MM 5012

BUSINESS STRATEGY AND ENTERPRISE MODELLING

FINAL EXAM
FACEBOOK

R48A

Henny Zahrany
29112551

MASTER OF BUSINESS ADMINISTRATION

SCHOOL OF BUSINESS AND MANAGEMENT
INSTITUT TEKNOLOGI BANDUNG
2014

I.

Background
Social media services has become parts of nowadays lives that facilitate many of
our needs, especially needs for communication, information, meeting new friends,
sharing facility, join a discussion in a community, etc and now it has evolved into
fulfilling peoples needs in doing business, have some entertainment in many various
ways possible (games, quizzes, etc) and many others. Its not just a platform, as the
technology develop and customers needs getting more complicated and always seek for
something new, it is such an important key to keep innovating to fulfill customers needs
and creating many other possibilities to creates customer satisfaction.
Facebook is one of the most successful online social networking services in the
world, it has its triumph back in the day and has successfully managed to outcome its
competitors, but now it faces even more challenging circumstances and threats as people
are started to migrate its social media activities to other social medias. The 2014
demographic reports of Facebook showed that there has been a decline in Teens users for
about -25.3% over the last three years, supplemented with even interesting facts, the 55
years old and above users has exploded with a 80.4% growth in the last three years
(http://istrategylabs.com/2014/01/3-million-teens-leave-facebook-in-3-years-the-2014facebook-demographic-report/).
2014 maybe is not really a good year for Facebook for its stock price. Facebook
started the year on a high, with its stock selling more than 50% above its IPO price, but
the company is ending 2014 in a very dark place. After briefly exceeding a price of $70
per share, Facebook's stock is now back to its mid-2013 level.
Facebook has conducting many strategic and tactical moves in a fast pace, many
change executed in the service to enhance its performances, it also commencing many
partnership and acquisition, Facebook has acquired 10 companies such as WhatsApp,
ConnectU, Instragram, etc and the latest one is Oculus VR, a virtual reality technology
company. Most of Facebooks acquisitions have been a Talent Acquisition and acquired
producrs are often shut-down, though its an exception for Instagram.
With the changing in customers behavior, needs, and also preferences, declining
stock price back to its mid-2013 level, competition with Google, Microsoft, Twitter, Path,
Vine, and many other social media, also including internet or mobile companies that
could offer products and services that compete with Facebooks features, with its
integrated business strategy they could crush Facebook in a blink of an eye if they dont

think fast and could actually predict and have visions of what will it do in the future. With
85% of its revenue coming from advertising, Facebook also competes with both
traditional and online media business. Severe competition and threats in technology and
social media industry, makes it critical to maintain and enhance its business, this paper
aims to provide a Strategic Management Process along with Projected Financial
Statement, and the Business Model of Facebook, which could give the company a broad
picture of how the company could achieve strategic competitiveness and earn above
average return.
II.

Facebook Inc Background

Facebook is a social networking service launched in February 2004, founded by
Mark Zuckerberg with his college roommates and fellow Harvard University students
Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes. The name of
the service stems from the colloquial name for the book given to students at the start of
the academic year by some university administrations in the United States to help
students get to know each other.
Facebook filed for an initial public offering on February 1, 2012 and
headquartered in Menlo Park, California. Facebook held an initial public offering on May
17, 2012, negotiating a share price of $38 apiece. The company was valued at $104
billion, the largest valuation to date for a newly listed public company. Facebook Inc.
began selling stock to the public and trading on the NASDAQ on May 18, 2012. Based
on its 2012 income of US$5 billion, Facebook joined the Fortune 500 list for the first
time on the list published in May 2013, being placed at position 462.
In March 2012, Facebook announced App Center, an store selling applications
that operate via the site. The store will be available to iPhone, Android and mobile web
users.
In 2012, Facebook was valued at $104 billion, and by January 2014 its market
capitalization had risen to over $134 billion. At the end of January 2014, 1.23 billion
users were active on the website every month, while on December 31, 2013, 945 million
of this total were identified by the company as mobile users. The company celebrated its
tenth anniversary in the week of February 3, 2014.

III.

Analysis
1. Strategic Management Process

Strategic management process is a full set of commitments, decisions, and actions

required for a firm to achieve strategic competitiveness and earn above average returns.
First it all started with analyzing the external environment and internal organization to
determine its resources, capabilities, and core competencies- the sources of its strategic
inputs (Ireland et al, 2013: 6).
1.1. Strategic Inputs
1.1.1.
External Environment Analysis
a) General Environment Analysis
It is composed of dimensions in the broader society that influence an
industry and the firms within it (Ireland et al, 2013: 34).

Segments

Elements
Facebook allows users from age of 13 to any age to
use it

(istrategylabs.com/2014/01/3-million-teens-leavefacebook-in-3-years-the-2014-facebook-demographicDemographi
c segment

report/, 19 April 2014).

It is now dominated by 35-53 years old users

(31.1%) and 25-34 years old users (24.4%).

In USA, it has been highly used in New York,
but worldwide, India is now Facebooks
second largest national market (after the US),
as the network passed 100 million users there.
It expects further rapid growth as it increases
its mobile focus in a country where eight in 10
users are mobile.

(http://wearesocial.com.au/blog/2014/04/15/so

cials-tuesday-tuneup-136/, 19 April 2014).

The U.S. economy will grow by about 4
percent, much faster than the 2.5 to 3 percent
predicted

by

the

IMF

and

mainstream

economic forecasts.
Equity prices in most of the world should

b) Industry Environment Analysis

Threat of new
entrant

Rivalry among
competitors

Bargaining power of
suppliers

Threat of substitute
products

1. Threat

Bargaining power of
buyers

LOW

of new

Mobile journal Path is a threat as they are

entrant

new, focused, and gaining traction (Miller,

2010). Path is a mobile only social network
that added nearly 1 Million new users in
two months; they now have a nearly 2
Million users (Gannes, 2012). As noted by
Facebook in their S-1 filling, the company

has 425 Million monthly mobile users and

the company hasnt been able to monetize
this user base (Ebersman, 2012). As users
start using new platforms like Path, it can
pose a threat due to a new user experience
(Lynley,

201).

Despite

rapid

growth,

products like Path offer low threat since

they are limited to smart phones (iOS and
Android)
2. Bargaining power
of suppliers

whereas

FAcebook

can

be

accessed on multiple platforms.

