A STUDY ON CUSTOMER PREFERENCES TOWARDS ONLINE GROCERY SHOPPING IN BANGALORE ...RAMESH CHAVAN
a study on customer preferences towards online grocery shopping in Bangalore city, this project is related to online shopping and study the customer attitude towards online grocery shopping.
A Study on Customer Satisfaction towards Online Shopping in Filpkart in Coimb...ijtsrd
Flipkart are one of the leading online shopping websites in India. In this paper an attempt has been made to find customers satisfaction towards and flipkart. A sample of 50respondent's were conveniently selected from Coimbatore District. The findings were analyzed using simple percentage analysis, ranking test. Findings reveal that female customers whose annual income is high are highly satisfied towards and flipkart. The research also concludes that even though is giving branded and quality product but customer are very much attracted towards the best services of flipkart. R. Maheswari | N. Sandhiya "A Study on Customer Satisfaction towards Online Shopping in Filpkart in Coimbatorecity" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-6 , October 2019, URL: https://www.ijtsrd.com/papers/ijtsrd29267.pdf Paper URL: https://www.ijtsrd.com/management/consumer-behaviour/29267/a-study-on-customer-satisfaction-towards-online-shopping-in-filpkart-in-coimbatorecity/r-maheswari
A DISSERTATION REPORT ON CONSUMER’S PERCEPTION AND AWARENESS ON ONLINE SHOPPING\MARKETING IN INDIA.
Including research methodology, data analysis, findings, conclusions, and survey questionnaire.
Dissertation report on switching behavior of consumer Pinkey Rana
Dissertation report on “To study the switching behavior of consumer special reference to urban market ”which is submitted by me in partial fulfillment of the requirement for the award of degree B.Com(Hons.) .
A STUDY ON CUSTOMER PREFERENCES TOWARDS ONLINE GROCERY SHOPPING IN BANGALORE ...RAMESH CHAVAN
a study on customer preferences towards online grocery shopping in Bangalore city, this project is related to online shopping and study the customer attitude towards online grocery shopping.
A Study on Customer Satisfaction towards Online Shopping in Filpkart in Coimb...ijtsrd
Flipkart are one of the leading online shopping websites in India. In this paper an attempt has been made to find customers satisfaction towards and flipkart. A sample of 50respondent's were conveniently selected from Coimbatore District. The findings were analyzed using simple percentage analysis, ranking test. Findings reveal that female customers whose annual income is high are highly satisfied towards and flipkart. The research also concludes that even though is giving branded and quality product but customer are very much attracted towards the best services of flipkart. R. Maheswari | N. Sandhiya "A Study on Customer Satisfaction towards Online Shopping in Filpkart in Coimbatorecity" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-6 , October 2019, URL: https://www.ijtsrd.com/papers/ijtsrd29267.pdf Paper URL: https://www.ijtsrd.com/management/consumer-behaviour/29267/a-study-on-customer-satisfaction-towards-online-shopping-in-filpkart-in-coimbatorecity/r-maheswari
A DISSERTATION REPORT ON CONSUMER’S PERCEPTION AND AWARENESS ON ONLINE SHOPPING\MARKETING IN INDIA.
Including research methodology, data analysis, findings, conclusions, and survey questionnaire.
Dissertation report on switching behavior of consumer Pinkey Rana
Dissertation report on “To study the switching behavior of consumer special reference to urban market ”which is submitted by me in partial fulfillment of the requirement for the award of degree B.Com(Hons.) .
How online selling has changed marketing perspective including consumer perce...Bhavesh Bhansali
Research/ Dissertation on “How online selling has changed the marketing perspective including customer perception”
OR
"How online shopping changed customer perception"
Contents:
Introduction
Objective of the Study
Title of the Project
Objective of the Study
Scope of the Study
Review of Literature
Research Methodology
Research Design
Data collection methods/sources
Sampling plan
Data analysis and interpretations
Findings
Limitations of the Study
Recommendations and suggestions
Questionnaire sample
Bibliography
The Internet has developed into a new distribution channel and online transactions are rapidly increasing. This has created a need to understand how the consumer perceives online purchases. The purpose of this dissertation was to examine if there are any particular factors that influence the online consumer. Primary data was collected through a survey that was conducted on students and Employees from different part of India. Price, Trust and Convenience were identified as important factors. Price was considered to be the most important factor for a majority of the Customers. Furthermore, three segments were identified, High Spenders, Price Easers and Bargain Seekers. Through these segments found a variation of the different factors importance and established implications for online stores. Mrs. T. Sreerekha | Mrs. R. Saranya | Mr. V. S. Prabhu "Consumer Behaviour in Online Shopping" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-5 , August 2019, URL: https://www.ijtsrd.com/papers/ijtsrd26354.pdfPaper URL: https://www.ijtsrd.com/management/marketing-management/26354/consumer-behaviour-in-online-shopping/mrs-t-sreerekha
A study on consumer buying behavior towards online retailers in Delhi NCRkanishamittal1
“Consumer is the sole end and purpose of all production, and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer."
