new products and services in 2001?the iPod, the iTunes online music service, and the iPhone?which catapulted the firm to the top of its industry.
Layer player:
Companies that add value across many markets and sectors are referred to be layer players. Occasionally, specialist companies achieve dominance in a specific niche market. The effectiveness of their operations, along with their economies of size and footprint, establish the business as a market leader.
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Profitable Business Models > Business models of large companies
Facebook’s Business Model Canvas: From College Experiment to Becoming the King of Social Media
- by Joanne Moyo
- August 26, 2021
TL;DR: Summary of the Facebook’s history
- Facebook’s success is due to its focus on innovation, platform development, and its ability to adapt quickly to changes in the social media landscape.
- Zuckerberg had been coding and programming since the age of 11, and he continued to develop his skills while attending college.
- The Social Network landscape in 2002 was dominated by Friendster, Myspace, and Second Life, all of which had free user bases and relied on advertising for revenue.
- Zuckerberg created Facemash, an early Facebook prototype that allowed Harvard students to compare female student’s pictures side by side and rank them based on attractiveness, but it was shut down before it even took off.
- Mark Zuckerberg created The Facebook, a social networking site exclusive to Harvard students, in February 2004.
- The Facebook platform was hit with its first lawsuit soon after its incorporation, with the plaintiffs alleging that Zuckerberg had stolen their idea.
- Zuckerberg and Saverin started selling small advertising spaces to companies and individuals to offset the cost of running and maintaining the platform servers while getting the company off the ground.
- Zuckerberg partnered with Sean Parker and Peter Thiel to help grow The Facebook in its early stages.
- Facebook focused on controlled and staged growth, which attracted investors, users, and great engineers and designers.
- Facebook’s Business Model Canvas: The Early Days
- 2006 was a big year for Facebook as they made several site improvements, went mobile, and partnered with Microsoft.
- Facebook had a busy year in 2008, hiring Sheryl Sandberg as COO, launching Facebook chat, Facebook Connect, and the Facebook for iPhone mobile app, and settling the ConnectU Lawsuit.
- 2009 saw the launch of the iconic like button, Facebook’s expansion into gaming, and the release of the Facebook Timeline.
- Facebook started as a social networking site for students, but has since evolved into a business, entertainment, and news platform.
- Facebook’s Business Model Canvas: The King of Social Media
Introduction
Undeniably, Facebook has become part of our daily routine. Opening the Facebook app on your phone has become second nature. The way Facebook has effortlessly integrated into the daily lives of users is by design. It’s hard to imagine life before Facebook, which is reflected in how well the company has done financially.
As of August 2021, the social media giant has been ranked with a market cap of more than $1.024 Trillion, making it the world’s 6th most valuable company. Facebook has 2.80 billion monthly active users and 1.84 billion daily active users.
A survey conducted in January 2021 found that of the five most popular social media platforms (YouTube, Facebook, WhatsApp, Facebook Messenger, and Instagram), Facebook owns four. This means that Facebook has significant control over crucial data and advertising.
From its inception in 2004, Facebook and its chief founder Mark Zuckerberg, have been at the forefront of innovation and the development of social media. It revolutionized the way people connected online and has made information sharing a breeze. Millions of businesses rely on the Facebook platform to advertise their products and services. Therefore giving Facebook the title of “King of Social Media” seems very apt.
Nevertheless, its rise to giant status has not been without missteps, controversies, and criticism. Marred with lawsuits from the very beginning, Facebook has managed to sustain its monopoly and dominance using various tactics, including a razor focus on innovation and platform development.
While the idea of a social network did not originate from Zuckerberg, his tenacity, adaptability, and quickness at launching the site gave him an advantage. Being a latecomer into the social network scene, Facebook has managed to disprove the proverbial theory that the early bird always gets the first worm.
So let’s take an in-depth look at how Facebook did it. How it managed to evolve from a free networking site for a few select college students to a multi-billion dollar empire with over a billion users worldwide.
2002-2005: How Facebook was born
2002: the history of zuckerberg’s programming passion & the state of social networking.
Mark Zuckerberg had been dabbling in coding and programming since the age of 11. Seeing a growing interest in the industry, his parents hired a software developer named David Newman to teach him. He successfully created an internal instant messaging program called ZuckNet for his father’s dentist’s practice through this tutoring.