MEDIUM
According to the S-1 filling, Facebook
currently has 845 Million monthly active
users (Ebersman, 2012). Precise information
about 845 Million users likes, dislikes,
interests, and preferences is what Facebook
offers their customers. This data voluntary
supplied

by

the

user

and

Facebooks

algorithms to show targeted ads lets Facebook

have leverage over their customer and to
increase ad prices.
However, as mentioned by Facebook in their
S-1 filling, the company risks losing the
suppliers for various factors, such as:
Inability to enter new countries or
lose users in existing geographical
locations due to privacy laws
Users switching to new entrants or
competitor products like Google+
While Facebook has no cost-of-entry barrier
for the supplier, Facebook is seeing some

resistance in adding new users (Wortham,

2011). Having said that, for 845 Million
interconnected users are interconnected with
an existing social graph, so migrating to new
networks is a tough choice, hence the
3. Bargaining power
of buyers

bargaining power of suppliers is medium.

LOW

Advertiser is Facebooks customer,

they are the ones who pay facebook to
use

the

platform.

According

to

Facebooks S-1 filling for their Initial

Public Offer (IPO) with the Securities
and Exchange, Facebook says that
$3.1 billion of their $3.7 billion
revenues,

comes

advertising
Theres

even

from

(Ebersman,
a

69%

social
2012).
increase

compared to the $1.85 Billion in

2010. Facebooks financial details
point out that 18% ad revenue
increase was due to increase in

average ad price.
Also Developers

as

Facebooks

customer has been using Facebook

and see a 30%-200% increase in
registration on their sites.
Engagement: sites

with

Facebook Connect see a 15-100%

increase in reviews and other user
generated content
Traffic: For each story published
in Facebook, we see roughly 3

clicks back to the site. Nearly

half the stories in the Stream get
clicked

on.

opportunities

This

creates

for the

site to

encourage more user actions

knowing that each one may result
in 3 new visits to their site. With
other models like search, theres
nothing you can do to increase
user traffic besides optimizing for

keywords.
While Facebook

currently

has

leverage while negotiating with its

customers which has allowed them to
increase the average ad price, theres a
threat of inability to add new users or
lose existing customer due to platform
fatigue, new entrants, and substitutes.
If Facebook is not able to retain their
existing user base by providing a
better

experience,

the

customers

bargaining power increases. Also,

Facebook says, they have 425 million
active mobile users each month but
have

not

monetized

the

mobile

platform, this could be a deal breaker

if a new entrant or substitute can fill
the gap. But as

for now, the

bargaining power of customers is low.

4. Threat of
substitutes

LOW

Since Facebook is essentially a social

products

network that allows users to stay in touch

with friends, services like WhatsApp,
iMessage and Skype can be a threat.
WhatsApp and iMessage are internet
bsed

short

messaging

services

that

integrate with a users phonebook and

allow the user to send short messages

using their phone.

Video calling services like Skype and
Google Hangout can attract users by
allowing

video

communication

over

moble phones and PCs. To counter both

of these threats, Facebook has introduce
independent text messaging apps and tied
up with Skype to offer video calling.
Since Facebook has taken steps to realize
potential substitutes and neutralize them,
5. Rivalry among
competitors

the threat of substitutes is rather low.

HIGH
Some countries do have their own social
networks such as :
1. Wer-kennt-wen (English: Who-knowswhom) is a popular German social
networking site.
2. Renren Network (English:"Everyone's
Website) is a Chinese social networking
service that exists as the Chinese remake
of Facebook.
3. VK is the largest European social network
with more than a 100 million active users.
VK is the most visited site in Eastern
Europe.

However, these networks are mostly only

used by the population of the origin country.
Facebook, on the other hand has users from
all over the world which makes it attractive to
people who have international friends.
As

Facebooks

growth

has

grown,

competition from Google has strengthened.

In June 2011, Google introduced Google+, a
new social network leveraging existing
Google

infrastructure

to

compete

with

Facebook (Miller, Another Try by Google to

Take On Facebook, 2011). According to
Google CEO, Larry Page, their network has
90 million users according to Googles
revenue numbers; the company has 350
Million Gmail users, 250 Million Android
devices.

96% of Googles $37.9 Billion

revenues came from advertising (Abell,

2012). Given Googles wide product range
(Email, Blogging, Search, Mobile, and TV);
Facebook can find strong competition in
retaining users. Every Google product user is
a Google+ user and hence the threat of
industry rivalry from Google+ is high.
c) Competitor Analysis
Performance
Facebook

Metrics
More than
billion

Capabilities

Objectives/Values

1 With more than Make the world more Facebook

monthly 1 billion users in open and connected

active users

Strategy

markets

database, users

them as

can connect in

platform

better ways
Google+

allows u

An estimated 343 Google+

Organize

million monthly integrates

information and make it markets

active users

youtube

and universally

the

to connec
worlds Google+

accessible them as

Android to gain and useful

extension

competitive

other

advantage over

services

Facebook.

(gmail,
search,
video
sharing
youtube,
photo
sharing
picasa)
provides

Google is one of the biggest competitors of Facebook and they compete with
each other at many levels from social networking to advertising.
a) Advertising - Googles Adsense and Facebook ads is the main source of
their revenues. They are both into the advising business. They are
competing for advertising budget of other companies. Not only
Facebook provide a way for advertisers to target their ads to specific
demographics and interests of the users but the use of the social graph
can potentially create a network effect on sales that Google can only
limitedly provide. That is attracting advertisers. The following show Ad
revenue of Facebook and Google conducted by eMarketer.com.

b) Social Networking - Googles G+ social networking site that is direct

competition to Facebook. G+ allows the same set of features (like Chat
messaging, sharing pictures and videos, your interests, your status
update ,comments ,video conferencing, likes, etc) and others like
communities on G+ similar to groups of Facebook. Since Facebook is
essentially a social network that allows users to stay in touch with
friends, services like WhatsApp, iMessage and Skype can be a threat.
WhatsApp and iMessage are Internet based short messaging services
that integrate with a users phonebook and allow the user to send short
messages using their phone. (iMessage is iOS specific, whereas
WhatsApp is multi platform.) Video calling services like Skype and
Google Hangout can attract users by allowing video communication
over mobile phones and PCs. To counter both these threats ,Facebook
has introduced independent text messaging apps and tied up with Skype
to offer video calling. Since Facebook has taken steps to realize potential
substitutes and neutralize them, the threat of substitutes is low.

1.1.2.
Internal Environment Analysis
a. Resources
Tangible Resources
Physical Resources

Facebooks biggest resource and asset

Intangible Resources
Sharing Knowledge
XL Axiata owned by Axiata group

is their information database on 845

owned telecommunication company

Million

several country such as Celcom Malay

users

worldwide.

