1. the Perfect Startup
Five keys to their unprecedented success
LOGO
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faberNovel 2012 ••• 1
2. •••
A quick word from Stéphane Distinguin ( CEO – faberNovel )
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It is not about the IPO the entire world is
We all know Facebook. commenting on: an IPO is certainly not an
We all know Mark Zuckerberg. end, but a point on a startup trajectory.
These are the names. It’s all about perfection. Up to now, Facebook has
been the perfect startup, not because it has
We all know the figures, succeeded in everything, but because its has built
they are mind-blowing: more than itself step by step, in a very pragmatic way. There is
no miracle here: it is just a startup that has had an
900 million members for a current almost perfect stance towards every challenge it has
valuation of over 100 billion dollars. faced to date, and has built the most fascinating
innovation platform.
At first sight, we all knew Facebook Perfection is rarely encountered and even harder to
would be the biggest start up "after analyze… At faberNovel, as we do every year, and
Google", Mark Zuckerberg, the Social after Google, Apple and Amazon, we wanted to
Network hero, a juvenile CEO signing highlight what could be the formula behind Facebook's
roaring success. Is there a formula for perfection? We
autographs and striking the pose like would like to share our discoveries, our dissection of
one of the biggest rock stars of his this marvel just to make it more useful for all of you. I
generation. am not sure perfection will be achievable for all of us,
but it certainly is our best source of inspiration.
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faberNovel 2012 ••• 2
3. •••
This work was made for you to share, reuse, remix, rework…
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It is licensed under the Creative Commons BY-NC-SA license to allow for further
contributions by experts and users in the coming months.
You are free to share and remix/adapt the work.
You must cite this document:
faberNovel, Facebook: The Perfect Startup, May 2012.
You may not use this work for commercial purposes. You may distribute a modified
work under the same or similar license.
Why do we release this kind of work for free?
Our job is to help big organizations think and act like startups. And we
believe that this cannot be achieved without causing people to want to
innovate and explore new business models. Our ambition is to inspire you
by giving you the keys to understand new markets like Russia or successful
companies like Apple, Amazon… or Facebook.
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faberNovel 2012 ••• 3
4. •••
Facebook is quite a big 8 year old …
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billion
Likes & Comments
per day
million
Photos uploaded
per day
million user accounts
12.8% global market share!
Average
Time spent
by users in a month
Source: Facebook S-1, May 2012
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faberNovel 2012 ••• 4
5. •••
… with many characteristics of a giant .
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Instagram Snaptu Friendfeed
$1 billion $65 million $47.5million
(2012) (2011) (2009)
The largest tech IPO in history
$16 billion
raised on the day of the IPO
Which ranks its CEO among the TOP10 World’s Billionaires
Source: Based on information disclosed by Facebook, May 2012; Facebook’s IPO commented by Bloomberg
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faberNovel 2012 ••• 5
6. •••
Altough still a small company, relative to other tech giants
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Facebook’s Page Views = 10x Youtube’s but… Facebook’s Revenues = 10% Google’s
1 trillion $37b
100 billion $3.7b
26 years ld
average Facebook employee age
Source: Facebook, Google, Adplanner June 2011
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faberNovel 2012 ••• 6
7. •••
Its meteoric growth results in a remarkably high valuation per employee
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3500 employees $30 million valuation per employee
Obviously, they must be doing something right
Estimates: Fabernovel, based on a $100b valuation; Number of employees: Facebook, May 2012
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faberNovel 2012 ••• 7
8. We believe that
Facebook’s
amazing performance
was driven by excellency
in business management.
Facebook is remarkable not so much in its
product or usage, but in the way they
built themselves as a company,
from inception to maturity.
What’s Facebook story?