- Adam Smith
The growing interdependence of the world economy and the international character of many business practices have contributed to the development of universal emphasis on consumers. Modern technological developments have no doubt made a great impact on the quality, availability, and safety of goods and services. A consumer person who purchases or ultimately consumes goods and services. The growing practice of electronic transactions includes both e-commerce and e- consumers.
“To study the switching behavior of consumer special reference to urban market ”which is submitted by me in partial fulfillment of the requirement for the award of degree B.Com(Hons.)
A study of how application usage can help increase consumer satisfaction for ...Abeer Raza
This study uses regression analysis to determine the effects of mobile applications on consumer satisfaction. The paper focuses on the impact of mobile application usage on consumer behavior with regards to consumer engagement and brand loyalty. The author also looks into understanding the different factors within a mobile app that increases consumer satisfaction. This approach helps identify not just the factors themselves and their benefits but also their contribution in cultivating a long-term relationship between consumers and businesses.
Research Paper: Consumer Trust and Perceived Risk in B2C E CommerceTanzir Islam
This research paper was created by a group of students of Institute of Business Administration, University of Dhaka as their term paper for the course Research Methods.
Topic of the research paper: Consumer Trust and Perceived Risk in B2C E-commerce
The internet is being developed rapidly since last two decades, and with relevant digital economy that is driven by information technology also being developed worldwide. After a long term development of internet, which rapidly increased web users and highly speed internet connection, and some new technology also have been developed and used for web developing, those lead to firms can promote and enhance images of product and services through web site. Therefore, detailed product information and improved service attracts more and more people changed their consumer behaviour from the traditional mode to more rely on the internet shopping. On the other hand, more companies have realized that the consumer behaviour transformation is unavoidable trend, and thus change their marketing strategy. As the recent researches have indicated that, the internet shopping particularly in business to consumer (B2C) has risen and online shopping become more popular to many people. According to the report, The Emerging Digital Economy II, published by the US Department of Commerce, in some companies, the weight of e-commerce in total sales is quite high. For instance, the Dell computer company have reached 18 million dollars sales through the internet during the first quarter of 1999. As a result, about 30% of its 5.5 billion dollars total sales were achieved through the internet (Moon, 2004). Therefore, to understand internet shopping and its impact on consumer behaviour could help companies making use of it as a form of doing e-business.
There are many reasons for such a rapid developing of internet shopping, which mainly due to the benefits that internet provides. First of all, the internet offers different kind of convenience to consumers. Obviously, consumers do not need go out looking for product information as the internet can help them to search from online sites, and it also helps evaluate between each sites to get the cheapest price for purchase. Furthermore, the internet can enhance consumer use product more efficiently and effectively than other channels to satisfy their needs. Through the different search engines, consumers save time to access to the consumption related information, and which information with mixture of images, sound, and very detailed text description to help consumer learning and choosing the most suitable product (Moon, 2004). However, internet shopping has potential risks for the customers, such as payment safety, and after service. Due to the internet technology developed, internet payment recently becomes prevalent way for purchasing goods from the internet. Internet payment increase consumptive efficiency, at the same time, as its virtual property reduced internet security. After service is another way to stop customer shopping online. It is not like traditional retail, customer has risk that some after service should face to face serve, and especially in some complicated goods.