As

mentioned earlier, competitors like

Dialog Srilangka, Robi Bangladesh

Google+ and new entrants like Path

Hello

have not reached even half of the user

between Axiata subsidiaries can imp

base Facebook caters to. This makes

individual knowledge among emplo

Facebooks

and

database

their

most

valuable resource.
The major resources of Facebook are
the servers that keep the site running
despite the heavy amounts of traffic.
These

servers

are very

essential

Kamboja,

contributes

sharing

to

knowle

performa

improvement for the company.

Human Resources
Facebook has a young and innova

culture, it sources puts people f

top silicon valey companies.

because the services and operations of

Facebook
website.

depend
On

solely

November

on
1,

the
2005,

Facebook signed a multi-year contract

with web hosting provider and data

Creative labs division of Facebook

Creative Labs is an intra-comp

effort to have separate teams wor

on separate mobile apps that specia

center

operator

Terremark

Worldwide to house over 450 of its

Facebook

serves at their NAP West facility in

trying to make changes to Facebo

Santa Clara, California. Facebook is

main web version, mobile version

able to create a more secure and

its iOS and Android apps, and

efficient network by co-locating its

that Facebook Paper is the

servers, which is very important in the

product of Facebook Creative Labs

operations of the business.

Technological Resources
Facebook ntroduced functionality that

Most of Facebook's acquisitions h

allowed merchant website to embed

Facebooks

like

button.

As

users

continued to browse the web and like

webpages

or

products

they

liked,

Facebook was able to build a rare utility

to track product acceptance and user
preference

(Kessler,

2012).

Though

Google has tried to introduce similar

functionality, Facebooks first mover
advantage, user-base and brand have

in different facets related to

given the company an upper hand.

Innovation Resources
Facebook bought Face.com a Face
Recognition Platform for enabling
auto tagging feature on shared

pictures.
Introduction
Subscribe,

of

features

Timeline,

like
Spotify

integration, and a new app platform.

Creative labs, an invention which
Facebook will begin to splinter into
many

smaller,

more

narrowly

experience,

been 'talent acquisitions'.

rather

focused services, some of which

wont

even

carry

Facebooks

branding, and may not require a

Facebook account to use.
Reputational Resources
Facebooks brand is valued at $9.8bn
by Brand Finance, almost double the
$5.57bn it was valued at in 2012.
Facebook has built a strong
reputation and perceived by its users
as more personal.
b. Capabilities
Specific functional areas for the capabilities of Facebook are including the
management, marketing, research and development and Human Resources.

Management
Recently Mark Zuckerberg, the companys co-founder and chief
executive, has been working on revamping the way the company creates
and distributes new services. The effort, which he began this year, is
called Creative Labs. In the past, he said, Facebook was one big thing, a
website or mobile app that let you indulge all of your online social
needs. Now, on mobile phones especially, Facebook will begin to
splinter into many smaller, more narrowly focused services, some of
which wont even carry Facebooks branding, and may not require a
Facebook account to use.
Mr. Zuckerbergs plan isnt really a surprise. Facebook has long
been offering its services in separate apps; it introduced a stand-alone
text-message app, Messenger, in 2011. The new plan will accelerate that
effort. To use all of Facebooks features, you may need to install a bunch
of different apps that will each prioritize a single function, from
browsing the News Feed to sending messages to interacting with groups.
The Creative Labs strategy fits with Mr. Zuckerbergs view that some
parts of the mobile Internet are much bigger and more complicated than

he had previously thought. He noted that WhatsApp and Facebooks

Messenger were nominally identical both are used to send texts
but that after studying both products huge user bases, Facebook found
they were being used by different people for different purposes.
This idea explains Facebooks increasing appetite for acquisitions.
On a huge mobile web, services like WhatsApp and Instagram can
benefit from Facebooks resources while maintaining their own
communities and, crucially, not cannibalizing Facebooks own user base.

Marketing
Facebook has its consumers from the users, advertisers, and developers.
From these consumers, Facebook has commencing strategy for
marketing in each of the segment. In fact, Facebook has beaten Twitter
to the title of the most "marketing friendly" social platform, according to
a poll of social media marketers carried out by the Direct Marketing
Association.

http://marketingland.com/facebook-marketing-friendly-80861, 21 April
2014.
According to a survey of 171 UK social marketers, Facebook is the
favored platform for social media campaign development and
evaluation. The survey was conducted by the Social Media Council of
the London-based Direct Marketing Assn. Survey participants were
asked to rate each social network from 1 to 10 in campaign planning,

execution and post-campaign analysis. Facebook ranked highest in each,

with a 4.8 score for planning, a 4.5 (tied with Twitter) for execution, and
3.9 for analysis. Notably, in the planning portion of the survey, LinkedIn
ranked highest with a 5.2 for tools to target individual users.
The fastest growing networks on the internet Airbnb, Instagram,
Facebook, YouTube, Snapchat may not have spent much on marketing,
but they all have one thing in common: Each of these networks
piggybacked on top of another pre-existing network. Facebook and
Bebo grew on top of the network embedded in our email. Many
networks, including Instagram, grew on top of Facebook itself. For a
while, Airbnb grew on top of Craigslist, while Snapchat and WhatsApp
have leveraged the mobile phones organic network, the phone book, to
create networks native to mobile.

Research & Development

As Facebook looks to prove its value to advertisers, it has focused
on conducting research that demonstrates whether online advertising
impacts offline sales and that uses large data sets to gain insight into
how to make campaigns more effective.
Facebook spends a smaller percentage of revenue on engineering
than other Internet companies, mimicking Apple (AAPL) Inc.s strategy
of keeping costs low by relying on outside developers for research and
development. Facebook devoted 10 percent of its sales to R&D spending
last year, a fraction of the level of some other companies holding recent

initial public offering.

Human Resources
As mentioned before, Facebook has a young and innovative culture, it
has people from top silicon valey companies, as showed below.

All of these talents have various experiences and skills that could
complement each other into building Facebooks vision & mission.
Recent mergers and acquisition also intended to absorb exceptional
talents that will help Facebook into reaching many potential outside its
current position now.
c. Core Competencies
From the capabilities explained above, I believe the capability that has a
unique value for Facebook are from the management information system,
marketing, human resources, and Research and development capabilities.
Two tools that help firm to identify their core competence, are:
a. The combinations of four criteria for sustainable competitive advantage:
Question
Is

Answer
the Yes

Reason
The core competencies could neutralized

capabalitites

threats in its external environment.

valuable?

In this case, the management information

system that has hold manages more than
1 billion users, are valuable resources for
Facebook, that binding its customers
(especially advertisers and developer).
Human resources capability is one of the
valuable

resources,

since

it

is

capability that easily can be taken away

from a company because they grow
together with the company with its
culture, visions, skills development,
synergy, etc.