A few years later, while attending an elite boarding school called Phillips Exeter Academy, Zuckerberg attracted the interest of Microsoft and AOL, who offered him a job. Both companies were looking at purchasing Synapse, a software that used AI to map a user’s music taste. Zuckerberg declined and chose to go to Harvard instead.
He decided to major in psychology and took several classes in computer science. This might seem like an odd choice for a kid with a knack for coding. However, his selection would prove to be very strategic in developing the very ‘addictive nature of Facebook and social media.
The Social Networking landscape
The Social Network landscape in 2002 was just in its infancy. Before Zuckerberg landed on his idea, several other social networking sites captured the interest of young teens and college students at that time.
There had been several early movers around the globe from as far back as the late 90s. When SixDegrees.com was launched in 1997, it became the first website to combine the basic features that we associate social media with today. Features such as; “…user profiles, listing of “friends,” and the ability to browse[ through a] friend’s list.” was developed by Six Degrees.
Three sites were trendy and quite successful before Facebook came onto the scene. These were; Friendster, Myspace, and Second Life. All three sites functioned on a non-subscription-based business model, meaning users could use the site for free. The aim was to make money by selling advertising to companies who want to reach the vast number of users.
Friendster, in particular, was launched in 2002. Within a few months, the company had more than three million monthly active users. Unfortunately, the Friendster platform was riddled with glitches and had too many restrictions for the user. These problems resulted in many early adopters migrating to MySpace the following year.
2003: Facemash, an Early Facebook Prototype & Competition from MySpace
Still, in his freshman year, Zuckerberg created an early Facebook prototype called Facemash. This new website allowed Harvard students to compare female student’s pictures side by side and rank them based on attractiveness.
Within a few hours, Facemash had garnered over 22 000 photo views. It was a smash hit; unfortunately, the website was shut down before it even took off. Zuckerberg didn’t have permission to use student photos from the Harvard student system for his website. Fortunately, he was not expelled for breaking the rules, and after a public apology, he set his sights on the next big thing.
That same year MySpace burst into the market and became an instant hit. It was a place for users to connect and build a private community to share blogs, groups, music, photos, and videos.
The platform was similar to Friendster’s model but focused more on sound infrastructure and scalability. It allowed users to personalize and continuously added new features based on user demand. By the end of the year, MySpace was established and dominated the social networking market.
2004: The Facebook is launched, tackling the first Lawsuit & Taking on MySpace & Friendster
Mark’s experience with his prototype helped him create a new site vastly different from Facemash. He noticed the mistakes and problems that sites like MySpace and Friendster were having.
Mainly the fact that Friendster was beginning to face challenges with managing their rapid new subscriber rate. The site often crashed, was slow to load, and the Friendster team didn’t bother with improving the platform design.
While MySpace was growing in leaps in bounds, Zuckerberg felt it necessary to control the growth of his new venture. He began working on a social networking site that connected Harvard students using their school email addresses and photos. Unlike MySpace, where the platform was open to anyone, The Facebook was exclusive to Harvard students only at first.
The platform was straightforward. Students could upload photos, share their interests and connect with people they knew at first.
Once he had worked on the platform for a few weeks, he told a few friends who suggested that Zuckerberg share the site on one of the school’s mailing lists. He launched the new site on the 4th of February 2004, incorporating it as a Florida LLC.
The strategy was a hit, and at least 1,200 students had signed up within a day of launch. The appeal was that this was a safe and exclusive place for Harvard students to meet each other.
The First Lawsuit from ConnectU
Barely a week after its first incorporation in February, The Facebook platform received the first of many lawsuits to follow. Zuckerberg was accused by three senior Harvard students of having stolen the idea from them.
The three students alleged that they had engaged Zuckerberg as a programmer to help them figure out a similar platform to The Facebook that they were calling ConnectU. This allegation soon developed into a full lawsuit. This started a cascade of legal issues that would plague Facebook for decades.
Monetizing the site
From the get-go, Zuckerberg saw the platform’s potential but needed a way to sustain it. So far,
Zuckerberg and his friend Eduardo Saverin absorbed the costs of operation from their own funds.
Borrowing the idea from MySpace who had lots of adverts running on their site, Saverin and Zuckerberg started a Flyer project to generate ad revenue in April. They started selling small advertising spaces to companies and individuals. They marketed services, job listings, T-Shirts, and other products from students.
While it wasn’t particularly sophisticated, it gave them a cushion to offset the cost of running and maintaining the platform servers while getting the company off the ground.