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faberNovel 2012 ••• 8
9. •••
Facebook isn’t the first social network in history
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• Created as an embryonic • Probably the first genuine • A reaction to Friendster
social community. social network • Chose an absolute freedom
• Bought by Yahoo in 1999 • Faced technical difficulties policy
for $3.57 billion. from 2004 to 2006 • Huge success among artists
• Yahoo turned the service • Lacked activity & content and celebrities
into free web hosting in for the users • Too much freedom
attempts to monetize it. • Chose a restrictive policy deteriorated the quality of
• Having lost the social (e.g. no pseudonym) the website
element, the service • Refused a $30 million • Lacked activity for the users
closed in 2009. buyout offer from Google • Acquired by News Corp. for
• Acquired in 2009 for $26 $580 million in 2005
million after its reboot • Sold for $35 million in 2011
to Specific Media
These three social networks were short-lived leaders.
Why would Facebook be different?
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faberNovel 2012 ••• 9
10. •••
Facebook managed to survive 3 classical challenges
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Focus Technology Policy
Facebook always kept the Facebook only experienced 3 Facebook has learned from the
social feature at the center of severe outages: mistakes of its predecessors,
the user-experience: • The most severe outage keeping a balance between
“Facebook’s mission is to Facebook faced was in 2010 freedom and control:
make the world more open for 2.5 hours • Allowing users to modify the
and connected.” • They experienced a few content
difficulties later in 2010, • Preventing users from
Facebook stayed focused on unveiling new pages modifying the interface
the “big idea”. • In early 2012, some • Allowing brands and artists
Facebook’s European users to create special pages
could not connect to the
platform for a few hours
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faberNovel 2012 ••• 10
11. •••
It has done so with a perfect scaling strategy
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Test Growth Consolidation
College Networks Gradual opening to the world Self-sustaining community
• Low-scale • Word-of-mouth extension (through • Improvement of existing features
• High-density invitations) • New features to maintain engagement
• High need to connect • New features that drive engagement
Build the platform Scale the platform Maintain the platform
2004-2006 2007-2010 Nowadays
Source: Quora, “What are some decisions taken by the Growth team at Facebook […]?”, answered by Andy Johns
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faberNovel 2012 ••• 11
12. •••
2006 breakthrough: The News Feed – Your friends ticker tape
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With the News Feed launched in 2006, Facebook managed to automate relevant content
creation… from friends’ activity.
The News Feed aggregates the user’s friends activity:
status updates, photos uploads, comments… The more
friends, the more content to explore.
As every webmarketer knows: fresh content is key to
generate stickiness.
Facebook’s News Feed concept goes even further:
providing user-centric content from his network, hence
tastes and interests.
News Feed gave a considerable competitive advantage
to Facebook in its battle against MySpace, because it
provides permanent user-centric content renewal.
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faberNovel 2012 ••• 12
13. •••
Facebook motto : “Product First”, but with business sense
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Mark Zuckerberg
"Facebook was not originally created to be a company. It
was built to accomplish a social mission - to make the
world more open and connected"
But Zuckerberg quickly understood that business perspective
benefits the overall management:
• Straightforward and quantifiable objectives
• Money can assemble the best team of developers
In order to enforce these objectives, he hired Sheryl
Sandberg as COO in 2008.
Zuckerberg met Sandberg in 2007, at a Christmas party, while
she was still Vice President of Online Sales and Operations
at Google.
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faberNovel 2012 ••• 13
14. •••
With 56.6% of voting rights, M. Zuckerberg can keep the shareholders at bay
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Here’s an enlightening extract from Facebook S-1:
“Our CEO has control over key decision making as a result of his control of a majority of our voting
stock. As a stockholder, even a controlling stockholder, Mr. Zuckerberg is entitled to vote his shares,[…], in
his own interests, which may not always be in the interests of our stockholders generally. “
Source: Facebook S-1
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faberNovel 2012 ••• 14
15. •••
Zuckerberg even refused several opportunities to sell out
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“I admire Mark Zuckerberg for not selling out, for wanting to
make a company. I admire that a lot.”
