Overview of Facebook Company - Case Study Example

Facebook: Company Report Introduction The failure of several technology companies at the start of the millennium has prompted a much closer scrutiny of those companies which are arising now. The technology bubble, as it is well known now has become a lesson from which all startups have to learn. There were several missteps that led to the technology bubble. Among them was overconcentration in a single industry. There was also too much investment in companies which essentially offered the same products and so there was little differentiation. These are among the lessons that modern startups need to learn from. One of those companies is Facebook. This is a company that was conceived in a Harvard dorm room but whose services are available almost everywhere and therefore we affects the lives of multiple people. The founder was a young student, Mark Zuckerberg. Discussion Facebook today has become the industry leader along Twitter and other companies. They are more commonly referred to as social media. Their power seems to have no bounds too. Its initial aims were to connect multiple numbers of people over the internet. Those aims have largely been fulfilled today since Facebook has around a billion users around the world. Such a huge number undoubtedly poses huge potential for the company. The company recently became a publicly listed company amidst tension that such a move was bound to fail. The critics say that Facebook has to explore alternative revenue streams like advertising, precisely the sort of thing the users abhor. This leaves the company in a sort of dilemma. In the course of writing this company report, I shall analyze this company from different viewpoints. The first is from its performance in the markets. This is usually a reliable indicator for the sort of direction in which a company is headed. The main advantage of the markets is that they respond simultaneously when anything important involving the company happens. Another yardstick shall be marketing. This is usually the be all and end all as far as some companies are concerned. We shall look at the role that advertising has played in this company. The third yardstick shall be the financial position of the company. We shall explore whether the company is self sustaining. Finally we shall look at the important matter of strategy and planning. Which mix of the two has the company employed and how successful has it been. After a long period of anticipation and speculation, this company finally went public on the week of 29th January 2012. Facebook’s offering to the public also doubled up as the biggest technology company initial public offering in history and the largest company to ever go public. This is evident in the huge growth the company has witnessed in a very short space of time. The company offered each share at 38 dollars, quite reachable by every class of investors (BBC News). The company had different offerings however for the different investors. There were common stocks, class A common stocks e.t.c The company was of course registered on the NASDAQ. By May, the stock was still trading at just above 38 dollars meaning that it had not witnessed explosive rises but no sharp falls either. This marginal increase was attributed to several things. On the pessimistic side, many cited the fact that this stock was not likely to be attractive primarily because there was not likely to be much more growth in the sector and some even said that the Facebook stock was one for the long term and not for the short term as many speculators had intended (The Guardian). A much more realistic analysis however is that the stock was priced in the right range. As is well known, in the investment markets, it is commonplace for the initial euphoria to raise the price of stocks only for the stocks to plummet soon afterwards. Facebooks relatively stable stock therefore can be looked at as an auspicious omen. This is in comparison for instance to another technology behemoth, Google, whose stock rose a whooping 18% on the first day of trading. Such comparisons are inevitably going to be there regardless of the different financial positions and even different sectors of the companies involved (CBC News). Marketing is another crucial component if such a company is to be a success. There are different strategies that different companies employ in different areas so as to be able to sell themselves successfully to the people. Facebook is no different. At first glance, it might seem to the naked eye that this is a company that does not need a concrete marketing strategy because after all it is self advertising. One user will talk to the next user about it and the user base will grow naturally. However, Facebook does have a marketing strategy. The main marketing tool for Facebook is that there are no costs for those wishing to join. However, joining Facebook should not be seen as a ‘costless’ step as it usually seems to most of us. Once the user joins the real marketing starts. The company advertises several products to its clientele on behalf of manufacturers and sellers and gains its revenue from this core function. As a result, advertising is the primary source of revenue for this company. After joining, it should also be said that the company strives to always collect as much information from its users as possible (CNN Money). This has always led to the privacy concerns that surround the company. It is believed that the company collects information relating to its users likes and dislikes and in turn passes it on to its corporate clientele. This is what has been referred to by many commentators as Facebook getting involved in e-commerce, something the company is not ready to admit. A better term that the company does not mind being associated with however is that it is involved in ‘word-of mouth-marketing’. The rationale behind this relatively new form of marketing is that we as consumers trust people around us more when they recommend products to us compared to when corporations advertise them to us. In essence ‘when a user buys something, the seller will ask for