Within a month, at least 50% of all Harvard undergraduates had a profile. Around April 2004, The Facebook became available to college students from Yale, Columbia, and Stanford. Sensing the potential growth of the platform, Zuckerberg moved out of his Harvard dormitory in June and rented a house in Palo Alto, California, to serve as the company’s headquarters.
Getting Investors
He partnered with Sean Parker, who in 1999 had co-founded Napster, a file-sharing service that would change the way music was consumed. Parker became the first President of The Facebook when the company was incorporated in July in Delaware.
Parker went on the hunt for investors. After getting rejected by a few investors, he was directed to PayPal co-founder Peter Thiel. After an initial meeting with Zuckerberg and Parker, Thiel agreed to make a $500,000 investment for a 10.2% control of the company. Thiel became a member of the board and helped steer more people towards The Facebook.
As the year ended, The Facebook accepted membership from almost all universities in the U.S and Canada. They closed off their first year of operations with over 1 million active users and 7 employees.
2005: Early Expansion, Changing Name & Zuckerberg drops out
In May 2005 The Facebook received more capital. They got $12.7m from Accel and $1m from a venture capitalist Jim Breyer. All this money was being absorbed by the costs of operating, maintaining and developing the site. Selling ad space was still their only source of revenue. The platform was beginning to gain traction now, and a lot of people were paying attention.
Introducing Facebook.com
In August, they dropped the ‘the’ and renamed the company Facebook. They bought the facebook.com domain for a whopping $200,000 and continued to expand. Facebook continued to make improvements to the site, introducing a high school version of the platform in September and photos.
They expanded the site to allow Microsoft and Apple employees. They were soon ready to move beyond being a student platform. In October, Facebook expanded to the U.K and other countries, opening the site for up to 21 universities.
In November, Zuckerberg decided to drop out of Harvard and focus his efforts on running the company as CEO. By the end of the year, Facebook had expanded to Australia, New Zealand, Canada, Mexico, and Ireland. It had over 6 million users and 15 employees.
By avoiding the temptation to grow rapidly and instead opting for controlled and staged growth, Facebook built and developed a solid infrastructure to support the growing number of users. This attracted investors, users, and great engineers and designers who would create new products and features that catered to Facebook users. It was clear, Facebook was out for blood, and everyone could see it coming.
Facebook’s Business Model Canvas: The Early Days
At this point, Facebook’s Business Model Canvas looked like this:
2006-2012: Facebook to the World, Some Strategic Acquisitions & Going Public
2006: facebook becomes available to everyone and goes mobile.
2006 saw several significant changes to the site. Firstly, Facebook redesigned the group and events features to make them more accessible. They also launched a My Messages Page, a Browser Page, and several other improvements to their site. This made the site more user-friendly and convenient by allowing people to instantly connect with each other
Facebook took advantage of the rising availability of broadband and went mobile. They capitalized on the rise of smartphones and introduced additional networks that allowed people with corporate email addresses to join in May.
About two months later, Yahoo sent an acquisition offer of $1 billion to Facebook. Zuckerberg rejected it because he thought that Yahoo was grossly undervaluing Facebook’s potential. (Boy, was he right!)
As internet participation began to spread among diverse groups of people, social media was slowly becoming entrenched in the daily lives of individuals, schools, and families. Sensing this, Facebook lowered the age of users to 13, signally that they were a much ‘safer’ space for the youth and more family-friendly than MySpace.
Later that year, they launched the News Feed feature, which gathered users’ posts into one place. This made the site even more user-friendly. However, the change was met with resistance and outrage as certain users felt that Facebook was breaching their privacy. This outrage was to become a common thing for the company.
Partnership and Investment from Microsoft
Several vital things happened in 2007 for Facebook. Firstly, in October, Microsoft became highly interested in Facebook and purchased a 1.6% stake for $240 million. This new investment raised Facebook’s value to $15 billion. A month later, Facebook and Microsoft entered into a partnership intending to launch their Beacon ad program.
The aim of the program was to track a Facebook user’s behavior on third-party platforms. The product was highly unpopular and turned into a public relations nightmare because of user privacy concerns. Eventually, the many legal issues and lawsuits over the program forced Facebook and Microsoft to shut it down.
Acquisition of Parakey
The second significant event was Facebook’s first acquisition of a small startup called Parakey. Parakey was a crucial acquisition mainly because its founders Blake Ross and Joe Hewitt, were programming geniuses accredited for creating the Firefox web browser. They joined Facebook to help develop its platform and website.