How online selling has changed marketing perspective including consumer perce...Bhavesh Bhansali
Research/ Dissertation on “How online selling has changed the marketing perspective including customer perception”
OR
"How online shopping changed customer perception"
Contents:
Introduction
Objective of the Study
Title of the Project
Objective of the Study
Scope of the Study
Review of Literature
Research Methodology
Research Design
Data collection methods/sources
Sampling plan
Data analysis and interpretations
Findings
Limitations of the Study
Recommendations and suggestions
Questionnaire sample
Bibliography
The Internet has developed into a new distribution channel and online transactions are rapidly increasing. This has created a need to understand how the consumer perceives online purchases. The purpose of this dissertation was to examine if there are any particular factors that influence the online consumer. Primary data was collected through a survey that was conducted on students and Employees from different part of India. Price, Trust and Convenience were identified as important factors. Price was considered to be the most important factor for a majority of the Customers. Furthermore, three segments were identified, High Spenders, Price Easers and Bargain Seekers. Through these segments found a variation of the different factors importance and established implications for online stores. Mrs. T. Sreerekha | Mrs. R. Saranya | Mr. V. S. Prabhu "Consumer Behaviour in Online Shopping" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-5 , August 2019, URL: https://www.ijtsrd.com/papers/ijtsrd26354.pdfPaper URL: https://www.ijtsrd.com/management/marketing-management/26354/consumer-behaviour-in-online-shopping/mrs-t-sreerekha
A study on consumer buying behavior towards online retailers in Delhi NCRkanishamittal1
“Consumer is the sole end and purpose of all production, and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer."
- Adam Smith
The growing interdependence of the world economy and the international character of many business practices have contributed to the development of universal emphasis on consumers. Modern technological developments have no doubt made a great impact on the quality, availability, and safety of goods and services. A consumer person who purchases or ultimately consumes goods and services. The growing practice of electronic transactions includes both e-commerce and e- consumers.
“To study the switching behavior of consumer special reference to urban market ”which is submitted by me in partial fulfillment of the requirement for the award of degree B.Com(Hons.)
A study of how application usage can help increase consumer satisfaction for ...Abeer Raza
This study uses regression analysis to determine the effects of mobile applications on consumer satisfaction. The paper focuses on the impact of mobile application usage on consumer behavior with regards to consumer engagement and brand loyalty. The author also looks into understanding the different factors within a mobile app that increases consumer satisfaction. This approach helps identify not just the factors themselves and their benefits but also their contribution in cultivating a long-term relationship between consumers and businesses.
Research Paper: Consumer Trust and Perceived Risk in B2C E CommerceTanzir Islam
This research paper was created by a group of students of Institute of Business Administration, University of Dhaka as their term paper for the course Research Methods.
Topic of the research paper: Consumer Trust and Perceived Risk in B2C E-commerce
The internet is being developed rapidly since last two decades, and with relevant digital economy that is driven by information technology also being developed worldwide. After a long term development of internet, which rapidly increased web users and highly speed internet connection, and some new technology also have been developed and used for web developing, those lead to firms can promote and enhance images of product and services through web site. Therefore, detailed product information and improved service attracts more and more people changed their consumer behaviour from the traditional mode to more rely on the internet shopping. On the other hand, more companies have realized that the consumer behaviour transformation is unavoidable trend, and thus change their marketing strategy. As the recent researches have indicated that, the internet shopping particularly in business to consumer (B2C) has risen and online shopping become more popular to many people. According to the report, The Emerging Digital Economy II, published by the US Department of Commerce, in some companies, the weight of e-commerce in total sales is quite high. For instance, the Dell computer company have reached 18 million dollars sales through the internet during the first quarter of 1999. As a result, about 30% of its 5.5 billion dollars total sales were achieved through the internet (Moon, 2004). Therefore, to understand internet shopping and its impact on consumer behaviour could help companies making use of it as a form of doing e-business.
There are many reasons for such a rapid developing of internet shopping, which mainly due to the benefits that internet provides. First of all, the internet offers different kind of convenience to consumers. Obviously, consumers do not need go out looking for product information as the internet can help them to search from online sites, and it also helps evaluate between each sites to get the cheapest price for purchase. Furthermore, the internet can enhance consumer use product more efficiently and effectively than other channels to satisfy their needs. Through the different search engines, consumers save time to access to the consumption related information, and which information with mixture of images, sound, and very detailed text description to help consumer learning and choosing the most suitable product (Moon, 2004). However, internet shopping has potential risks for the customers, such as payment safety, and after service. Due to the internet technology developed, internet payment recently becomes prevalent way for purchasing goods from the internet. Internet payment increase consumptive efficiency, at the same time, as its virtual property reduced internet security. After service is another way to stop customer shopping online. It is not like traditional retail, customer has risk that some after service should face to face serve, and especially in some complicated goods.
consumer engagement has been postulated, more comprehensively, to represents the interactive consumer-brand relationship, relative to other relational concepts such as “involvement” and “participation”. This notion becomes even more crucial with the emergence of online band communities, where a number of people with similar interests gather in a virtual context to communicate. This study aimed to explore the nature and scope of consumer engagement in an online brand community, in relation to Facebook brand page. The findings presented in this thesis propose that consumer engagement is dynamic and dual-focused phenomenon.