 Marketing division of Facebook has

been really busy in doing effective
promotions, pricing strategy for its
developer and advertiser, dealing with
countless apps business, and so on, up
until now it has help Facebook to retain
its business. For now, Facebook is the
best social media platform in terms of
functionality and post-campaign analysis
although it still have to be cautious with
what will happen in the next 12 months,
but it is one of the important elements to
retain its consumer base and its other
capabilities to neutralize the threats that
coming.
Research and Development: innovative
technology

and

making

rapid

transformation of technology into new

products and services are important
activities that will work in harmony with
Facebooks vision. It has been mentioned
before that Facebook will begin to
splinter

into

many

smaller,

more

narrowly focused services, that some of

which wont even carry Facebooks
Is

the Yes

branding.
Other competitors
in

are likely to have

capabilities

difficulty

building

rare ?

(especially servers, user data, and consumer

base), eventhough

some

resources

some excel at other

capabilities also. It has been explained

before that it has an intense rivalry with

Google in a Multipoint competition, but until

this point other competitors still far behind
Facebook and Google with their resources &
Is

the No

capabilities
costly

capabilities compared.
It is indeed difficult for new entrants or other
existing competitor to straightly compete

to

imitate ?

with Facebooks resources and capabilities,

but in this industry the ability to capture
insight from customers and ability to deliver
ideas could threaten Facebook, and maybe
could take some of its market as it provides
better design/user interface, or provide
something

Is

the Yes

new.

Facebooks

capabilities are strong but

Each of these capabilities

intangible
cannot

be

capabilities

exploited separately. For example, their

Nonsubstitutabl

human resources capability certainly cannot

e?

be substitute easily with other capability as it

takes a lot of an effort to motivate,
empowering, and retaining potential and
valuable employees. They have already
created a culture which enhance the firms
specific knowledge which is difficult to be
substituted.

Conclusion :
The competitive consequence from the above combinations is a Temporary
Competitive Advantage. Hence the performance implication is average
return s to above average returns.
b. Value Chain Analysis

Before jumping to Facebooks value chain analysis, first lets compare the
traditional media companys value chain with the social media companys
value chain. There are some similarities, but there are some differences that
can be identified, such as:
User loop bacl: the users of social media services are involved in a sort
of loop back arrangement where they produce most of the content use

by the service, but they are also the ones who consume it.
No payment provided to content creators: in spite of investing a lot of
time creating the content used by social media services, users do not

normally receive direct payment for producing this content.

UGC-based content services are mostly free: With traditional media
forms there is a strong tradition, of paying to access content. But for
social media, there is a strongly-held belief that access to UGC-based
services should be free. Some social media services have begun
introducing user-pays models but these models have to be extremely

carefully and are always tied to features, not the actual UGC.
No internal content-production function: a social media services main
role lies in creating and operating an infrastructure that provides users
with tools they can use to create or upload their own personalized
content.

There are some key points to make about the agile value chain, the
primary activities are a cohesive set of activities, and it is important to
optimize value across the entire life cycle. The value of primary activities
can be dramatically enhanced with good supporting activity. That
supporting capabilities may be delivered using primary activities which
either have qualified goals and objectives, or that the outcomes of
primary activities are harvested to create supporting capabilities.
Facebook has relentlessly evolved its product, even when users
were resistant to change, allowing it to incorporate ideas that could have
disrupted it had it remained stagnant. Its created a lucrative Platform
developers want to build on. Finally, its turned its Pages and advertising
products into central components of brand and local marketing, giving it
the money to fund innovation elsewhere.
Facebook have their own infrastructure rather than using a third
party cloud provider and they built own data centres to support physical
infrastructure which available to partners as API and IaaS, also they
maintain a PaaS service for those the partners, and theyre both deliver
their own SaaS for specific applications . They are also one of the largest
photo repositories on the planet due to inexpesive and scalable cloud
storage.
They have also launched the Open Compute program that allows
large scale data server and storage services to enter into the world of
Facebook and ultimately make recommendations for how the architecture
can be improved.
The defense system, run by a 30- person security team, is designed
to weed out spam and malicious links. It analyzes up to 650,000 user
actions per second and 2 trillion link clicks per day. So Less than 0.5% of
Facebook users experience spam spreading. In case a users account is
hacked, Facebook is providing more ways for them to regain access.
These include Social Authentication that lets users identify friends in
photos to prove theyre an account owner, and the Trusted Friends feature

that sends an access code to a locked out users closest friends who can
share it with them so they can login again, this has created a high level of
trust and credibility among users.
These latest improvements to efficiency and security strengthened
the service in ways it was moving too fast to focus on. While only seven
years old, Facebook is looking more and more like an established,
sophisticated company ready to deliver value for a long time into the
future.

1.2. SWOT Analysis

STRENGTH
Huge active user base; more than

WEAKNESS
Lack source of revenues, having

1 billion of active users for each

difficulties in monetizing the mobile

month
Huge amount of personal user

service
Inability to manage application feeds

information and preferences

Present in all geographies
Available in more than 70

languanges (localization)
Email and chat client integrated
Integration with websites and

applications
Organized and simple to use

interface (Design)
Broad target market
OPPORTUNITY
Consolidate Facebook Fan Pages
and Facebook App Pages They

seem redundant
Diversify sources of revenue

(especially the mobile one)

Improve Email and Chat
Facebook can provide better web

search (compete with Google)

Improve privacy structure

1.3 Quantifying the variable quadrant

leading to clutter on the website &

reactions from users

Privacy issues
Average Load Time is slow (2.537
seconds), 76% of sites are faster

THREAT
Social networking audience is fickle

and thy frequently shift providers

Risk of losing young, hip image
Users using ad-block extensions
Identity thefts and other cyber crimes

through Facebook
People have privacy concern with

Facebook
Many regional social networking

STRENGTH
1. Huge active user base;

WEAKNESSES
1. Lack source of revenues,

more than 1 billion of

having difficulties in

active users for each

monetizing the mobile

month
2. Huge amount of

service
2. Inability to manage

personal user

application feeds leading

information and

to clutter on the website

preferences
3. Present in all

& reactions from users

3. Privacy issues
4. Average Load Time is

geographies
4. Available in more

slow (2.537 seconds),

than 70 languanges

76% of sites are faster

(localization)
5. Email and chat client
integrated
6. Integration with
websites and
applications
7. Organized and simple
to use interface
(Design)
8. Broad target market

OPPORTUNITY
1. Consolidate Facebook Fan

S-O
O-W
Increase targeted 1. Work on ways to reduce

1.

