Internal Analysis of Facebook - Essay Example

Facebook Executive Summary Facebook is currently the top ranked social networking site that has surpassed strong competitors in the market due to its innovative features and options. The concept that initiated from the dorms of Harvard University by a student, has managed to attract more than 600 million users in the past 7 years. The co-founder of Facebook, Mark Zuckerberg, had been accused of stealing the concept of Facebook from three students in Harvard University. However, he won his case against them and cleared any misconceptions about the source of the concept. Facebook was launched when the idea of social networking sites had already been circulated on the web in the form of MySpace, Orkut etc. These competitors were overshadowed by the inventive ideas and features of Facebook. It is a matter of time until another interesting idea makes its way to the top rank and supersedes Facebook. External and internal analysis has been conducted regarding Facebook to facilitate the continuation of the achievement of its goals and objectives. Other than the constant threat of the initiation of an even more inventive idea, Facebook is starting to face ‘Facebook Fatigue’ from the users due to the extensive usage of the same features. Few strategies have been proposed in the report that can be useful for Facebook to improve their service and achieve their goals and objectives. The need of the hour is to inhibit the adaptation of third party applications to ensure greater security, offer new features and functions to handle ‘Facebook Fatigue’ and reduce the number of advertisements display for the users. Facebook 1. Introduction Facebook is a social networking site that has leaped mankind to a new level of social networking; in terms of greater interactivity and communication. It is not only considered as a mechanism to communicate, but also an effective medium to share different types of multimedia, like videos, images, documents etc. It enables the users to stay in touch with their friends, colleagues, family and strangers who might have similar interests or hobbies. It is a global platform where an individual from any race or religion can become a member to communicate with his peers. Facebook has become the most commonly adopted social networking site in the prevailing times since they have greater number of registered users every day; Facebook shows records that on average, 100 million users access the respective website every day. This report discusses different aspects of the social networking site and how the respective company has gained the status of one of the leading companies in the world. The core objectives and mission statement of the company has also been included to communicate the core values of the company. External, as well as internal analysis has been done for the company to identify the strengths, weaknesses, threats and opportunities for the company. An important and final aspect of this report is the proposal of effective strategies to facilitate the achievement of the goals of the company, along with the strategic plans to implement the propositions in the company. The financial impacts of the propositions have not been analyzed in the report due to the unavailability of extensive financial information from Facebook. It is also recommended that some of the proposals should be implemented after attaining feedback from the user to ensure that the tedious task of implementing the changes would cause a positive effect on the users, such as the provision of customization options, lessening of advertisements on profile pages. 2. Company Overview Mark Zuckerberg is one of the main founders of the company. Womack stated that the annual revenues of 2010 amounted to around $2 billion. It has been ranked as the 3rd largest IT company in the world, behind Microsoft and Google. Womack also provided the information that the founder was named as the “Person of the Year” by Time Magazine in 2010. The value of the company has reached to an enormous amount of $50 billion with more than 600 million users under its flag. The users at Facebook do not belong to a certain age bracket; rather all age groups are included, ranging from teenagers to old people. The concept of Facebook initiated in 2004 as a platform to keep Harvard students connected to each other via an exclusive social networking site. The platform slowly grew beyond the vicinity of the Harvard community and expanded globally. In 2005, the company realized that their platform had the potential of becoming the integral part of many internet users’ lives and advertising hub for companies. It is due to this realization that they decided to formalize their business operations and move to California. Facebook has surpassed its competitors in the market, such as My Space, LinkedIn and Orkut, and has occupied the No.1 rank among other social networking sites. Figure 1 shows the rank of Facebook: Figure 1: Top 25 social networking sites in 2009 (Wilson) It is required by the SEC for companies to register as public companies if they have assets that amount to more than $10 million and 499 shareholders. Facebook announced in January 2011 that they were going to register as a public company very soon. The web 2.0 aspects of the current web technologies