Strategic Analysis of Facebook

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Strategic Analysis of Facebook

  1. 1. Facebook - Strategy Analysis (2004 - 2011) Presenter: Vishal
  2. 2. Table of ContentsEvolution - Social NetworksInsights, FootprintGrowth & Revenue SplitPlatforms & Emerging NetworksFacebook vs Google vs TelcoThreat to TelcosHorizontal Play – Skype AcquisitionFacebook Success vs Myspace FailureEnterprise Play
  3. 3. Social WebPerceptual Map Social High Web Willingness to Share Web Low Low Ability to Share High Source: The Social Practice - 2011
  4. 4. Social Networks Evolution 97 2000 2002 2004 2006 Six MiGente Friendster, Flickr, Piczo, Mixi, Windows Live,Degrees.com Six Degree Closes Skyblog Facebook, Twitter, Mychurch Hyes, Orkut 2003 2005 99 2001 Linkedin, Youtube, Live Journal, Cyworld, Myspace, Xanga, Blackplanet Ryze Last.fm, Hi5 Bebo, Ning, Yahoo!360 Source: HBR Facebook Platform 2010
  5. 5. Social Networks Perceptual Map High High Twitter Linkedin Knowledge Updates LinkedinProfessional Twitter FacebookLow Low Facebook Low Personal High Low Personal Updates High
  6. 6. FacebookInsights• Founded in 2004• 2000 Employees Ownership Pie• Market Value - $60B to $70B• 600 M users (3rd Largest Country)• 200 M users access via Mobile• 29 visits/month/user• 55 minutes/day• 55% Female Users (US)• Average Age – 28.2 years• 2nd Preferred way of sharing contentWhy Facebook• Friends 63%• Keep in Touch 59%• Social Life 37%• Guilty Pleasure 30% Microsoft – 1.6% Source: Wikipedia, Reface.me – Who Owns Facebook, ExactTarget, Fans & Followers Report
  7. 7. Facebook Virtual Place & Growth 2500 Sina Weibo 100 Revenue (Mill) Badoo 113 2000 Bebo 117 2000 Orkut 120 Vkontakte 135 Gmail 176.5 1500 Twitter 200 Habbo 203 1000Windows Mgr 330 775 Qzone 480 Facebook 600 500 Tencent QQ 636 280 150 Skype 663 52 0 0 500 1000 Active A/Cs (in Mill) 2006 2007 2008 2009 2010 Source: Wikipedia
  8. 8. FacebookRevenue Split Paid for Virtual Goods Brand Advertising Self Service Advertising Microsoft Advertising• Revenue is dominated by advertising & sponsorship (2009) Source: Stlpartners, Telco2.0 – Facing up to Facebook
  9. 9. Facebook Footprint Wall Contact Other Email &Year Photos Likes Name Picture Gender Birthday Friends Networks Post Info Data Chat20052011 Legend High Medium Low Source: Facebook InsideOut, 2010
  10. 10. PlatformsSocial, Mobile, Search Facebook iPhone/iPad/iTouch 622 M Users 130 M Users + 41% Y/Y + 103% Y/Y 550 K Apps 350 K Apps 500 M Downloads 10 B+ Downloads Google 972 M Users + 8% Y/Y Paid Clicks +18 Y/Y Source: TOP MOBILE INTERNET TRENDS , KPCB, 2011
  11. 11. PlatformsAPIs – Billion Club 13 billion API calls / day (May 2011) 10 billion API calls / month (January 2011) Over 260 billion objects stored in S3 (January 2011) 1.6 billion API-delivered stories / month (October 2010) 5 billion API calls / day (April 2010) 5 billion API calls / day (October 2009) 8 billion API calls / month (Q3 2009) 3 billion API calls / month (March 2009) Source: Open APIs -State of the Market, 2011, Glue Conference
  12. 12. 2 Sided Market Overview Revenue Revenue PLATFORMCost Cost Customers Customers Upstream Value Chain Downstream • Value moves in both direction from Left to Right and Right to Left • Marginal Revenue and Profit contribution is always increasing as user base grows, Network effect leads to infinite economies of scale (for information goods only) Source: Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
  13. 13. Facebook PlatformIntegration & Distribution Source: Facebook.com
  14. 14. Emerging NetworksInformation, Gaming, Commerce Twitter Zynga 253 M Users (Farmville on FB) + 85% Y/Y 130 M Active Users +15% Y/Y Groupon 51 M subscribers + 25x Y/Y Source: TOP MOBILE INTERNET TRENDS , KPCB, 2011
  15. 15. FacebookCommerce Image Source: F-commerce, Leveraging Facebook to develop – Barry Sweeney,2011
  16. 16. FacebookCommerce Image Source: http://www.socialmediaexaminer.com/facebook-credits/