Pages and Facebook App

advertisements

and

the increasing amount of

Pages They seem

develop local ads A

clutter on FB homepages
2. Create more monetization

redundant
2. Diversify sources of
revenue (especially the
mobile one)
3. Improve Email and Chat
4. Facebook can provide

way

of

showing

products relevant to the

users location.
2.
Improve quality of
the integrated email and

opportunities

better web search (compete

chat apps.

with Google)
5. Improve privacy structure

THREATS
S-T
T-W
1. Social
networking 1. Try to deliver localized 1. Always keep

enhancing

audience is fickle and

content and ads (i.e.

and innovating features to

thy

move

keep users coming back to

frequently

shift

beyond

the

providers
language translations)
the website.
2. Risk of losing young, 2. Improve development 2. Increase opportunities to
hip image
3. Users using ad-block
extensions
4. Identity thefts and other
cyber crimes through
Facebook
5. People have

platform

on

aspects

like security, privacy,

customize pages without

ruining design

monetization and limit

clutter.

privacy

concern with Facebook

6. Many regional social
networking
1.4 Business Level Strategy
Business level strategy is an integrated and coordinated set of commitments and
actions to gain a competitive advantage by exploiting core competencies in specific
product markets. Firms choose from among five business level strategy to establish
and defend their desired strategic position against competitors. Facebooks business
level strategy is an Integrated Cost Leadership/Differentiation strategy, it emphasizes
several activities to keep its costs low but also includes some differentiated features
with its low-cost products.

Cost leadship in the social networking industry isnt a factor, because social cloud
services are free, but profits are basically generated from advertising and additional
applications. According to theverge.com, 85% of Facebook profits came from
advertising and 12% from Zynga - a social network game developer.
The revenue derived from Zyngas payments processing fees related to sales of
virtual goods, plus virtual and real gift shops. Facebook provides its own selfadvertising platform and competes with Amazon.com, Google Adwords, YouTube
and Twitter . The cloud marketing is low-cost oriented industry, so Facebook focuses
its strategy on uniqueness differentiation for a broad market.
It provides such advertising services like Campaign Cost and Budgeting with
cost per click (CPC) and cost per one thousand impressions (CPM) tool, attractive
user interface, like recently launched Timeline and free social media services
integrated with other highly valued websites, which delivers a massive exposure
potential for businesses.

1.5 Corporate Level Strategy

Facebook level of diversification is in low level from single business unit because
95% of revenue comes from a single business unit. But recently Facebook has
introduced a slew of new products in recent months that indicate it is going after new
revenue. The product debuts include stand-alone mobile texting applications;
Facebook Exchange, a real-time bidding ad exchange that allows advertisers to better
target specific groups; and Gifts, an online store. Also with its creation of Creative
Labs, the new internal initiative at Facebook, is playing more with products outside
the core social networking site, or spun out from that experience. Its latest products ,

Home and Paper also still in further development aside from critics they got from the
customers. From the previous competitive advantage analysis, Facebook has
tremendous sources and capabilities in the R&D and Human resources areas, but
apparently hasnt been able to monetize that into the profits since they still havent
found out to monetize the mobile service.

Projected Financial Statement

A. Income Statement

B. Balance Sheet

Balance Sheet
All numbers are in $ million unless

FY

FY

FY

FY

FY

FY

FY

mentioned otherwise
Ass

10

11

12

13

14

15

16

1,78 1,51 1,19

2,53

3,68

7,93

14,4

4
2,39

5
2,39

6
2,39

81
2,39

ets
Current Assets:
Cash & Cash Equivalents

Marketable Securities

6
1,26

6
1,28

6
2,92

6
3,39

6
6,37

Accounts Receivable
Prepaid Expenses & Other Current

373

547

9
1,22

7
2,07

Assets

88 149 252
2,24 4,60 5,11

427
6,63

723
9,72

5
14,9

4
25,3

56

28

1,47 1,99

3,36

5,06

7,97

12,0

574
5
2
59
80 149
37
82
82
74
90 179
2,99 6,33 7,51

5
215
82
250
10,5

6
350
82
414
15,6

9
529
82
622
24,1

54
816
82
962
39,2

Total Current Assets

Non-Current Assets:
Property & Equipment, net
Intangible Assets, net
Goodwill
Other Assets
Total Assets
Liabilities and Stockholders Equity
Current Liabilities:
AccountsPayable

2
9
2,39 2,39

49

40

68

42

29

63

104

141

244

358

553
1,44

75

171

267

382
1,38

633
2,98

958
6,45

9
13,9

Liabilities
Deferred Revenue & Deposits
Current Portion of Capital Lease

137
42

296
90

640
90

2
90

5
90

0
90

36
90

Obligations

106

279

279
1,37

279
2,27

279
4,23

279
8,13

279
16,3

389

899

08

117
250
72

398 322
135 135
1,43 1,83

228
135
2,63

109
135
4,47

17
135
8,28

11
135
16,4

54

615
2,68 2,68

2,68

2,68

2,68

2,68

PlatformPartners Payable
Accrued Expenses & Other Current

Total Current Liabilities

Non-Current Liabilities:
Capital Lease Obligations, Less
Current Portion
Long-Term Debt
Other Liabilities
Total Liabilities
Stockholders Equity
Convertible Preferred Stock
Common Stock

828
615
-

C. Cash Flow
Cash Flow Statement
All numbers are in $ million unless

FY

FY

FY

FY

FY

FY

FY

mentioned otherwise
Cash Flow from Operating

10

11

12

13

14

15

16

1,00

1,3

2,23

3,25

4,71

6,90

0
(174

93
(71

2
(1,6

6
(475

8
(2,9

7)
(10

(17)
(175

43)
(296

)
(501

78)
(849

Current Assets
Accounts Payable
Platform Partners Payable
Accrued Expenses & Other

(61)
34
96

3)
41
96

)
38
115

)
102
252
1,60

)
114
324
3,46

)
195
492
7,48

Current Liabilities
Deferred Revenue & Deposits

159
48
1,10

344
0
1,0

742
0
2,93

4
0
3,27

5
0
7,64

6
0
11,2

Cash Flow From Operation

52

53

(901

(51

(1,3

(1,7

(2,9

(4,0

7)

73)

01)
(135

13)
(180

75)
(287

(21) (69)
(45)
(2,3

(66)
-

)
-

)
-

)
-

(164

(208

(340

(16) (89)
(3,3 (67

(71)
(1,5

)
(2,0

)
(3,3

)
(4,7

10)

00)

00)

02)

Net Income
Accounts Receivable
Prepaid Expenses & Other

Cash Flow from Investment

Property and Equipment
Intangible Assets
Goodwill
Marketable Securities
Other Assets
Cash from Investing Activities
Cash Flow from Financing

96)

79)

4)

(119
Capital Lease Obligations

454 (76)
(250

Long-Term Debt
Other Liabilities

(94)

(92)

(6)