Steve Jobs (1955-2011)
Revenue
$3.7 billion
$300 million
invested
by DST Global
$15 billion to postpone IPO
acquisition offer
$10 million
by Microsoft
acquisition offer
by Friendster
$1.6 billion
acquisition offer
by Yahoo
Revenue
Revenue $777 million
$382,000
Source: Steve Jobs quoted in Walter Isaacson biography; acquisitions offers reported by TechCrunch
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faberNovel 2012 ••• 15
16. •••
To sum up, Facebook managed to tackle one of the most common tensions in
any startup: Product vs. Business
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Product Business
vs.
Many startups struggle or fail when they find themselves
prioritizing one over the second. Facebook seems to have
passed this test quite brilliantly.
What is fascinating with Facebook ?
The way it deals with most startups’ challenges.
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faberNovel 2012 ••• 16
17. •••
Facebook’s excellency lies in managing classical startup challenges
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Technology &
User Experience Business model exploration Business & Ecosystem
Disruption Long term vision
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faberNovel 2012 ••• 17
19. •••
Facebook’s platform is both a best practice in user-centric design…
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Customizable appearance thanks to
new Cover Picture
Timeline featuring the user’s story, with
milestones and events.
Engaging content thanks to smart
display
Facebook New Timeline, released in 2011,
replaced “The Wall”
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faberNovel 2012 ••• 19
20. •••
… and technical wizardry
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Visual aggregation of numerous
sources of content
Third-party apps integration
Action links to out-of-platform apps
and software
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faberNovel 2012 ••• 20
21. •••
The result let people and brands tell their story in a way that is engaging and new
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faberNovel 2012 ••• 21
22. •••
Facebook accomplishes all of this at a breakneck, startup pace
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A new version of Facebook million
is released every Tuesday to users!
= 12,000 modifications per month
More than 1,000 developers deliver code to be released each week, most of the
time small iterations… sometimes completely new features.
Facebook manages to do this with a few simple rules:
#1 #2 #3
Developers are
“Move Fast and
individually responsible “Mark is always right”
Break Things”
for the code they write.
Source: Arstechnica.com, A behind-the-scenes look at Facebook release engineering, April 2012; Facebook Developer Garage, Paris, April 2012
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faberNovel 2012 ••• 22
23. •••
The key to Facebook’s agility: its testing process
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Facebook teams’ tools prove there’s no need to be sophisticated to be efficient. They
work with hacker tools, such as: IRC chat (a geek instant messaging system) and P2P file-
sharing technology (basically content piracy tools) to release Facebook each week!
Source: Arstechnica.com, A behind-the-scenes look at Facebook release engineering, April 2012; Facebook Developer Garage, Paris, April 2012
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faberNovel 2012 ••• 23
24. •••
Acting like a startup is not just a question of process : it’s a question of culture
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Two atypical leaders….
Mark Zuckerberg, CEO Sheryl Sandberg, COO
The Genius who hacked into Named in the top 100 most
Harvard’s security network to influential people in the world,
create the first version of and still leaving work at 5:30
Facebook at only 20. everyday to pick-up her children
at school.
… managing an army of highly-talented youngsters
Avada Kedavra, Expecto Facebook average
Patronum, Alohomora employee is 26 years-old
Names of Facebook’ HQ meeting By comparison, IBM’s average
rooms, inspired by Harry Potter magic employee is 44 year old…
spells
Source: Mashable
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faberNovel 2012 ••• 24
25. •••
When it comes to new features, Facebook takes a pragmatic approach
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Customer feedback Fail fast, fail often Constant improvement
New News Feed Deals Groups
In 2011, Facebook introduced a new With Facebook Deals, the engineering Through analytics, Facebook
News Feed which presented “Top team faced a lack of traction: the discovered that Groups were
Stories” first. Despite the business product wasn’t used enough to justify it cannibalizing a large portion of
opportunity offered by this new to continue. They simply shut the their new Pages.
feature, Zuckerberg decided to service down. They decided to improve their Groups
remove it and set up the “latest to meet the genuine objective of the
updates first” as demanded by the feature, differentiating it from User
vast majority of users. Pages.