Identifying Key Social Media Strategies for FMCG Brands to Influence Consumer...Prachi Salvi
Social media has revolutionized the way people seek information, share their experiences and communicate with each other, in the recent times. It has made a massive impact on the lives of people by keeping them enthralled, engrossed and engaged. For marketers, however it has opened an exceptionally diverse and a
uniquely new channel to promote their brands. Social media, not only presents new prospects for the marketers to engage and influence the consumers but it also
possesses new challenges to effectively utilize this medium.
The objective of this research study was to specifically look at how FMCG (Fast Moving Consumer Goods) brand marketers, can make use of social media to
influence consumers. A qualitative research methodology was adopted which consisted of six semi-structured interviews with social media professionals.
The topics covered in the interview ranged from knowing how different the social media channel is from other marketing mediums, understanding the utilization of
different tools within social media, challenges faced by FMCG brands in particular,
how best to utilize the medium for influencing consumers The theoretical framework for the research study included review of literature on consumer behaviour and word of mouth.Drawing upon the findings from the interviews, this
research study presents ten key strategies that can help FMCG brand marketers to effectively use social media platform, to influence consumers:
1. Humanize your brand
2. Message is the key
3. Listen and monitor
4. Know the social media tools
5. Interact and engage
6. Connect to consumer emotionally
7. Identify and utilize influencers
8. Build consumer response platform
9. Plan for long term
10. Adapt and Experiment
Social Media Marketing: From Entertainment to EssentialKristina Lane
Capstone research project where students were expected to synthesize and integrate learning experiences acquired through the program's previous courses while evaluating current media communications topics.
Case study about developing a new digital brand online. Assignment undertaken by Salford Business School MSc Digital Marketing students: Katrina Winstanley, Lucie Apampa, Fianna Hornby, Namitha Muthukrishan and Ayse Guemueshan. This was was completed as part of their Search and Social Media Marketing module.
Digital marketing is one type of marketing that is widely used to boost products or services and to reach consumers using digital media. Digital marketing extends beyond web based marketing, including channels that do not require the use of the internet. It includes mobile phones, social media marketing, display advertising, search engine marketing and many other forms of digital media. (Afrina Yasmin, 2015) In this era of digital marketing, social media change the game for many businesses. Nowadays, it is easy to influence consumers through social media. Although many businesses take their strategies based on social media. Today, communication is an essential part of both business and market to build competition. Now a day's online media like Facebook, Instagram, and YouTube is act as a referring media for most of the consumers. Gather product- related review, inquiry, and sort of every detail regarding products and services possible in social media. In the traditional approach reaching consumers is hard, time-consuming also expensive as well. But in current world digital marketing, it is very easy to reach target consumers and sell consumers (Researcher’s own perspective). Despite this fact, think about the service industry, many companies are run their business, promote themselves through social media. That is why marketers have attempted to grow by using social media to improve their communication with consumers by focusing on the advertisement which is based on the internet.
Now what we understand about digital marketing? Digital marketing is the use of the channels to reach the desired target consumer by some channels like social media, websites, online search engine advertisements, E-marketing, interactive marketing (polls, the game adds, mobile marketing). It is considered as a new era of marketing because of the ability to reach people, do business regardless of geographical locations. So this paper purpose of investigating the impact of digital marketing on social media.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
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Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
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Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
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Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
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Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
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[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Accpac to QuickBooks Conversion Navigating the Transition with Online Account...PaulBryant58
This article provides a comprehensive guide on how to
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As a business owner in Delaware, staying on top of your tax obligations is paramount, especially with the annual deadline for Delaware Franchise Tax looming on March 1. One such obligation is the annual Delaware Franchise Tax, which serves as a crucial requirement for maintaining your company’s legal standing within the state. While the prospect of handling tax matters may seem daunting, rest assured that the process can be straightforward with the right guidance. In this comprehensive guide, we’ll walk you through the steps of filing your Delaware Franchise Tax and provide insights to help you navigate the process effectively.