)
63

(61

1,73

5)
-

2,00

(69

(119

1)

(94)

(92)

(6)

(273

(31

1,33

1,15

4,25

6,54

3)

1,78

1,5

1,19

2,53

3,68

7,93

Opening Balance

5
(273

12
(31

9
1,33

4
1,15

5
4,25

6
6,54

Net Change in Cash

1,7

)
1,51

3)
1,1

5
2,53

1
3,68

1
7,93

5
14,4

85

99

81

Convertible Preferred Stock

Common Stock
Additional Paid-in Capital
Accumulated Other
Comprehensive Loss
Retained Earnings
Cash from Financing Activities

Net Change in Cash

Cash Balance

Closing Balance

D. WACC (Weighted Average Cost of Capital ), is one of the method to calculate the
firms overall cost of capital based on Ross(2008). Calculating WACC using cost
of debt, cost of equity, corporate tax (25%) and the proportion of debt & equity.
WACC = We x Re + Wd x Rd x (1-Tc)Where,
We = Weight of equity capital
Wd = Weight of debt capital
Re = Cost of equity
Rd = Cost of capital
Tc = Company Tax
Cost of Debt
The cost of debt is the effective rate that a company pays on its total debt.
As a company acquires debt through various bonds, loans and other forms of debt,
the cost of debt is a useful metric. It gives an idea as to the overall rate being paid
by the company to use debt financing. This measure is also useful because it gives
investors an idea as to the riskiness of the company compared with others. The
higher the cost of debt, the higher the risk for the investor.
Cost of debt (before tax) = Corporate Bond rate of companys bond rating.
Currently Facebook has no bonds.
Anticipating Facebook will receive an A bond rating from Standard and
Poors or Moody Facebooks current cost of debt = 5.10%
Current tax rate
2013 TTM = 41.46%
2013 TTM Facebook Inc. has averaged tax rate of 16.11%
10. Cost of Debt (After Tax) = (Cost of Debt Before Tax) (1 Tax Rate)
The effective rate that a company pays on its current debt after tax.
.051 x (1 .4146) = Cost of debt after tax
The cost of debt after tax for Facebook is 2.93%
Cost of Equity or R Equity = Risk Free Rate + Beta Equity (Average
Market Return Risk Free Rate)
The cost of equity is the return a firm theoretically pays to its equity investors (for
example, shareholders) to compensate for the risk they undertake by investing in
their company.
Risk Free Rate = U.S. 10-year bond = 2.92% (Bloomberg)
Average Market Return 1950 2013 = 7%
Beta = (Macro Axis) Facebooks Beta = 2.1
Risk Free Rate + Beta Equity (Average Market Return Risk Free Rate)
2.92 + 2.1 (7- 2.92)
2.92 + 2.1 x 4.08

 2.92 + 8.57 = 11.49%

Currently, Facebooks has a Cost of Equity or R Equity of 11.49% so investors
should expect to get a return of 11.49% per-year average over the long term on
their investment to compensate for the risk they undertake by investing in this
company.
Weighted Average Cost of Capital or WACC
The WACC calculation is a calculation of a companys cost of capital in which
each category of capital is equally weighted. All capital sources such as common
stock, preferred stock, bonds and all other long-term debt are included in this
calculation.
As the WACC of a firm increases, and the beta and rate of return on equity
increases, this is an indicator of a decrease in valuation and a higher risk. By
taking the weighted average, we can see how much interest the company has to
pay for every dollar it finances. For this calculation, you will need to know the
following listed below:
Tax Rate = 41.46%
Cost of Debt (before tax) or R debt = 5.10%
Cost of Equity or R equity = 11.49%
Debt (Total Liabilities) for 2013 TTM or D = $1.885 billion
Stock Price = $57.77 (Dec. 23rd, 2013)
Outstanding Shares = 2.44 billion
Equity = Stock price x Outstanding Shares or E = $140.959 billion
Debt + Equity or D+E = $142.844 billion
WACC = R = (1 Tax Rate) x R debt (D/D+E) + R equity (E/D+E)
(1 Tax Rate) x R debt (D/D+E) + R equity (E/D+E)
(1 .4146) x .051 x ($1.885 /$142.844) + .1149 ($140.959 /$142.844)
.5854 x .051 x .013 + .1149 x .9868
.0003 + .1134
= 11.37%
Based on the calculations above, we can conclude that Facebook pays 11.37% on
every dollar that it finances, or 11.37 cents on every dollar
E. Economic Value Added (EVA)
Economic Value Added of Facebook will be calculated with below formula:

=
=
=

Net sales
Operating expenses
Operating profit (EBIT)
Taxes
Net operating profit after tax (NOPAT
Capital charges (invested capital X cost of capital)
EVA

First we calculated RONA, which is NOPAT/ net assets, from the data
presented above, we get:
RONA= NOPAT/ net assets
2236/ (10549-2637)= 0.282. From here, we can calculate EVA, which is
(RONA WACC)* invested capital, so:
EVA= (0.282 0.1137)* invested capital, invested capital calculated with this
formula:
Invested capital= total debt and leases + total equity and equity
equivalentsnon-operating cash and investments, So back to EVA,
EVA= (0.282- 0.1137)* 4274= 0.1683*4274= 719.3142
Based on this calculation, EVA>0, so Facebook actually created value added.
3

Facebook Business Model Canvas

There are nine blocks in business model canvas, The component are :
a. Customers Segments
b. Value Propositions
c. Channels
d. Customers Relationships
e. Revenue Streams
f. Key Resources
g. Key Activities
h. Key Partnership
i. Cost Structure

Facebook Business Model Canvas

Key

Key Activities

Partnerships
Content
Partners (TV
Shows, Movies,
Music, News
Articles)

Platform
Development
Data Center
Operatins
Management

Key
Resources
Facebook
Platform
Servers
Technology
Infrastructure

Value
Propositions
Connect with
your friends,
Discover &
learn, Express
yourself
Reach,
Relevance,
Social Context,
Engagement
Personalized
and Social
Experiences,
Social
Distribution,
Payments

Customer
Relationships

Customer
Segments

Same-side
Network Effects
Cross-side
Network Effects

Internet Users
Advertisers
and Marketers
Developers

Channels
Website, Mobile
Apps
Facebook Ads,
Facebok Pages
Developer Tools
and APIs

Revenue
Streams

Cost
Structure
Data center Costs
General and Administrative
Marketing and Sales
Research and Development