At Facebook, modifications or removals are not seen as failures: everything is constantly tested and
modified. It is a never ending beta, with high-quality user-experience.
Source: Facebook Blog
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faberNovel 2012 ••• 25
26. •••
Facebook’s main asset is the map generated by users data : the Social Graph
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Women
Men
The Social Graph is in fact the digital map of real-life connections and interactions between users.
Facebook stores more than 100 Petabytes of user data. That’s 2x the size of the entire written works of
mankind (from the beginning of recorded history, in all languages).
In order to enrich this database, Facebook opened its Social Graph to third-party developers and app
editors.
Source: Facebook S-1
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faberNovel 2012 ••• 26
27. •••
Facebook opened its data to third-party developers with an API: Open Graph
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Open Graph
Open Graph is an API provided by Facebook. With users’ authorization, third-party
developers can access users’ data or publish new data on user profiles.
What’s an API? It is an Application Programming Interface, basically it is an interface through which software
components communicate with each other.
Access Publish & Access
Access user’s data Publish rich actions and objects
with Facebook Connect in users’ timelines with Open
Graph 2.0
Now, users can like but also:
listen, watch, read, cook…
Publish
Publish
Include links into
status updates Publish likes in users’ timelines
with Open Graph 1.0
2008 2010 2012
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faberNovel 2012 ••• 27
28. •••
Analyzing this graph with algorithms creates the Edge Rank
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The Edge Rank is a score given to a piece of content for every user, depending on its interests.
Whether a particular content will be displayed or not in the News Feed of a user will depend on its Edge Rank.
Friend 1 The Edge It doesn’t
doesn’t like Rank of the appear on
post is low his News
for Friend 1 Feed
User A
posts
something
about
on his Timeline The Edge It appears
Friend 2
likes Rank of the on his
post is high News Feed
for Friend 2
It is an major improvement of the News Feed, increasing content relevancy for each user.
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faberNovel 2012 ••• 28
29. •••
Before going further, let’s review some key Facebook concepts
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News Feed Timeline Social Graph
It’s the user’s Facebook It’s the profile page of every I t ’s t h e u s e r s ’ d a t a
home page which user. It displays a timeline accumulated by
displays the user ’s o n w h i c h a r e Facebook on its
network activity: status chronologically placed the platform. It can be
updates, photos main events of his social visualized as a social
uploaded, links shared… life. map if each element is
put into its context.
Open Graph Edge Rank
It’s Facebook’s API that It’s the relevancy coefficient
enables any third-party calculated on content shared
developer to connect to on Facebook’s platform. This
Facebook’s database and relevancy is calculated for
access the Social Graph each piece of content
(with Authorization) to read relatively to every user.
it and/or write new data.
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faberNovel 2012 ••• 29
30. •••
2. Business Model exploration
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faberNovel 2012 ••• 30
31. •••
Facebook’s key figures
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million users users connecting every day
million million
Pages apps
in revenues in 2011
[Over $4 per user per year]
In 2009, Facebook was profitable for the first time.
In 2011 it generated $1b profit !
[$1 per user per year]
Source: Facebook S-1, May 2012
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faberNovel 2012 ••• 31
32. •••
Facebook’s actual business model is mainly advertising
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In 2011 it generated
billion
in revenue,
for $1b profit!
billion
Advertising
+17% of average
growth per quarter.
million Sale
of Facebook
Credits
+89% of average
growth per quarter.
Source: Facebook S-1, May 2012
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faberNovel 2012 ••• 32
33. •••
An advertising-based business model inspired by Google’s
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Google implements CPC
Google revenues
increase x7 from
2002 to 2004
CPM advertising era Performance based advertising business
Inherited from Print, TV & Radio advertising models are born
2008
2002
Performance based advertising market
gets larger than CPM advertising
CPM: Cost-per-Mille CPC: Cost-per-Click
The Advertiser buys space to the Media Sales The Advertiser negotiates the price of one click-
Agency for a thousand prints of the ad. through on its ad with the Media Sales service of
the platform.