Their programming and web development talents were immediately felt at Facebook with the launch of Facebook Marketplace for classified listings. The marketplace was a feature aimed at maximizing Facebook’s advertising revenue. The pair also helped create video posting and Facebook Ads and Pages. They were instrumental in developing the Facebook Application Developer platform aimed at developers who wanted to build their own applications and games integrated with Facebook.
It was clear that Facebook was now looking beyond personal user profiles. They were focusing on how businesses could use the site. By the end of the year, the platform had over 100,000 companies registered. Facebook’s value and appeal was accessibility, even for the smallest of businesses.
The decline of MySpace
The third critical event that occurred in 2007 was the beginning of MySpace’s decline. Although valued at a whopping $12 billion, MySpace was losing users to Facebook for several reasons. The platform was overloaded with advertising that made it extremely annoying to use. Its loading time was slower compared to Facebook. They were being beaten left, right and center in terms of innovation and features by Facebook. Facebook closed off the year with a membership of 58 million.
2008: Key Hires and settling lawsuits
Facebook started the year with a bang. In March, they hired Google executive Sheryl Sandberg as COO. Sandberg had extensive leadership experience and significant political acumen from her tenure as chief of staff for the Treasury Department under the Bill Clinton administration. This hire would prove crucial later on in the year when the financial crisis hit.
In April, Facebook launched Facebook chat, giving users an instant connection to their friends and family. The company also added Spanish as a language option, giving millions of Spanish speakers easier access to the side.
Another significant platform development was Facebook Connect, which allowed members to link their Facebook profiles to third-party sites. Lastly, they launched the Facebook for iPhone mobile app partnering with Apple.
Settling the ConnectU Lawsuit
After four years of back and forth, Facebook finally settles the lawsuit with the three senior Harvard students who claimed Zuckerberg had stolen their idea.
Navigating the Financial Crisis
When the global financial crisis hit, Facebook was just a small startup that relied heavily on ads for revenue. The situation made it challenging for this business model to survive. Fortunately, with Sandberg at the helm, Facebook managed to weather the storm by changing its advertising pricing and adapting the way it advertised.
2009: The Like Button Arrives and Product Expansion
2009 saw the launch of the iconic like button, allowing people to endorse other people’s posts. The launch was made possible through Facebook acquiring FriendFeed, a social media feed aggregator with many similar features to Facebook. As part of the acquisition, all 12 employees of FriendFeed joined Facebook, including its four founders, who played a crucial role in developing Google products such as Gmail and Google Maps.
Facebook also ventured into gaming, releasing Farmville in June. Within two months, the game had 10 million daily active users.
In 2011, Facebook purchased Snaptu, a small Israeli app developer tasked with redesigning and launching Facebook’s mobile app. Within a few years, the app had been downloaded by 100 million users. The same year Facebook retired the “Wall” and introduced the Facebook Timeline. This changed the platform’s user interface, reorganizing a user’s posts and putting them in chronological order.
2012: Disappointing IPO & Acquiring Instagram
The 18th of May, 2012, was a momentous day for Facebook. The company had the largest and most anticipated IPOs in history. They were offering 421,233,615 shares at $38 per share. Although they raised $16 billion through that offering, the IPO failed to meet expectations.
The stock fell immediately at opening, and the share prices plummeted by over 40% over the next few months. By August, Facebook had made a total loss of $50 billion. So why the lousy IPO turnout? The problem was that 57% of the shares sold on the IPO originated from Facebook insiders. This lack of confidence in the stock came from within Facebook itself.
Regardless of the disappointing IPO, the year 2012 saw Facebook make one of its most significant acquisitions. They bought Instagram, a photo-sharing social network that was integrated into the Facebook platform itself. This acquisition allowed Facebook to expand its user base and revenue from adverts. The year ends with Facebook announcing 1 billion active users.
2013-Present: A Maniacal focus on Advertising, Acquisitions & Product Launches
2013: htc phone fail.
In one of its few ill-advised ventures, Facebook partners with HTC to create a Facebook phone. The phone featured a home screen that was based on Facebook’s design and technology. It failed to garner any attention, and within a month, the selling price dropped from $99 to just $ 0.99. There were simply better phones on the market.
2014: Buying WhatsApp
In 2014, Facebook bought WhatsApp, a messaging app that increased Facebook’s reach. Despite already having a messaging system, Facebook wanted to have access to a younger user base and overseas users. This acquisition boosted Facebook’s presence in the mobile world, ensuring that their presence was felt one way or another.