enables the users to cherish their experience on the social networking sites since they are able to share multimedia documents, communicate instantly and stay connected via various forms of mobile devices. Facebook is not only meant for keeping in-touch with one’s peers, it has also been recognized as an effective and attractive medium of advertising for companies around the globe. Some of the globally recognized companies are also active to post advertisements on Facebook, for example, Coca Cola, Reebok, Mc Donald’s etc. Facebook users sign up for free therefore advertising is their foremost means of earning revenue. Facebook has been surrounded by controversies ever since its inception on the world of web. According to Carlson; just after the launch of Facebook.com, Mark Zuckerberg was accused of stealing the idea of Facebook from three Harvard students namely, Cameron Winklevoss, Tyler Winklevoss, and Divya Narendra. They claimed that Mark was originally hired to develop HarvardConnection.com for them; it was based on a concept identical to Facebook.com. Eventually, Facebook won the case against these students since Mark Zuckerberg’s acts of thefts could not be proven (“Facebook’s Zuckerberg wins case against Winklevoss twins”). Several other controversies have surrounded the top social networking site on the web, like privacy and security issues of the Facebook users (that shall be discussed later in the report). 3. Mandate The mission statement and core purpose of Facebook has been subjected to a certain extent of evolution with the passage of time. The evolution of such kind is a sign of improvement and commitment to providing an effective service to their users. Their mission statement is as follows: “Facebook gives people the power to share and make the world more open and connected.” (Reagan) The vision of the company is to accumulate all the people in the world on a single platform where they can interact, share files and exchange ideas without incurring any cost. Their objective includes the accumulation of all individuals on a single platform free of cost, irrespective of their beliefs, race and cultures. Their objective is to provide a safe and secure medium that would not threaten the privacy and security of any individual. Few of the guiding principles that are followed by Facebook are as follows (“Facebook Principles”): Every individual has the right to control his information in the desired manner and set privacy levels for all types of information to control the access by each of his friends. Same rules, regulations and rights apply to all the Facebook users irrespective of their race and beliefs. Every individual or company should have unbiased access to information for which they have been authorized by their peers. Every individual should be able to access his profile irrespective of his level of participation on the platform. The security policies of the company should be reliable and accessible to all the users to ensure transparent processing of all operations. The users should be provided with efficient and reliable features to enhance their experience on the web and to facilitate fast-paced communication with their peers. The main stakeholders of Facebook are the investors, partners of the company, users of the social networking site and the companies that use this medium as an advertising platform. The Facebook users need to be communicated the commitment to protect their privacy since the trust of the users will cause an increase in the number of new members and upload of contents. The greater number of users will attract more companies to advertise their products and campaigns on the respective platform. Greater activity on the website, increased number of companies will ensure the investors and partners of the strong position of the company in the market. 4. External Analysis 4.1 Competitive forces It would not be wrong to term the current times as the technological era where newer technologies and concept never cease to be launched in the market. Social networking sites started gaining popularity at the beginning of the current century with the advent of Orkut and MySpace. These were considered to be the main competitors in the market when Facebook was launched. Due to its innovative features and options, it became the market leader in social networking sites. A college student changed the entire industry of social networking sites. This denotes that there exists a constant threat to the technological media since people have become more technology savvy than ever. It is just a matter of time until an even more attractive and innovative platform is introduced to the internet users. Other significant sources of competition that are being witnessed by the respective global company are the local networking sites that do not have a global presence but cater to the regional needs of their users. China is a good example of this kind since the top 3 social networking sites in the respective region are Xiaonei, Chinaren and 51 (“Top 10 Best Social Networking Sites in China”). The inclination of the Chinese towards their own social networks can have numerous reasons, such as promoting their national platforms, customization according to their unique values and traditions etc. Germany is also posing similar competitive forces against