This is usually display advertising. This is performance advertising.
Source: Google
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faberNovel 2012 ••• 33
34. •••
How Facebook tried to replicate Google’s formula… to find out it wasn’t working
for them
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Facebook tried to replicate Google’s high-value proposition: large
traffic, targeting and performance driven by search context, and
tools for advertisers.
Facebook offered two types of advertising: CPM and CPC.
Both were placed on the same spot on the right bank of the page.
Traffic: Performance: Targeting: Tools:
Facebook is the most Facebook enhances Facebook uses the Facebook sets up its
time-consuming action by introducing data provided by own advertising
website with 8h18 rich ads, with a Title, users. It supposedly platform with all the
per user per month, Picture, and Text. provides a 90% targeting options.
and 1 trillion PV. accuracy.
The average click-through rate in 2010 proved Facebook’s advertising weakness :
Google Traditional banner advertising Facebook
Source: WordStream, 2010
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faberNovel 2012 ••• 34
35. •••
And yet, Facebook has generated a lot of money out of its advertising
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Revenue from advertising:
Q4 2011
With the average user spending 8
hours and 18 minutes a month on
Facebook, there is potential for much,
million $ increase YoY
much more.
Revenue per minute of user activity (Q4 2011)
Source: Facebook S-1, May 2012; Estimates Fabernovel
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faberNovel 2012 ••• 35
36. •••
So Facebook decided to do what it is best at
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Facebook
invents
SOCIAL
advertising
And extends its platform philosophy
to its monetization strategy.
It is neither an epiphany nor a direct strategy:
it has been implemented
Facebook-style, through small iterations.
Let’s see how.
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faberNovel 2012 ••• 36
37. •••
A critical notion to understand: Facebook is not a social network…
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The network is how each person is related to another.
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faberNovel 2012 ••• 37
38. •••
… it is a social media
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Facebook is also a digital content exchange platform of our social network.
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faberNovel 2012 ••• 38
39. •••
A simple feature led to a whole new social thinking strategy
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In 2009, Facebook introduced the “Like” action
The “Like” feature generated so much traction that Facebook
was eager to implement it everywhere.
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faberNovel 2012 ••• 39
40. •••
Applied to brands, the like button developed the social graph even further
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#
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faberNovel 2012 ••• 40
41. •••
Applied to third-party content, it improved social discovery
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#
In one-click on any type of content, users could recommend the content they
stumbled upon to their friends. With this feature, Facebook deeply evolved:
News about user’s Content sharing
social network (articles, videos,…)
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faberNovel 2012 ••• 41
42. •••
Facebook’s Like had become a real economy
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#
In 2011… More than There were Average Like User
years old
million websites million
average amount of friends
had integrated the “likes” a day
Like button
more clicks on external links
A few examples:
On Gawker.com On NHL.com On NBA.com
Facebook integration Facebook visitors are Facebook was #2
increased traffic by 200% reading 92% more articles referral source.
Source: Facebook, 2011
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faberNovel 2012 ••• 42
43. •••
Focus on: the Viral Loop
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#
*139 is the average size of Facebook users’ networks, Source: Facebook S-1
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faberNovel 2012 ••• 43
44. •••
Facebook decided to look for new interactions that could strengthen and qualify
this relationship with brands
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#
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faberNovel 2012 ••• 44
45. •••
With its new version of Open Graph, Facebook is able to qualify the actions of its
users more precisely
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#
2012
Facebook now has a granular view of how its users are related to brands, products, services…
Case Study: Spotify
Spotify was one of the first to set the example, at f8 Example:
conference* in 2011.
How did it use the new Open Graph features?
User’s activity on Spotify is recorded and published on
Facebook. The action is defined as “listening” and both the song
and the artist are identified.