2015-Present: Growing beyond Social Networking
From the years 2015 onward, Facebook continued to buy up everything in sight they felt was relevant for the company’s survival. Their advertising-dependent business model relied heavily on mining user’s data, behavior, and content. This landed them in trouble on several occasions, with privacy breaching complaints and lawsuits following them at every turn.
Nevertheless, Facebook continued to evolve beyond a place where students connect. It slowly grew into a business, entertainment, and news platform. Soon every business, organization, government, and individual was clamoring to be on Facebook. Its integration with third-party apps made it the most sought-after social media platform. Not to mention the thousands of updates, added features, and upgrades the platform introduced over the years.
Without a doubt, in today’s world, Facebook is the “King of Social Media”!
Facebook’s Business Model Canvas: The King of Social Media
- https://companiesmarketcap.com/facebook/marketcap/
- https://www.statista.com/statistics/272014/global-social-networks-ranked-by-number-of-users/
- https://www.forbes.com/sites/gilpress/2018/04/08/why-facebook-triumphed-over-all-other-social-networks/?sh=2b526c4a6e91
- Tags: apple , facebook , google , microsoft , social media
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Facebook Business Model Canvas
- Customers- Facebook has three types of customers. Firstly, the users that interact with the outside world using different products. Secondly, the brands and advertisers that place offers and promotional content on Facebook. Lastly, the app and game developers via Facebook Gaming.
- Value Propositions- Facebook Business Model helps in global connectivity and communication. It also initiates sharing of new ideas, cultures, experiences, etc. It also helps in developing and playing games and has live streaming sessions. Moreover, Oculus provides virtual reality hardware to Facebook. Additionally, Facebook Business website allows for the trading of products and services of a company. In addition, Messenger helps in creating virtual rooms for video conferencing. Facebook Ads also help in the promotion and marketing of a product or service. Lastly, it also helps in making digital payments via Facebook Pay.
- Channels- Facebook operates through the internet via laptops, smartphones, tablets, etc. Moreover, there are websites and apps for using various Facebook products like Instagram, Facebook Ads, etc. Further, there are third party developer tools and APIs.
- Key Partners- There are two partners in Facebook Business Model. Firstly, the content creator partners such as Movies, Gaming, TV shows, News articles, etc. It includes partnerships with companies like Sony Music Entertainment, Universal Music group, and Warner Music Group. Secondly, the third-party partners like mobile operating system developers (for example- iOS), handset manufacturers (like Apple), browser developers (Chrome), credit card companies (Visa), etc.
- Key Activities- Facebook carries out various activities like app, website and game development. It also looks after data security and privacy. Facebook business model also involves strategic acquisitions and partnerships. Further, the company ensures that it complies with the government’s rules and regulations. It also involves various activities like hiring, marketing, sales, operations, etc. Lastly, it has undertaken activities to attain sustainable goals.
Cost Structure of Facebook
- The website and app development and maintenance incur the majority of Facebook’s expenses.
- The company also directs costs towards data maintenance, storage and protection and maintenance of data centres, equipment, etc.
- The company also pays content producers and influencers to increase engagement on the platform.
- Moreover, it focuses on research and development, which requires a large investment.
- The marketing and advertising cost also increases exponentially to expand their base.
- Lastly, the company values customer feedback. It incurs costs in retaining and acquiring new customers.
The above table shows the breakdown of costs of Facebook as of December 2021 and 2020.
Here, the cost of revenue includes data centre, traffic and acquisition cost, partners payment, credit processing fees, etc.
General and Administrative costs include employee compensation, salaries, legal expenses, administrative expenses, etc.
Facebook’s revenue sources
The majority of Facebook’s revenue is generated from advertisements. Ads displayed on Facebook, Instagram, Messenger, and third-party affiliated websites or mobile applications generate revenue. Based on the number of actions and impressions like clicks or likes, marketers pay for the ads displayed either directly or indirectly via advertising agencies or resellers.
Facebook recognizes revenue from the display of impression-based ads in the contracted period i.e., when an ad is displayed to users. Moreover, they recognize revenue from the delivery of action-based ads in the period based on likes or clicks. The Facebook Business Model calculates advertising revenue on a gross basis since it controls the advertising inventory before it gets transferred to customers. For revenue generated from third-party publishers, Facebook recognizes revenue on a net basis if they were the agents. Customers may receive cash-based incentives, credits, or refunds. The company estimates these amounts and reduces revenue.