global social networking sites, such as Facebook. Social networking sites are utilized by internet users without incurring any costs therefore it has been witnessed that individuals switch their web services even to avail slightly better services. The absence of any switching costs gives the power to the buyers i.e. internet users. Supplier power is very low since most of the applications and functionalities are built in-house. Some of the applications that are bought from outside sources are developed by small scale software houses or individuals developers who do not have much bargaining power. Google is trying to make its mark in the field of social networking sites since they have lost great deal of advertisement business to Facebook. Companies have started preferring the interactivity of Facebook over opting for advertisement on Google search engine. Google is taking extensive measures to regain their lost users and companies by initiating new ideas and features; Liedtke provided the information that Google has launched a feature of “+1” which is similar to the “Like” feature of Facebook. This feature will enable the internet users to provide their feedback regarding different links, articles and advertisements on the web. This is considered to be the beginning of extensive measures by Google to regain their lost business. Google has also announced the launch of an innovative form of social networking service that will help the internet users to attain discounts and deals from vendors and restaurants if a sufficient number of their peers agree to purchase the coupons. 4.2 Macro Environment Macro environment involve numerous aspects that manipulate the business processes and strategic planning of any organization; these factors are uncontrollable since they initiate from the external environment of the company. The macro environment of Facebook has been analyzed by the aid of PEST analysis. PEST analysis involves the political, economic, social and technological factors that might play a role in affecting the position of a company or their decisions. 4.2.1 Political Factors In the recent history, Facebook has faced numerous issues regarding their security and privacy policies. These policies shall be discussed further in the proceeding section; however the company is facing repeated political pressures to improve their service and to safeguard the privacy of their users at all costs. The longevity of the mistrust among companies and individuals can lead to disastrous consequences for the company therefore this is one of the major threats for the company in the prevailing times. 4.2.2 Economic factors One of the opportunities for Facebook is that it possesses a prominent market share in the respective industry that helps it to attain greater economic stability. Companies tend to consider it a reliable source for investing their resources. More investments from companies tend to make the company larger and hence cause an increase in the influx of users. 4.2.3 Social factors Facebook has become more than a social networking site to facilitate effective communication between peers; it has become a trend that is desired to be followed by all. Mostly all internet users want to be associated with the concept and want to be present on it to ensure that they do not miss any online social event, discussion, exchange of information etc. In younger age group, this trend is followed even more religiously since there may exist greater social pressures in schools. The acceptability of Facebook in the social perspective is one of the most prominent opportunities to attract more users and companies to increase their infrastructure and revenues. 4.2.4 Technological factors Due to the continuous advancement in technological services, users expect their service providers to offer latest techniques and technologies. Facebook faces the pressure of offering effective bandwidth at an increasing number of users. The increased number of users also creates the need to purchase and maintain greater infrastructures for data storage purposes. The provision of reliable and fast-paced service is a continuing challenge for Facebook at an increasing rate of online activities. 5. Internal Analysis Facebook has shown remarkable progress since its launch on the web. At first, it opened its services for the Ivy League students in February, 2004. Then, they expanded its services to numerous other universities in US and Canada in March, 2004. In 2005, top companies were made eligible to utilize the services of the social network and then finally, it was made public to the whole world in 2006. The remarkable incremental growth and dominance on the social networking industry reaffirms the fact that Facebook has strong technical and management skills present in the company. The top management of the firm includes experienced and competent individuals who have had the opportunities to acquire expertise while working in some of the top IT companies in the world, such as Apple, Google and YouTube!. The technical and managerial competence has helped the company dominate the social networking industry and maintain its position on the No.1 slot since considerable time. Facebook is known to identify the wants and requirements of their customers quicker than its competitors. This commitment to serve the users initiated the idea of the Facebook Platform in 2007; this platform provided a framework to the software developers where they could develop applications for the Facebook users. Yudhi explained that this has resulted in the development of thousands of applications that serve to provide better services and entertainment to the users. The company has taken measures to ensure that the global nature of the company satisfies all the types of people that may interact with it; it is due to this realization that Facebook.com has been made compatible with 40 languages. 