Free
Ad Revenues
Payment Revenues

The Business Model

Business model is the mechanism by which a business intends to generate
revenue and profits. It is a summary of how a company plans to serve its
customers. It involves both strategy and implementation. It is the totality of:
How it will select its customers
How it defines and differentiates its product offerings
How it creates utility for its customers
How it acquires and keeps customers
How it goes to the market (promotion strategy and distribution strategy)
How it defines the tasks to be performed
How it configures its resources
How it captures profit
There are many different types of business models as some are more complex
than others depending on the service. A few examples of types of business models
are as follows:
The subscription business model
The razor and blades business model
The pyramid scheme business model
The multi-level marketing business model
The network effects business model
Facebook fits into the network effects business model, which was pretty
common in the dot-com boom of the late 1990s. This type of business model is
based on the network effect which causes a good or service to have a value to a
potential customer dependent on the number of customers already owning that
good or service. Facebook fits this model because the more registered users there
are on the site, the more useful the site is. In this paper I will discuss Facebooks
business model using the eight criteria above.
How it will select its customers
Facebooks selection of customers is a very important part of the companys
business model. Social networking sites have been on the rise in the last decade

and many are in existence today including MySpace, Friendster, and LiveJournal.
Most of these social networking sites are not very specific and have a variety of
users. This fact is what makes Facebooks selection of customers so important.
Zuckerberg developed a personal niche for his site in making it specifically for
high school (recently), college and university communites, primarily in the
United States.
How it defines and differentiates its product offerings
The second aspect of a business model is how the company defines and
differentiates its product offerings. One of the key elements to Facebooks success
is differentiation, particularly from the social networking giant, MySpace. What
makes a student with an existing MySpace account want to register with
Facebook? The answer to this question lies in how Facebook sets itself apart from
other social networking sites. Facebook is the only brand of these sites that is for
students and students only. Also, to narrow down the potential networks even
more, members are mostly restricted to viewing detailed information about
students only at their school. As a result of this, more intimate communities are
created based on the school. For example, when a UCSD student types
www.facebook.com into their browser and logs onto the site, the real url that they
are accessing is in fact http://ucsd.facebook.com/home.php. Facebooks features
are very similar to the features of MySpace. The major features include: profile,
friends, groups, messages, wall, and photos. The profile is was makes up the
users personal sites. Here they post information about themselves as well as a
photo. The friends feature is one of the major ways that students are able to
become connected through the site. Users can search the site and send friend
requests to other users to acknowledge online friendships. The other way that the
site connects students is through the groups feature. Students with particular
interests, views, or hobbies are able to form and join online groups. The messages
and wall features allow users to interact directly within the online community.
Messaging is a private way of contacting members, almost like e-mail. Also, as an
alternative to messaging, there is a poking feature, which is basically a way of

saying Whats up. The wall acts as a sort of message board and offers more
public communication between users. The recently added photos feature is part of
the users profile in which they can post photos of themselves and others for
people within their college to see.
How it creates utility for its customers
Michael Huston from the Arizona Daily Wildcat writes, If youre not on
Facebook.com by now, then youre either protesting it deliberately in an attempt
to avoid doing what everybody else is doing, or youre afraid that stalkers will use
it to come after you. At first it was simply a site to connect college students but
now it is becoming a staple in the college social scene. The utility that Facebook
creates for its customers is essential in creating traffic. Online social networking
companies like Friendster have failed in the past for being too one-dimensional
and unreal. Facebook was able to recognize these mistakes and capitalized greatly
in forming a very real online social network. In theory, the services provided by
these two companies are very similar. The difference is what makes the individual
keep coming back to the site. On Friendster you can browse through various
peoples profiles and add them as friends but the likelihood of you actually
meeting these online friends is very small. Facebook, on the other hand, is the
opposite. With the number of participating schools and users climbing, it is not
rare to see someone online prior to meeting them in person. Facebook is useful in
a variety of ways including:
Forming study groups
Finding roommates
Keeping in touch with friends at distant schools
Finding others with like interests
Keeping up with social events
Getting information on fraternities/sororities

How it acquires and keeps customers

Facebook is able to easily acquire and keep customers due to its increasing
popularity. The statistics are almost unbelievable:
5M+ registered users
coverage of 45% of US colleges (a total of 2,000 - representing 8M students)
80% penetration among students of colleges that are on the platform
10th most visited Internet site in the US
5.5B page/views a month (230M page/views a day)
8.5M unique visitors
signing 20,000 new users a day
Repeat usage: daily 70%, weekly 85%, monthly 93%
Creating a Facebook profile is slowly being integrated into the freshman
college registration process along with items like sending an official transcript,
signing a housing contract, registering for classes, etc. Lets face it, going into
college is a scary time socially, but Facebook makes the transition a lot easier.
Incoming freshmen can add their roommates and even get to know them
months before move-in weekend. Some freshmen are even able to build extensive
friend lists (networks) before college begins. Through groups and classes one can
be connected to thousands of students. Networking is very important in college
and Facebook helps students to establish these with little effort on their part.
Facebook acquires customers as students realize their personal need for online
networking, a need that is becoming more and more necessary everyday. When
students meet they often tell each other to facebook them as a means of furthering
a friendship. Someone without an account misses out on this completely.
Keeping the customers is a very easy task once they are on Facebook. Users
continue to visit the site to partake in one of the newest activities, facebooking.
Facebooking defined is the act of simply browsing though facebook.com with no
specific purpose. More specifically, the verb facebook (as in to facebook) is
used across campuses for the looking up of a certain individual and a) adding

him/her as a friend, b) sending him/her a message, c) poking him/her, or d)

writing on his/her wall. These features bring about major opportunities for the
communication that college students are looking for.
Most new users go through a period of Facebook addiction sometime in
their college career. The degree of which Facebook is used as a means of
communication requires that it be checked on a daily basis. Throughout the
course of the day one can get messaged, poked, or have their wall written on.
Also, with the new photos feature, one can get tagged in a picture by one of their
friends.

How it goes to the market (promotion strategy and distribution strategy)

Distribution Strategy
Zuckerbergs distribution strategy is the key element behind his idea, the internet.
Facebook provides a service that connects college students through a few clicks
of the mouse. This strategy is not new as its used by many social networking
sites. In todays busy world, people dont have the time and effort to put into
physical networking with others. Companies such as MySpace and Friendster use
this same idea which has been proven to be successful.
Promotion Strategy
Promotion hasnt been a major issue due to Facebooks instant success. Facebook
has not funded any major advertising campaigns in order to increase awareness
because the awareness was there from the start. Zuckerberg started Facebook as
an online directory of Harvard students and it was an instant hit. Within a month
Facebook was available at Columbia, Stanford, and Yale and by the summer it
was available at about thirty different universities. The promotion of the site has
been mostly by word of mouth, as current users rave to their friends about the site
and its many features. Publicity in the media has also helped the companys
promotion along. There have been a number of newspaper articles as well as
television interviews documenting the recent success story.

