Facebook Customer Growth Strategy by Mark Allen Rabago, University of the Philippines Strategic Management

1. Facebook’s Customer
Growth Strategy
Mark Allen N. Rabago
BA 190 - Strategic Management
University of the Philippines
Prof. Mita Angela M. Dimalanta

2. How is Facebook currently
performing?
 Globally popular social networking site
 Founded at 2004 by Mark Zuckerberg and his colleagues
 2012 end-of-year revenue = more than $5 billion
 2015 end-of-year revenue = $17.928 billion
 Number of active users in 2012 = 1.1 billion
 Number of active users as of June 2016 = 1.71 billion
 Stock price at IPO = $38
 As of yesterday, stock price = $128

3. Facebook’s focus on customer
growth
 IPO only happened in May 2012
 Investments from other companies facilitated growth
 $240 million, Microsoft 2007
 $200 million, Russian company 2009
 Managers weren’t pressured to produce too much profits or
revenues
 More users first, revenues later
 Diverse customers, 70% of users come from outside of the US

4. Myspace didn’t stand a chance
 Launched a year earlier than Facebook
 Acquired by Newscorp (partly publicly owned) in 2005
 Loss of management control
 Too focused on revenue and profit generation
 Focused on specific ad-heavy markets (US, UK, etc.)
 Became reliant to the stability of those markets
 Highly affected by economic crises

5. Hallmarks of good and bad strategy
 Grandiose statements are not strategy
 Vision: People use Facebook to stay connected with friends
and family, to discover what’s going on in the world, and to
share and express what matters to them.
 Mission: to give people the power to share and make the
world more open and connected
 A failure to face a competitive challenge is not strategy
 Overcoming the first-mover advantage of Myspace
 Tactical tools are not strategy
 Profitability and revenue were ordinary at the beginning

6. Recommended Courses of Action
 Be cautious of the exponential development of technology
 Facebook platform could go obsolete at any time, it needs to be
able to adapt accordingly to new mediums (e.g. mobile)
 Keep pursuing a global strategy in acquiring customers
(sustain this competitive advantage)
 Reap what they have sown for so long
 Extremely large consumer base

7. Why is Facebook the number one social media company,
and not Myspace which enjoyed a first-mover advantage?
 Managers in Facebook were not pressured to produce too much profits and
revenues as compared to Myspace (after it became a Newscorp subsidiary).
This led to conflict of whether to focus on making more customers or to focus
on making more money. Myspace focused on the latter and Facebook focused
on the former. This “customer growth strategy” of Facebook is what makes it
the number one social company in the world.
 Since Newscorp was partly publicly owned, Facebook was significantly more
privately owned. Thus, Facebook greatly benefitted from advantages of
private ownership. These advantages include less problems in terms of
principal agency (conflict between managers and owners) because Facebook
was managed by the team of Zuckerberg (which were all part owners).

8. Given the hallmarks of good and bad strategy, do you
think Facebook has a good strategy? Why or why not?
Facebook does have a good strategy because they were not able to take into consideration the three basic hallmarks.
This opinion is based three bullets, which are hallmarks of good and bad strategy :
 Grandiose statements are not strategy
Statements such as “to be number one” is not a strategy. Vision and mission statements and objectives stated by the
organization which include this line is not a good strategy because it has no specific direction on achieving this goal. The
vision and mission of Facebook, as of now, are specific and have direction. Both of them are focused on giving the people
power to communicate and connecting people around the world. Which is why they started with their “customer growth
strategy.”
 Tactical tools are not strategy
Tactical tools are only meant to assist in making strategies, they are not to be mistaken as strategies themselves.
Measure of performance and achievement of these, are not good strategies. Profitability and revenue measures are not
strategies and strategies should not revolve around them. This was the mistake of Myspace, which, as compared to
Facebook focused on making its customer base grow.
 A failure to face a competitive challenge is not strategy
Ignoring a competitive challenge that affects you is a bad strategy (and that a bad strategy is not a strategy at all).
In formulating strategies, we must focus on the competitive challenges we face in order to make strategies that will benefit
us. Facebook was able to face the competitive challenge of Myspace having the first-mover advantage, as such, they
became successful.

9. The first step in creating a good strategy is to diagnose the
competitive challenge. What do you believe is Facebook’s
number one competitive challenge?
 The competitive challenge must be properly addressed in formulating
strategies. Facebook’s main competitive challenge before, was the first-mover
advantage of Myspace because there were already many Myspace users when
Facebook was just starting. By focusing on this intensely,Facebook grew its
customer base that it was able to overcome this challenge. This challenge
turned into its competitive advantage in the long run.
 As of the moment, Facebook’s number one competitive challenge is
maintaining its competitive advantage of having such a large customer base.
Without this edge of Facebook over its competitors, it would be hard-pressed
to survive, as it gets its money from this large number of users. Maintaining
this influence it holds in the cyberspace is its greatest competitive challenge
to date.

10. What top three recommendations would you give
Mr. Zuckerberg? Why? Support your arguments.
 Be cautious of the exponential growth, development, and obsolescence of
technology. The Facebook platform (which was first browsers on computers,
now apps in smartphones) could go obsolete any time. Facebook needs to be
able to adapt accordingly to new medium in the distribution of the service
they provide, especially since what they offer are highly technology
augmented.
 Start focusing more on sustaining large number of users they have, and less on
making that number grow. By doing this, they will be able to establish more
loyal customers who stay active on their site.
 Reap what they have sown for so long. Their extremely large customer base
has a lot of opportunities yet to be explored. Since social networking is now
highly integrated in the lives of many people, Facebook needs to seize the
many opportunities that exist in the sheer number of users they have online.

11. Thanks for listening!
Add me: Allen Rabago

12. References
 Rothaermel, Frank T. Strategic Management: Concepts & Cases. New York:
McGraw-Hill Irwin, 2013. Print.
 https://www.bamsec.com/filing/132680116000043?cik=1326801 retrieved 16
September 2016
 http://www.businessinsider.com/how-facebook-was-founded-2010-3#we-can-
talk-about-that-after-i-get-all-the-basic-functionality-up-tomorrow-night-1
retrieved 16 September 2016
 http://www.forbes.com/2006/09/11/facebook-opens-up-
cx_rr_0911facebook.html retrieved 16 September 2016