Filing Your Delaware Franchise Tax A Detailed Guide
M01 mba research project raj sambwani may 2013 final
1. Imperial College London
Is Revenue from Online Advertising for Social Networks Sufficient to Justify Market
Valuations?
by
Rajesh Sambwani
A Project submitted in partial fulfillment of
the requirements for the MBA degree
May 2013
2. I
Synopsis
Social networks like Facebook and LinkedIn have become public companies over the
last few years, and are garnering strong public, consumer and industry interest both for
their public image and their ubiquity. The IPO event for Facebook was a record breaking
event for the $10B in cash raised for the company, and in October 2012, Facebook
crossed the 1 billion user mark as a global social network.
Powering these social networks revenue model is online advertising, responsible for the
success of many businesses on the Internet, and consumers continuing to engage and
consume the services these social networks provide. This research project explores the
sustainability of Facebook‟s online advertising revenue model over the near term, and
evaluates consumer engagement, marketing agencies‟ adoption of the social network as
a medium to reach consumers as well as core revenue activities. Benchmarking against
global competitors, where appropriate, was done to evaluate the potential revenue
growth, and regional differences and market dynamics were also explored for
opportunities for Facebook to exploit.
The views of various industry experts were sought to gain insights into the industry and
growth options for Facebook, and consumer views on their emotional connection and
propensity to engage with online advertising were constructed. A map of the potential
revenue opportunities helps to uncover online advertising as a core revenue stream, and
requiring revenue stream diversification and aggressive growth to sustain Facebook‟s
growth model over the next several years.
3. II
Acknowledgements
Writing an acknowledgement is never an easy task, especially when there has been a
nine month journey with incredible support from many. I dedicate this thesis to my wife,
Jane, for her untiring support and patience through this journey; my parents, friends and
Santi, my dog, who have always been there for me.
I would like to thank Dr Marcel Cohen, my supervisor, for his invaluable guidance and
constructive feedback throughout the course of the thesis. Thank you also to Ms
Tatyana Protsenko, who has unselfishly ensured that the process of doing this thesis
has been easy, removing roadblocks and obliging with help when necessary.
I would have to show my deep appreciation to the long list of experts in the industry who
have provided critical assessments of developments in the field throughout the
interviews and contributed significantly to enriching the research process: JoostNienhius,
Nelson Wee, Simon Piff, LuoChuan, SriramAdukoorie, Andrew Lazzaro, Audrey Kuah,
JawazIllavia, RohitDadwal and Arthur Chang.
4. III
Contents
Synopsis ............................................................................................................................................I
Acknowledgements..........................................................................................................................II
1. Introduction .................................................................................................................................1
1.1 Online Social Networking Definition......................................................................................3
1.2 Aims and Objectives...............................................................................................................4
1.3 Terms of Reference................................................................................................................5
2. Discussion of Literature ...............................................................................................................6
2.1 Social Network Usage and User Growth................................................................................6
2.2 Media advertising spend and outlook ...................................................................................8
2.3 Global online advertising market.........................................................................................10
2.3.1 Definition ......................................................................................................................10
2.3.2 Interactive advertising market and Users outlook .......................................................10
2.4 Interactive advertising market - United States....................................................................11
2.5 Interactive advertising market - Japan ................................................................................12
2.6 Interactive advertising market - United Kingdom ...............................................................12
2.7 Interactive advertising market - China.................................................................................12
2.8 Consumer Response to Advertising.....................................................................................13
2.9 Valuing a Social Network Consumer....................................................................................13
2.10 Strategic Challenges and Thrust ........................................................................................13
3. Research Methodology..............................................................................................................17
3.1 Introduction .........................................................................................................................17
3.2 Conceptual framework ........................................................................................................18
3.3 The hypothesis.....................................................................................................................19
3.4 Methodology........................................................................................................................19
3.5 Research Design...................................................................................................................20
3.5.1 Consumer Online survey...............................................................................................20
3.5.2 Expert Interviews ..........................................................................................................21
3.5.3 Secondary research.......................................................................................................22
3.6 Summary..............................................................................................................................23
4. Analysis ......................................................................................................................................24
4.1 Approach to Analysis ...........................................................................................................24
5. IV