50 programming languages have been adapted to develop the platform and its applications to encourage all types of software developers from around the world. As stated earlier, Facebook offers an extensive range of applications that include sources of entertainment, interactivity, games etc. The influx of applications is not appreciated by numerous Facebook users since they feel that the respective posting of applications proves to clutter their profiles to a great extent. Facebook fatigue is explained as the instances when the users get bored of the social network concept and begin to find it monotonous. Facebook fatigue has initiated from UK where the logins were reduced by 400,000 during December 2008 and January 2009 (Sorensen). Facebook has faced several acquisitions of transmitting user’s personal information to several advertising companies and other related companies for their betterment. Steel and Fowler reported that many top applications were transmitting information to third party companies and thereby violating the privacy rights of the users. FarmVille is a popular game application that is repeatedly played by its followers; it was also found to be one of the sources to transfer information to unreliable sources. Facebook responded to these notions and showed their full commitment to resolve the matter by taking dramatic and urgent steps. However, a series of allegations have shaken the image of Facebook and users feel vulnerable about the security of their information. To avoid any similar instances in the future, Facebook has legally prohibited the application developers to include any transfer of information to any other source in their applications. 6. Strategic Options As discussed in the previous sections, Facebook is facing certain challenges with respect to user engagement, privacy and influx of advertisements in the profile pages of the respective network. Few strategies have been proposed in the following section to tackle the prevailing challenges so that the company can continue to fulfill their goals and objectives of providing utmost security and connectedness to their users. 6.1 Strategic Option 1 Facebook is earning a negative image for itself by the prevailing allegations of not ensuring privacy of the data. The recent major security breach has been the leaking of information through applications. As stated earlier, some of the Facebook applications are being purchased or uploaded (for free) by small scale software companies. After the security breach, it has been proven that the external sources cannot be trusted to develop applications that are expected to be used globally by Facebook users. The application code might be scrutinized before it is allowed to be used by the users but hidden motives behind programming can never be entirely judged. Facebook team is technically equipped and skilled enough to develop innovative applications internally, rather than acquiring applications developed from outside sources. One of the advantages of its implementation will be that there shall be no hidden malicious intent in the code of the application that would be conducting spiteful activities without the knowledge of the respective company. In this way, all the employees would be responsible for the development of their own applications that would make them accountable for their creations. 6.2 Strategic Option 2 User engagement is one of the important aspects that need to be given utmost attention by Facebook. Due to the constant usage of similar types of features, Facebook users are slowly disengaging themselves from logging on the network and some have even deleted their accounts. Facebook needs to develop effective strategies to ensure that they do not lose their users and maintain No.1 rank in the respective industry. Facebook needs to introduce unique and innovative features on their platform to recreate the enthusiasm and excitement that was once witnessed at the launch of the network. Users also get irritated and put off due to the frequent design changes of Facebook. The change in the design proves to be even more difficult to comprehend by the visually impaired users and aged users. It is a misconception that change in designs will engage the users and revitalize their interest in the network. It takes the users considerable amount of time to get used to the design and some even consider it a tedious and futile task. Numerous users have complained about the lack of customization options on their profile pages. Another strategy to regain the level of user engagement can be to provide customization options on the pages so that the users can modify the display and layouts of their profile pages. However, the customization options should be in accordance with the