* The f8 conference is the annual meeting of Facebook developers, similar to Apple’s WWDC
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faberNovel 2012 ••• 45
46. •••
How powerful is this relationship exactly? We asked Dailymotion
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#
Dailymotion is YouTube’s main competitor. They saw
the potential of Open Graph at the f8 Conference in
September 2011.
After f8, technical teams at Dailymotion were granted a direct access to Facebook Tech Support in order to
integrate Open Graph publications on their service.
+10% in 4 months
with Open Graph
million million
video views per day video views per day
Though beneficial for Dailymotion, they didn’t Dailymotion worked with Facebook to improve
really enjoy it at first: many users complained the user experience: implementing Privacy
that it was too invasive and spammed their buttons (turn off Open Graph publications) on
News Feed. their video, and aggregating the publications
on Facebook’s walls to avoid spam.
Source: Dailymotion
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faberNovel 2012 ••• 46
47. •••
Facebook now monetizes this Viral Loop effect with Sponsored Stories
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#
Sponsored stories – January 2012
With Sponsored Stories, Facebook introduces digital word of mouth marketing.
Brands can now amplify the Viral Loop effect by purchasing impressions of
Branded Activities on targeted users.
Different types of branded activities:
Likes OpenGraph publications Check-ins
(Mark likes Starbucks) (Mark drank a Cappuccino at Starbucks) (Mark is at Starbucks)
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faberNovel 2012 ••• 47
48. •••
Sponsored Stories: how does it work exactly? Case study, Starbucks
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#
Reach among Starbucks fans with
Everyday, Starbucks gets tagged in Sponsored Stories:
Branded Activities 75%
(without having to pay for it)
Here, Sheryl just checked-in with one of
her friends.
Depending on on this
Depending this
update’s Edge Rank,
update’s Edge Rank, Sponsored
thethe publication will
publication will
appear in in friends’
appear friends’
News Feeds.
News Feeds.
Reach among Starbucks fans
without Sponsored Stories:
16%
The story appears on Sheryl friends’ News feed whose
profiles match Starbucks’s targeting.
Around $0.36 CPM in the US
(source SocialBakers.com)
With Sponsored Stories, Starbucks can make sure the story will
appear on Sheryl friends’ News feed. Starbucks pays to boost its
Edge Rank towards targeted profiles.
Source: Facebook
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faberNovel 2012 ••• 48
49. •••
It all sums up to two well-known webmarketing concepts
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#
Being visible Paying to increase your visibility
Integrating with Facebook platform will Buying Sponsored Stories will guarantee
make your content visible by Facebook your content to reach a maximum number of
users. users.
e.g. through Like, Facebook Connect, or
Open Graph. Equivalent in search marketing: Search
Engine Marketing (SEM).
Providing engaging content will help you
gain visibility.
Equivalent in search marketing: Search
Engine Optimization (SEO).
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faberNovel 2012 ••• 49
50. •••
But with word of mouth marketing, the whole concept of targeting changes
dramatically
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#
New target:
engagement
Ambassadors
Brands now have to seek their fans’ engagement to turn them into brand
ambassadors.
They then can target fans’ friends while sparking off your fans’ engagement.
It’s a win-win situation for Facebook: it delegates a part of the targeting to its users,
while improving the overall quality and relevancy of content shared by brands.
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faberNovel 2012 ••• 50
51. •••
In order to enable its social adv. strategy, Facebook created two special forces
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#
Technology Marketing
Facebook Partner Developers Facebook Studios
They work with high-potential partners to They promote how-tos and best-practices in
help them integrate new social features. this new field of “social marketing”.
Even though it is a high-value service, it is They will also deliver “facebook studio
free! Awards” to the best players in the field.
Their job can be compared to Evangelist,
Business Developer, Developer, Engineer.
