Case Study 1.1: A Short History of Facebook
Florida State College at Jacksonville
Professor Steven Miller
- As an investor in a social network such as Facebook, which financial and customer-related metrics would you use to assess and benchmark the current business success and future growth potential of the company?
The overall revenue model is ad-based advertising, which uses Cost-per-Click (CPC) and Cost-per-Thousand (CPM) payment models. The CPC model is used by charging the advertiser a certain price when a user clicks a link to a third-party website. The CPM model charges the advertiser for each 1,000 ad impressions on Facebook, which could range in price.
The metrics you could use for customer-related information would include the number of returning daily customers to a particular page, the number of pages those customers view per day, and the types of financial transactions they tend to make on a daily basis. The efficiency of these ads relies on the engagement of these returning users. Subscriptions to games or third-party apps on Facebook will also determine the type and placement of certain ads for those customers.
- Complete a situation analysis for Facebook focusing on an assessment of the main business risks which could damage the future growth potential of the social network.
I created a SWOT Analysis chart for Facebook below:
Overall integration with many websites
Over 1 billion monthly active users
Easy-to-use interface and user experience
Advertising is the only source of revenue
Poor use of customer information
Lack of customization
Invent new ways to acquire revenue
Continued growth in the mobile realm
Social network competitors (Twitter)
Overall weak business model
- For the main business risks to Facebook identified in Question 2, suggest approaches the company could use to minimize these risks.
As I stated in the SWOT analysis chart above, the incorporation of new types of revenue streams either including or not including advertising need to be made and implemented. Another avenue that could mitigate risk would be improving personal privacy among users, and upgrading the systems that keep personal information safe. Informing the users of these upgrades would help with the overall ratification of these changes. The international expansion of these ads could reach millions of untapped customers across the globe. Testing these new features and ventures will need to be completed before they are implemented, to ensure a smooth experience for both Facebook as well as its users.