How it defines the tasks to be performed

The tasks to be performed were very simple from the beginning in creating
Facebook. Zuckerberg had a clear idea in his head of the service he wanted to
provide the user with. Essentially, it would be an online directory comprised of
college students for their use and benefit. Having been programming since the age
of ten, Zuckerberg was able to easily accomplish this task and took a few weeks
to set up a website that allowed users to interact. Through classes, groups,
interests, and friends the site notifies the user how he/she is connected. This
feeling of connection is very important because thats what the general population
of users are seeking. Another major task that Zuckerberg was faced with was
setting his social network site apart from the others. In order to demand traffic a
site must be unique in one way or another. This task was performed by making
the site exclusive to ones college, forming a more intimate community. Also,
Zuckerberg added a variety of features that the user could utilize while on the site
such as messaging and poking.
How it configures its resources
The major resources of Facebook are the servers that keep the site running despite
the heavy amounts of traffic. These servers are very essential because the services
and operations of Facebook depend solely on the website. A down server could
result in the loss of millions of page hits. With little funding at the beginning,
Zuckerberg was forced to keep Facebook relatively small because only so many
servers could be purchased and set up. However, the growing audience could not
be contained and in the fall of 2004, former Paypal CEO, Peter Thiel, invested
$500,000 to buy servers to help support the rapid growth. (Theil noted that this
particular investments was one of the best venture investments hed ever made.)
Recently, as of November 1, 2005, Facebook signed a multi-year contract with
web hosting provider and data center operator Terremark Worldwide to house
over 450 of its servers at their NAP West facility in Santa Clara, California.
Facebook is able to create a more secure and efficient network by co-locating its
servers, which is very important in the operations of the business.

With our increased market share, we need the NAP's state-of-the-art

connectivity, security, redundancy and scalability in order to continue to service
our users, says Mark Zuckerberg, founder of Facebook. The expansion of
Facebook at the NAP West facility means that we can deliver the high quality
services and guarantee uptime that our users demand.
How it captures profit
The big question behind Facebook and many other free online networking
sites is: how do they actually make money? The answer is mainly advertising.
Advertisements on Facebook are very valuable considering the amount of traffic
the site is able to generate. About 70% of its five million plus users log on the site
daily and these users are all between the ages of 18 and 24. The advertising
prospects are just too high for big companies to ignore.
Zuckerberg offers three different ways to advertise: banner ads, sponsored
groups, and text announcements. Apple has its own sponsored group called
Apple Students where it lists the hottest items, prices, and even gives away free
stuff. Electronic Arts and Geffen Records sponsor groups on the site as well. Text
announcements, which are more geared toward students who want to announce a
party or event, are sold regularly for $9-$15 and guarantee a certain number of
hits. Banner ads are easily sold to many major companies including the three
listed above and Tiffanys.
Conclusion for Business Model
Facebook has a very specific and strong business model that will bring the
company continued success in the future. The site is growing every day in many
categories and is drawing more and more attention. Major corporations are
seeking out the Harvard dropouts for a possible deal, but these guys are just
having fun for now. Their main concern is providing a useful service.

4. Conclusion and Recommendation

Today, the more businesses rely on Facebook, the less likely it is to fail. Zynga
has already built a company valued at more than $1 billion using Facebook as a
platform, and thousands of websites now use Facebook Connect for their login
systems. The toolbar and web-wide like button are the next phase; by providing
more distributed services, Facebook becomes invaluable.
Uniformity is the next right feature that stands Facebook out of others. Blue and
white on every page, red for notifications, not too many graphics and the overall
layout is neat and well spaced. Another, friendly user interface feature - no
background glitter that seem to run through the bloodstream of anyone who visits a
page, no annoying GIFs on comments, no annoying background music or anything
that can alienate users. So The interface in Facebook is a very simple one and the
design is plain and easy to use. This sets Facebook apart from the networking sites
that are cluttered with obsolete tools.
Facebooks foundation is so deep that it will be very difficult for it to fall now
and it has a lot of ways to extend, it is already a cloud application vendor, but the
weakness is in search tools and low integration with Google. However, Facebook
has ability to enable search features and can upgrage their inbox.
Facebook appeals to users and can be very addicting to people who have an
insatiable appetite to stay connected with friends and make new acquaintances. In
fact, some people report they rarely use email or IM tools anymore in their online
social communications anymore, relying almost entirely on Facebook for email,
chat, image and video sharing.
Facebook users prefer the social portal model versus having to log into AIM,
Yahoo Messenger, Gmail, Hotmail, Flickr, YouTube, MySpace, etc. Instead,
Facebook gives them a single alternative to all these applications, with one login
and interface to manage their online social interaction needs. This largely explains
the explosive growth Facebook continues to experience and why the company

reportedly invested more than $200 million in data center upgrades last year to keep
up with demand.

REFERENCES
http://en.wikipedia.org/wiki/Criticism_of_Facebook#Investigation_by_the_Iris
h_Data_Protection_Commissioner_2011.2F2012
http://techcrunch.com/2014/01/30/facebook-creative-labs/
http://en.wikipedia.org/wiki/Timeline_of_Facebook
http://www.marketwatch.com/investing/stock/fb/financials
http://en.wikipedia.org/wiki/Criticism_of_Facebook#Investigation_by_the_Iris
h_Data_Protection_Commissioner_2011.2F2012
http://en.wikipedia.org/wiki/Criticism_of_Facebook
http://www.dazeinfo.com/2014/01/06/top-5-countries-facebook-inc-fbcontribute-40-total-users-study/
http://www.information-age.com/technology/applications-anddevelopment/1689138/facebook-ipo-reveals-hacker-culture
http://business.wikinut.com/Analyses-of-Facebook-using-Porter-smodels/3thk07b2/
http://qz.com/142032/why-is-facebooks-tax-rate-so-much-higher-than-itscompetitors/
http://techcrunch.com/2014/04/16/facebook-will-be-unbundling-the-bigblue-app-through-its-creative-labs/

http://www.fortune.com/fortune/technology/articles/0,15114,1130217,00.html?promoid
=yahoo http://ucsd.facebook.com/adfaq.php
http://biz.yahoo.com/bw/051101/15106.html?.v=1
http://blog.softtechvc.com/2005/10/the_facebook_un.html
http://eduinsight.com/articles/facebook.html

http://en.wikipedia.org/wiki/Business_model

http://wildcat.arizona.edu/papers/98/221/03_1.html
http://www.clickz.com/news/article.php/3527336
http://news.com.com/Facebooks+Greek+drama/2100-1046_3-5895963.html
http://en.wikipedia.org/wiki/Facebook_%28website%29