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faberNovel 2012 ••• 51
53. •••
The Facebook ecosystem: an incredible source of economic value
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#
Facebook is at the core of a large, new economic ecosystem: apps and websites
built on or integrated with Facebook, media consulting and advertising agencies,
community managers…
According to Deloitte, According to University of Maryland
Facebook’s positive impact researchers Facebook’s impact on the
on European economy is American economy is
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faberNovel 2012 ••• 53
54. •••
Two levels of dependence exist in Facebook’s ecosystem
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#
Both are considered by Facebook as content providers.
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faberNovel 2012 ••• 54
55. •••
At the heart of the Facebook Ecosystem: Facebook Platform
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#
Facebook was created as a platform from the beginning…
The story goes that Zuckerberg, having envisioned a platform
model for Facebook, met Bill Gates through Harvard’s network.
Gates shared with Zuckerberg his vision of the best platform...
which he followed.
In 8 years, Facebook has built one of the biggest platforms in the world:
The largest gaming platform in the world:
million
apps More daily players than XBOX+PlayStation
+Wii+Gameboy altogether
Source: David Kirkpatrick, The Facebook Effect; Facebook
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faberNovel 2012 ••• 55
56. •••
Facebook’s platform is built on three main tools
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#
Facebook Platform: a set of tools to enable developers to leverage the power of social.
Timeline Apps Canvas Apps Social Plug-ins
Timeline apps let users Canvas Apps are the “traditional” Social plug-ins are code
enhance their timeline with Facebook Apps that run inside elements that developers can
content coming from third-party Facebook. embed in their websites or
apps. Ex: Zynga (Farmville) and many mobile applications to implement
Ex: The Spotify Timeline App other gaming apps. some of Facebook’s most
will automatically post wrap-ups important functionalities: the Like
of what you’ve been listening button, the Facebook Connect
recently. button, the Facebook comment
module, etc.
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faberNovel 2012 ••• 56
57. •••
Facebook’s stance towards its ecosystem is dual
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#
Openness Control
Facebook Plaform is genuinely open Facebook keeps control on its platform
without the need to ask for Facebook’s and its product.
validation or permission of use.
Facebook has never hesitated to roll out
Facebook is dependent on the success big changes in its functionalities even
of its partners : the more users interact though it harmed a certain number of
with apps or social plug-ins, the higher its partners.
Facebook’s activity.
Facebook Credits is a good example: it has been developed as a tool for developers to
simplify their payment process, but Facebook takes a 30% cut and has forced them to
use this payment system on their platform since 2010.
To keep users from being constantly spammed with Zynga games stories in their
newsfeed, Facebook decided to display these stories only to users who actually play
Zynga games.
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faberNovel 2012 ••• 57
58. •••
Case Study: Zynga, a company born of Facebook’s ecosystem
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#
Zynga is the main social-games producer on 12%
Facebook. They created hit-games such as: FarmVille, Zynga accounts for 12%
Café World, FishVille, Texas Hold’em Poker, Mafia of Facebook’s revenue
Wars… they recently bought OMGPOP, Draw
Something’s creators.
Facebook accounts for
95%
95% of Zynga’s revenue
($600M)
Zynga launched its own web
platform using Facebook
Credits
Launch of the Facebook Zynga agreed to sign
Platform and birth of Zynga, a 5-year partnership
End of 2011 :
a company dedicated to contract benefiting
Zynga launched
developing gaming Facebook mostly Facebook
CityVille on
apps Google+: Zynga
hopes it is the first
Zynga raised $1B in its
IPO (biggest tech IPO step towards less
since Google’s) dependency on
at a $7B valuation Facebook
21,7M players 34,8M players 3,5M players
Dec 2009 : 60M Monthly Active Users Feb 2012 : 240M Monthly Active Users
Source: Zynga; Appdata
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faberNovel 2012 ••• 58
59. •••
Facebook’s ecosystem is outsourced growth
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#
For Facebook, growth is not about money, growth is calculated by the amount
of content available on their platform.