  17. 17. Facebook Google• Users – Communication Mode • Users - Transaction Mode• Generating Demand • Fulfilling Demand• Avg Time Spent (week) – 7hrs 7 mins • Avg Time Spent (week) – 1hr 16 mins• Users 600M • Users – 972M• Rev/User - $3.3 US • Rev/User - $30.2 US• Avg Price and CTR are low • CTR – 1.5%, CPM/CPT - $2.5 CTR – 0.1%, CPM/CPT - $0.6 Source: Nielsen monthly time spent November 2010, Telco2.0 – Facing up to Facebook
  18. 18. FacebookThreat to Telcos Social Networks Communities Relationships Volume Conversations Telephony Calls RendezvousTelco• Communications as core business service, largely synchronous Peer-to-Peer (P2P) communication• Paid for by the end userFacebook• Social Networking (communication) as a core business service, largely asynchronous group comm.• Subsidised (free) to the end user and funded by advertisers• 200 M users on Mobile Source: Google, Microsoft.com, Cisco.com, Telco2research.com, STL Partners
  19. 19. Facebook 1st 9 Years Revenue Rev Mkt Cap Users Rev/User Value/User Company Value/Rev (Mill, USD) (Mill, USD) (in Mill) (USD) (USD) 30.3 Facebook 2,000 60,000 600 3.3 100 (x6 Google) Google 29,321 171,200 972 30.2 176.1 5.85 Vodafone 72,089 145,000 300 240.3 483.3 2.01Source: Wikipedia, Google Finance, Telco2.0 – Facing upto Facebook
  20. 20. FacebookHorizontal Play - SkypeSkype• Users - 663M, (only 8.8 M paid)• Rev - $860Mill (Y/Y 20%), Ops Profit 20.8 M, Net Loss (7M)• eBay – Bought in 2005 for 2.5B, sold 70% in 2009 for 2.75B• Collaboration - Others (Google & Cisco )Microsoft• Acquired Skype 2011 – 8.5B (cash)• Every PC to Mac, Linux, all flavors of Smart Phone (Strategic Shift)• Xbox to Office Rev Net Profit Rev/User Acquisition Company Users Value/Rev (Mill, USD) (Mill, USD) (USD) Price 663M Skype (2011) 860M (7 M) (8.8 M paid) 1.3 8.5B 9.9 Webex (2007) 380M 47 M 2.2M (paid) 172.7 3.2B 8.4 Source: Google, Microsoft.com, Cisco.com, Telco2research.com
  21. 21. MySpace vs Facebook Myspace Failure – Old Media Model • Identified an opportunity with Myspace (Social Media), but couldn’t leverage it • Turned out to be a losing bet, in discussions to sell for $100M Revenue Upstream Downstream Only 1 MYSPACE CustomersCost Customer Content Distribution (Advertisers) Platform (Subsidised) Reason • Applied Old Media Model • Locked in Advertisers (via Google Search) on Upstream Side, and let the Customers Create Content (primarily blogs). Didn’t let/opened Upstream Side to other Customers • Networks effects on Downstream side are not leveraged on Upstream side – leading deterioration in asset and momentum shifting towards other platform (Facebook) Source: Google, Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
  22. 22. MySpace vs Facebook Facebook Success – New Media Model Revenue Revenue Upstream Downstream Various FACEBOOK CustomersCost Cost Content Distribution Paid Data Customers Platform Research Revenue Reason • Applied New Media Model in a 2 a Sided Market • Opened Platform for various Upstream Customers – Hosted Content from various players, Ads, 3rd Party Application Developers • Opened Platform for various Downstream Customers – Market Research Companies • Networks effects on Downstream side are leveraged on Upstream side – built mass and momentum Source: Google, Strategies for 2 Sided Markets, Thomas Eisenmann, HBR
  23. 23. Competitive Growth Internet Companies – Information Goods • No Diseconomies of ScaleSource: http://blogs.wsj.com/venturecapital/2011/02/26/facebook-groupon-zynga-off-the-chart-revenue/
  24. 24. Enterprise PlaySocial Stack - Top Down Social Networks (Facebook, Twitter, Foursquare, Linkedin) Monitoring & Analytics (Brand Monitoring, Insights) Infrastructure Services Aggregation Publication (Identity Brokers, Aggregators) (Apps, Management) Social Platforms (Community, Collaboration, Blogging, Innovation, Social Commerce ) Source: Altimeter Group, Business Stack
  25. 25. Summary• Social Web has evolved and players like Facebook is driving the growth• Facebook’s current business model is not sustainable, need to integrate horizontally, (Skype missed opportunity)• Digital Goods company have enormous potential to grow leveraging 2 sided model, doesnt suffer from diseconomies of scale• Early days in Facebooks journey, long way to go
  26. 26. Questions World Map Thank you Source: Facebook World Map – All thingsD
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