4.2 Consumer View....................................................................................................................25
4.2.1 Emotional Connection...................................................................................................25
4.2.2 Tenure and usage pattern.............................................................................................26
4.2.3 Response to Online Advertising....................................................................................28
4.2.4 Conclusion - Consumer Audience .................................................................................29
4.3 Marketers.............................................................................................................................29
4.4 Value Chain ..........................................................................................................................30
4.5 SWOT ...................................................................................................................................31
4.6 Modelling the Revenue Opportunity...................................................................................33
4.6.1 Mobile Advertising........................................................................................................34
4.6.2 Online Advertising and Search......................................................................................37
4.6.3 Social Commerce and E Commerce ..............................................................................39
4.6.4 Emerging markets – China ............................................................................................40
4.6.5 B2B................................................................................................................................41
4.6.6 Platform Play.................................................................................................................42
4.6.7 Social Gaming................................................................................................................43
4.7 Conclusion - Summary of opportunity.................................................................................43
5. Conclusion and suggestions for future research .......................................................................47
5.1 Conclusion............................................................................................................................47
5.2 Limitations of the research..................................................................................................49
5.3 Future research recommendations .....................................................................................49
References .....................................................................................................................................51
Bibliography...................................................................................................................................59
APPENDIX A: Consumer Survey Questionaire...................................................................................i
APPENDIX B: Interviewees List and Questionaire.......................................................................... vii
6. 1
1. Introduction
Facebook‟s IPO valuation at a record $104 billion in May 2012 drew particular attention
to the online advertising revenue model for social networks and the sustainability in
growth trajectory. Online advertising is the predominant revenue model for a large
number of social networks, and while the global online advertising market has been
growing at a CAGR of 11.4% between 2007 and 2012, stealing share away from other
traditional forms of competition, there is still room to grow. Traditional marketers and
agencies still continuously require convincing that any online site they spend money on
provides the expected returnon investment.
While audience engagement globally in social networks has grown rapidly, Facebook‟s
share of the total online advertising market remains at 7.8% in the US, lagging behind
the social network‟s penetration level of 14.1% of the global population, and 42.3% of
the global online consumer population.
Competition for online advertising dollars is also very high, with online portals like MSN
and Yahoo competing on one hand for the online version of display advertising, and
Google taking between 60 to 80% of market share for search advertising revenue, which
makes up 46% of the total advertising market.
So can Facebook continue to grow with online advertising as their main and dominant
revenue stream, accounting for 80% of the total revenue? The momentum for these
social networks continues, and one cannot miss the daily media coverage with headlines
like:
“Facebook’s Plan to Destroy Television” (Jim Edwards, Dec 2012)
“Report: Twitter hits half a billion tweets a day” (Daniel Terdiman, Oct 26, 2012)
“LinkedIn smashes Q3 earnings estimates” (Paul Sloan, Nov 1 2012)
The main driver supporting the growth of the online advertising model for social networks
is continued consumer engagement and interest, and as Facebook crossed the 1 Billion
user mark in October 2012, and LinkedIn reached the 200 million user mark in January
2013, the question becomes whether it is possible for these social networks to continue
to rely on the growth in the number of consumers and retaining engagement levelsto
drive the online advertising revenue model.Recent reports also highlight the challenges
7. 2
Facebook is facing with decreasing levels of engagement among the youth, which could
be a worrying trend in the long term (BusinessWeek, April 2013).
Several key drivers are identified (Nielsen Social Media Report 2012) as responsible for
the growth of social networks and social media on a global basis: growth of mobile
device usage both in developed and emerging markets, entrance of new social media
sites and the growth of social TV and social care.
Projections from eMarketeer indicate social networks users will continue at above 10%
year-on-year rates and reach 1.85B users by 2014 (Fig 1.1).
Fig 1.1
This paper is divided into the following five sections. The first section, Introduction,
focuses on defining the online social network, outlining the aims and objectives and
overall scope, summarizing the key research questions that the rest of the paper
addresses and includes terms of reference. Section 2, Background, outlines the size of
the consumer market, the online advertising market and the literature review for the
topic, including the strategic challenges that Facebook and LinkedIn face. The research
methodology and the hypothesis are outlined in Section 3, Research Methodology,
which details the approach taken designing and conducting the primary and secondary
research. The full analysis of the consumer research, the interviews and the
8. 3
development of revenue models are then presented in Section 4, Analysis, followed by
Section 5, Conclusions, where the conclusions, implications of the research and
hypothesis and recommendations for future research topics are presented.