permission to promote that fact to his or her social network’. (CNN Money). The only downside to this new form of promotion is that people are not very keen on becoming the public promoters or the public faces of a corporation. Corporations as is well known are not very popular with the larger public. A good example is given in the CNN Money article where after the launch of this revolutionary marketing strategy, Facebook cited ‘Sprite’ as a product to be promoted thus by users. The article says that there are no people who are willing to ‘trumpet their unhealthy association with sugar water’. There are few frontiers left into which Facebook is yet to make significant inroads. The main one that is yet to be fully exploited is China. This is after all a country of almost one and a half billion people. China accounts for a significant stake in the population of the world. However, their closed and sheltered society has not been allowed to embrace these new technologies fully by the communist government. Instead, there are Chinese companies that occupy the space which Facebook and other companies occupy in the rest of the world. In terms of products, there has to be a shift in the offerings that Facebook has for its users. There has been much said about the un-sustainability of running the social network alone. There are suggestions that search could be the new area in which Facebook could excel. In this market, Facebook shall have to contend with the dominance of Google. This has been the search engine of choice for most people for a very long period of time. For Facebook to be ready for the Herculean task of taking on Google and some of the other industry giants in their respective areas of expertise, the company has to be in a healthy financial state. This is because there is a lot that goes into innovation which is what separates market leaders from market failures. Facebooks’ revenues for the year 2012 were 1.18 billion dollars. These were indeed very healthy revenues when you consider it in context of expenses. The company spent 992 million dollars on advertising. This amount is without doubt going to increase substantially. So far, the company has depended largely on mouth to mouth advertising to push its offerings as has been mentioned above. The company has plans of developing a mobile phone. It is well known that the core base of Facebooks users is mobile users. If indeed the company does go into mobile manufacture, it shall be competing with other global leaders in mobile telephony like Samsung and Blackberry who spend substantial amounts on product research and development. Conclusion On the whole, Facebook is a company in a very healthy position. The company only recently entered the financial markets and despite initial losses, the stock is now on its way up. There is also huge opportunity for growth for Facebook. Technology companies today deal with a wide array of products and Facebook just has to choose the right product and run with it. In terms of strategy it’s also clear that the company is always seeking new ways to lure the user and consumer. The only thing Facebook has to be careful about going forward is not to stretch itself thin. It is much better to concentrate on one product and deliver well, as Apple has proven than to be involved in all kinds of products which all involve huge risk and then fail terribly because not enough attention is paid to one product. Sources BBC article ‘Facebook to go public with &10billion share offering’ published on 29th January 2012. Retrieved from www.bbc.co.uk/news/business-16779779 CBC article ‘Facebook closes just above $38 IPO pricing’ published on 18th May 2012. Retrieved from www.cbc.ca/news/world/story/2012/05/18/facebook-ipo-zuckerberg.html The Guardian article ‘Why has Facebook stock market floatation been such a disaster?’ published on 21 October 2012.Retrieved from www.guardian.co.uk/technology/2012/oct/21/facebook-mark-zuckerberg-shares-floatation Kirkpatrick, D.(2007,November 10).Facebook’s strategy: More then ads.CNNMoney.Retrieved from www.monwy.cnn.com/2007/11/08/technology/facebook_ads.fortune/index.htm Sengupta, S.(2013, January 14).Fortunes of Facebook may hinge on searches. The New York Times. Retrieved from www.nytimes.com/2013/01/15/technology/fortunes-of-facebook-may-hinge-on-searches.html Eldon, E.(2010, March 2).Facebook revenues up to $700 million in 2009, on track towards $1.1 billion in 2010.Retrieved from www.insidefacebook.com/2010/03/02/facebook-made-up-to-700-million-in-2009-on-track-towards-1-1-billion-in-2010/ Johansmeyer, T.(2012, April 16).Sneak Peek.Business 2 community. Retrieved from www.business2community.com/finance/sneak-peek-facebooks-q1-financial-perfomance-0164549 Article by Hunter Orr. ‘FB-Facebook Inc-Company Analysis and ASR Report Ranking’. Retrieved from http://reports.finance.yahoo.com/w0?61433583:1 Trotman, A.(2012, July 26).Facebook’s first financial results. The Telegraph. Retrieved from www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/digital-media/9429714/Facebook’sfirst-financial-results-as-it-happened.html Pinkasovitch, A.(2012, February 2).Analyzing Facebook’s Financial Statements. The Motley Fool. Retrieved from http://beta.fool.com/apinkasovitch/2012/02/02/analysing-facebooks-financial-statements/1573/ Andrew, L.(2012).I Know Who You are and I Know What You Did: Social Networks and the Death of Privacy: Harcourt Brace, New York Ammeson, J.(2012, January 29).New book on social media explores Internet privacy Issue.The New York Times. Retrieved from http://nwitimes.com/niche/shore/entertainment/books-and-literature/new-book-on-social-media-explores-internet-privacy-issues/article_e0be6065-3d48-5d72-ba68-21dea004c015.html Atwan, G. Lushing, E. Lushner, E.(2008).The Facebook Book: HNA books, New York Krueger, R. Dunay, P.(2011).Facebook Marketing For Dummies: Penguin, London Kirkpatrick, D.(2010).The Facebook Effect: Simon& Schuster, New York Mezrich, B.(2009).The Accidental Billionaires: Knopf Doubleday, London Movie: The Social Network directed by David Fincher Mezrich, B.(2010).The Accidental Billionaires: Knopf Doubleday, New York Read More