Facebook has two types of ads. Firstly, in self-serve advertising, one just needs to visit the Facebook ‘following’ page and create an ad campaign. The advertisements are visible on sidebars and other apps on Facebook. The ad is for a specific target audience. Examples of groups using these ads are restaurants, lawyers, doctors, etc. Secondly, Engagement ads, are on the homepage of Facebook for large advertising brands. The company increases the recruitment of the brand advertisers. many brands test the effectiveness of their product due to the unique Facebook business model.
Reality Labs Revenue
The delivery of consumer hardware products like Meta Quest, Facebook Portal, and related software and content helps in generating Reality Labs Revenue. Revenue is recognized at the time of delivery of the product to the consumer.
Deferred Revenue and Deposits
Deferred revenue and deposits mostly include billings and payments from marketers in advance of revenue recognition. The revenue is not yet recognized for unspecified software upgrades and updates for various Reality Labs products. The unused balances held on behalf of our users are used to make purchases in games on Facebook. Further, on utilizing the balance, the majority of the amount is payable to the developer, and the balance acts as recognized revenue.
The payment terms vary from product to product. For Facebook, the period term between billings and when payment is due is not significant. For certain products or services and customer types, the company requires payment before the delivery of the products or services to the customer.
Payment Revenue
Facebook receives fees from wholesalers and the developer community for using Facebook’s payment infrastructure. The company charges a fee for marketplace deals, sale of apps and digital products, money transfers, etc.
SWOT Analysis
- Firstly, Facebook is a valuable brand across the world.
- Moreover, Facebook’s portfolio includes- WhatsApp, Messenger, Instagram, etc. It helps in diversification.
- Despite the declining number of users, it still leads the social network industry with more than two billion users.
- In addition, the majority of the world uses Facebook and its products, which helps create a loyal customer base.
- Further, Facebook’s HR policies help retain and recruit the best talents across the globe.
- Almost 20% of Facebook’s revenue goes towards research and development.
- Lastly, Facebook is a powerful marketing tool-making because of which 97% of the revenue is from advertisements.
- Facebook’s bad reputation due to data and privacy issues leads to a decline in popularity.
- Moreover, the majority of revenue comes from advertisements, leading to overdependence on one revenue stream.
- Lastly, Facebook has faced a major hit after its incapability to control misleading information.
Opportunities
- Firstly, the company has the potential to diversify its portfolio to avoid overdependence on ads and social media.
- Additionally, it can integrate with other applications like podcasts, e-commerce, etc.
- Besides tech-savvy customers, the company can target a different audience with the help of new features.
- It also has room to acquire companies from different sectors.
- The number of users using Facebook is declining due to new entrants giving cut-throat competition.
- New data privacy rules and regulations can also impact the Facebook business model.
- Further, a data breach can expose users’ personal information to the dark web.
- Taxes like the equalization levy can also jeopardize Facebook’s profits.
- Lastly, data privacy, data breach, misleading information impacts, false accounts, etc. will harm the company’s reputation.
To sum up, Facebook is still booming irrespective of the accusations about the end of the business. Hence, the brand will exist with diversification of business and new approaches.
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The Facebook business model is a multisided platform. Although other brands have called themselves “social networks” before, such as MySpace
Value proposition for users · Contact with friends and family: This includes posting (incl Facebook Stories and Instagram), reading updates from
Users – Facebook's customers mostly comprise its users. · Advertisers and Marketers – Brands and advertisers also form a part of its customer base that earns
Business model canvas of Facebook explains the different aspects of a business model like customer segments, value propositions, channels
Facebook Inc builds products that enable people to connect and share through mobile devices and personal computers The ... Facebook business model canvas.
Canvas is designed to help businesses tell stories and show products on mobile ... spending it on mobile and in just a handful of apps, including Facebook.
The expansion of virtual business has transformed the exchanging of money/goods business model into a new form of indirect earnings (Panda, 2020)
Mark Zuckerberg created The Facebook, a social networking site exclusive to Harvard students, in February 2004. The Facebook platform was hit with its first
Facebook & Instagram (Meta Corporation) Business Model has some interesting ... Model Explained (with the Business Model Canvas)& strategy.
Facebook Business Model Canvas · Customers- Facebook has three types of customers. · Value Propositions- Facebook Business Model helps in global