Organic growth External growth
Facebook benefits from the Facebook always keeps an eye on
addition of content coming from high-potential teams building state-of-
third-party apps integrating into the-art social applications that could
Facebook. improve the product.
API Business Acqui-hires
By opening its platform to third-party Facebook already made 24
developers Facebook virtually acquisitions within its ecosystem.
increases its content production
without bearing the costs. Examples:
Gowalla
Examples: Its team implemented Facebook Places
Legal issues and technical costs for
streaming music or video.
Friendfeed
Its team improved the News Feed
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faberNovel 2012 ••• 59
61. •••
With mobile, the game’s rules are changing
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#
Smartphone penetration Tablet penetration
(US - March 2012) (US – April 2012)
With a growing penetration of mobile devices around the world, web-based
companies such as Facebook are facing a critical challenge.
Mobile will be the next interface for businesses to reach their audience.
Facebook is a web-based company, that now has to be a new entrant into
mobile.
As with every new entrant, it had to pick a strategy:
Build or Partner or Buy
Source: comScore, IPSOS
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faberNovel 2012 ••• 61
62. •••
With all its features, Facebook could have been an excellent mobile OS*
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#
Everything in Facebook could be translated to a mobile app.
*Operating System
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faberNovel 2012 ••• 62
63. •••
But it’s a bit too late for Facebook to conquer the mobile market from the top…
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#
OS shares (US) March 2012
For Facebook, building a proprietary mobile OS
would mean:
Spending too much time…
You don’t build a mobile OS as quickly as you update
your platform.
… on a sector they don’t know…
Mobile sector means dealing with phone builders and
carriers. Smartphones sold (world) Q1 2012
… with no chance of large success.
The market is now well established and blocked by the
major phone builders and OS.
Facebook can’t replicate its web success
on mobile.
Source: comScore, IDC
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faberNovel 2012 ••• 63
64. •••
… and Facebook failed to build strong partnerships with existing players
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#
iOS and Android represent 80% of the market, and they are almost closed to Facebook.
HTC Salsa HTC Chacha
Apple chose Twitter for Photo Sharing On Android, Facebook integration is
on iOS limited to HTC’s Facebook button
Apple decided to integrate Twitter instead of On Android, Facebook faces another problem:
Facebook in iOS, following heated negotiations atomization. It would have to partner with every
regarding the integration of Facebook Credits single Android constructor, and implement
inside Facebook’s App. (this eventually didn’t Facebook on every single mobile, for each version
happen, and Facebook had to go with Apple of Android.
In-App purchases)
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faberNovel 2012 ••• 64
65. •••
So Facebook is just an app on mobile…
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#
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faberNovel 2012 ••• 65
66. •••
… and it is a completely different perspective
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#
Web Mobile
vs.
Facebook’s mobile app cannot provide the same level of functionalities integration as the web version.
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faberNovel 2012 ••• 66
67. •••
On mobile, alternatives have diluted Facebook’s user engagement
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#
Facebook decided to focus on the expansion of the platform to all the mobile devices,
rather than trying to improve the quality of its apps on main devices.
So, in its effort to reach every single user, Facebook lost the hype.
Facebook emblematic features are challenged by “cooler” or more convenient
apps.
In-App Purchase News Feed
Credits New York Times
Check-ins Foursquare Instagram
Photos
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faberNovel 2012 ••• 67
68. •••
Facebook bought Instagram to get back some of its lost hype
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#
Three reasons why Facebook had to buy Instagram, even for $1 billion:
Buy an attractive Integrate the Instagram Call dibs on Instagram
point of entry experience further into Twitter was also interested in
Photo-sharing is an Facebook Instagram and had already placed
essential element on an offer for its buyout. Facebook
mobile, and Instagram Even when shared on Facebook, had to act fast.
managed to create a the level of integration wasn’t
Facebook-like level of beneficial enough for Facebook.
engagement.
A quite simple product:
take photo, apply funny filter, share.
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faberNovel 2012 ••• 68