1.1 Online Social Networking Definition
Social network sites have a long and interesting history with consumers over the last 16
years, as outlined in Boyd and Ellison‟s 2008 paper. The definition in the paperwill be
used as the working definition of social network sites, described as
“We define social network sites as web-based services that allow individuals to (1)
construct a public or semi-public profile within a bounded system, (2) articulate a list of
other users with whom they share a connection, and (3) view and travers their list of
connections and those made by other within the system. The nature and nomenclature
of these connections may vary from site to site.”
The central concepts of creating an identity and connecting with a network of users are
critical to the construct of the social network, in addition to all the activities that can be
conducted depending on the nature of the social network.
Many of the social networks in the paper, like Facebook, LinkedIn, Twitter and MySpace,
are familiar names to most consumers, and some, like MySpace, have gone through
metamorphosis over recent times, from an acquisition by News Corp to losing popularity
with users as Facebook became the new dominant social networking environment.
The social networking industry is dominated by both public, global companies, as well as
dominant local players. Two widely used social networks, Facebook for consumers and
LinkedIn for professionals, made their debut on the public markets in May 2012 and May
2011 respectively, and have been delivering positive business performance ever since,
although widely documented strategic challenges around mobile monetization and
revenue diversificationfor Facebook remain. In addition, Tencent and YY.com are public
companies which dominate the Chinese social networking market, and Mixi was once a
dominant social networking player in the Japanese market, recently being overtaken by
Facebook. Both Twitter and Pinterest, with their unique consumer proposition around
140 character interactions and the posting and sharing of pictures, are relatively new to
the social networking market andare also rumoured to be going public in 2013.
9. 4
1.2 Aims and Objectives
The major focus in this paper is on understanding Facebook from three perspectives: the
engagement pattern and levels with consumers, the marketer selling online advertising
solutions and the focus on diversifying revenue streams, with the goal of creating a point
of view about the impact of all three perspectives on the revenue growth projections of a
large online social network. There are references and comparatives conducted with
LinkedIn (while fully acknowledging the different consumer and professional user
audiences), as well as regional social networking sites that are making an impact on a
global level, like Chinese site Tencent. Google, a leader in online advertising, is used as
a proxy where appropriate to further understand the potential that Facebook can achieve
if it is possible to break into the search advertising market. Is Facebook‟s online
advertising model likely to keep its momentum now that it is a public company?
This paper will attempt to refute the commonly held belief that online advertising alone is
insufficient to sustain the growth of online social networks, in particular for Facebook.
This is done by focusing the research and analysis on answering the following
questions:
1. What is the consumer attitude and level of engagement with social networks, and
how do consumers respond to online advertising on social networks?
2. What is the current state of monetization through online advertising on social
networks?
3. What is the perception of marketers and advertisers of the effectiveness of the
online advertising solutions provided on social networks?
4. What possible scenarios exist for top line growth for online social networks, and
can the advertising model support the growth to justify market valuations?
Market valuation is not addressed directly in this paper to restrict the scope, and
demonstrating revenue momentum as an end results is defined as the proxy for
determining the valuation of social networks. The research study was done with a global
scope, and viewsof the market opportunity and competitive activity of regional players
were further researched and analysed to understand the impact of possible market entry
and growth strategies into these regions for Facebook.
10. 5
1.3 Terms of Reference
Online advertising is used interchangeably with Internet advertising and interactive
advertising. Online advertising is the “use of Internet as an advertising medium where
promotional messages appear on a computer screen” (Business Dictionary). Banner
ads, display ads, rich media, sponsorships and email marketing are examples of various
types of online advertising formats that are used by marketing professionals to distribute
their marketing messages to computer screens and websites, depending on the
marketing objectives.
Click through rate (CTR)measures the overall effectiveness of an online advertising
format (like banner ads) by measuring the “percentage of a website‟s users (or visitors)
who click on an (online) advertisement (like banner ads) to go to the advertiser‟s site”.
(Business Dictionary)
Contextual (or contextual advertising)refers to online advertising targeted specifically
to a particular user based on the actions that are being taken. (Larry Kim)
Cost-per-click (CPC)is used interchangeably with pay-per-click, and refers to a form of
online advertising where a buyer only pays for the “clicks”, or the number of times a user
on the Internet interacts with the buyer‟s advertisement.
Mobile advertising is online advertising that is delivered to mobile devices, and formats
may vary to suit the specific nature of the small mobile device screen. Mobile advertising
is called out as a separate category for this paper because of the growing importance of
mobile usage, and to understand its standalone impact on overall revenue.