current design of the pages such that they retain the individualistic layout of Facebook. Customization options also prove to help the users with disabilities, such as visually impaired users. Visually impaired users can change the colors and font sizes on the pages to suit their unique needs and to make the text legible for them. Aged users can choose to display only a limited number of sections to facilitate a pleasant and convenient experience for them. 6.3 Strategic Option 3 Online advertising has been considered as an important medium by companies. The advent of social networking sites like, Facebook has encouraged them even more. In 2007, Facebook management announced the introduction of advertisements in the profile pages of their users. This strategy initiated new avenues for direct marketing since the companies could launch targeted advertisements. The attraction of direct marketing provokes companies to invest hefty amounts on advertising on Facebook. The influx of advertisements proves to be infuriating for most of the users since they mainly access the network to communicate with their peers and family. The bombardment of advertisements clutters their profile pages and belittles the whole experience. Earning revenues from advertisements is common for web services; however, Facebook’s aggravating inclination towards this aspect can have adverse effects on the users. Facebook should revise their strategy and set a limit to the number of advertisements that would be displayed to each user in a week. 7. Recommendations and Implementation Security and privacy of data should be the foremost concern for any service provider that accumulates personal information as a part of the provision of the service. Facebook needs to take extensive measures to revise their security policies and procedures. The inhibition of adoption of third party applications can be achieved by effective strategic planning and execution. This innovative concept of enabling the Facebook users to experience third party applications has been a major source of attraction for significant number of followers. The inhibition of such a significant service will create a void in the respective social network service therefore Facebook will have to undertake extensive measures to acquire information about the needs of the customers so that they can develop interesting applications internally, for their users. A separate section can be created on the social networking site that would serve as an update for all the internal application development. An additional resource might have to be hired for managing the new section. The section can get feedback regarding the features that would be desired by the users. In accordance with the updates of the application development, the users would be able to select the direction in which the application is desired to be developed. This would bring about a novel concept in the social networking industry that would even prove to regain the interest of the Facebook users since they would be able to manage the flow of the application development. Security and privacy issues that have originated from third party applications will be ceased at once since all development would take be done internally. Security of user’s data is one of the main objectives of Facebook that shall be successfully achieved with the adoption of the proposed strategies. References Carlson, Nicholas. “In 2004, Mark Zuckerberg Broke Into A Facebook User's Private Email Account”, Business Insider, Mar. 5, 2010, Web. 3 June 2011. “Facebook’s Zuckerberg wins case against Winklevoss twins”, Channel 4 News, 12 April 2011, Web. 3 June 2011. “Facebook: Facts & Figures For 2010”, Digital Buzz.com, March 22, 2010. Web. 7 June, 2011. “Facebook Statistics”, KissMetrics.com, n.d., Web. 7 June, 2011. “Facebook Principles”, The Facebook.com, 2011, Web. 4 June 2011. Liedtke, Michael. “Former Google CEO ‘screwed up’ on Facebook threat”, Articles Boston.com, June 01, 2011, Web. 4 June, 2011. Reagan, Gillian. “The Evolution of Facebook's Mission Statement”, The New York Observer, July 13, 2009. Web. 4 June, 2011. Sorensen, Chris. “Has Facebook fatigue arrived?”, TheStar.com, March 7, 2008. Web. 6 June, 2011. Steel, Emily and Fowler, Geoffery. “Facebook in Privacy Breach”, The Wall Street Journal, October 18, 2010, Web. June 7, 2011 “Top 10 Best Social Networking Sites in China”, TechNama, May 9, 2009, Web. 5 June, 2011. Womack, Brian. “Facebook 2010 Sales Said Likely to Reach $2 Billion, More Than Estimated”, Bloomberg, Dec 16, 2010, Web. 2 June, 2011. Wilson, David. “Top Twenty Five Social Networking Sites – Feb 2009”, Social Media Optimization, February 17, 2009. Web. 4 June, 2011. Yudhi, “Introduction to Facebook”, IndoMetric, 24 Jan 2010, Web. 2 June 2011. Exhibits Figure 1: Latest design of Facebook profile page (Yudhi) Figure 2: Sessions of unique users on social networking sites from 2007 – 2009 (Wilson) Figure 3: Competitors for Facebook in China (“Top 10 Best Social Networking Sites in China”) Figure 4: Celebrities and public figures also use Facebook (“Facebook: Facts & Figures For 2010”) Figure 5: Relevant facts about Facebook (“Facebook: Facts & Figures For 2010”) Figure 6: Comparison of number of Facebook users with the population of different countries (“Facebook Statistics”) Read More