Instagram is a service provided by Facebook that allows a user to take pictures using
the mobile device and to share them on social networking sites.
AdMob is part of Google and provides the ability for owners of mobile applications to
make money by incorporating mobile advertising within their mobile applications.
Social TVis the “union of television and social media” interaction (What is Social
Television?) – the ability to use social media and related technologies to interact with
other television viewers in the midst of watching television.
11. 6
2. Discussion of Literature
This section focuses first on understanding the social network user growth pattern, which
is a critical driver for the social network business model. The discussion then looks into
one of the revenue drivers for these social networking sites: advertising, looking at both
the total global media advertising market as well as the online advertising market. A
review of the dynamics of online advertising in key markets, as well as the competitive
dynamics both locally as well as globally is then outlined, clearly identifying and defining
the key players in the social networking industry. Finally, some of the information shared
during the filing of the IPO papers for both Facebook and LinkedIn is reviewed for
information on both their views on the online advertising model as well as the challenges
faced by these social networks.
No global academic study correlating consumer engagement with online advertising and
lifetime value of the user for social networks was discovered, and would be relevant for
future research.
2.1 Social Network Usage and User Growth
Strong growth and engagement with social networks among consumers has been a
global trend over the last 5 years, both with the rapid growth of Facebook as a global
player, LinkedIn as a trusted professional networking tool and several local Chinese and
Japanese sites who have started globalization efforts. Usage of more than one network
to interact with friends is also not surprising as the major social networking sites reach
more than 30% of consumers and report growing their user base into hundreds of
millions of users. (eMarketeer)
Mary Meeker‟sInternet Trends presentation in December 2012 highlight some key
Internet and mobile global usage and growth trends among consumers that are worth
noting, as both of these are key drivers for the usage of social networks:
Internet Users: The global Internet user base is now at 2.4 billion Internet users,
with an 8% year-on-year growth and with global penetration at 34%.
Mobile Device Users: Mobile device usage, while having reached a total
number of 5 billion users, has been shifting from simple mobile devices to
smartphones, and globally the number of smartphone users has reached 1.1
billion, with a 42% year-on-year growth and global penetration level at 17%.
12. 7
Internet Traffic: 13% of the traffic on the Internet is now coming from a mobile
device, versus the PC. With mobile usage expected to grow rapidly, this trend of
Internet traffic increasingly coming from a mobile device is set to continue.
Mobile and Internet Advertising: There is a big gap, and hence upside
potential, between the level of mobile and Internet usage and the corresponding
percentage of share of mobile and online advertising spend, representing a $20B
opportunity just for the US, as Fig 2.1 illustrates.
Fig 2.1 (Source: Mary Meeker)
According to Piper Jaffray‟s “Taking Stock with Teens” survey in April 2013, Facebook
continues to decline in popularity among the teens, a trend seen in the last 12 months
(Fig 2.2). Since the teen segment is a crucial segment for advertisers, and as social
media becomes critical to influencing preference for products and buying behaviours
among the teens, this is a trend Facebook needs to monitor and respond to if necessary.
At least for Facebook, the usage of Instagram for photo taking and sharing on mobile
devices is increasing among the youth.
13. 8
Fig 2.2 (Source: Piper Jaffray)
No comprehensive global consumer studies of social networking usage was found, and
while Edison Research does have a comprehensive 2000+ people telephone survey
information for the US, there was also no corresponding correlations made to response
to online advertising. Growth trends for social network usage are highest among
emerging markets, while growth continues at a slower pace in developed markets.
(eMarketeer)
Attempts have also been made to model the true value of social network users based
purely on company valuations in 2008 and 2009 (Michael Arrington), but no academic
research was found that quantifies the value of social network users, either for the
company or for marketers.
2.2 Media advertising spend and outlook
The global media advertising market (eMarketeer, June 2011) continues to show year on
year growth, and is projected to keep growing in the 4 to 5% range up to 2015, as the
figure below (Fig 2.3) illustrates.
14. 9
Fig 2.3
The shift from traditional media (TV, radio, print) to online continues at a strong pace
across the major countries around the world. In the US, traditional ad spending has been
decreasing since January 2012, and in February 2013 is expected to reduce by 2.7%.
China is expected to surpass Japan as the number two media advertising market in the
world in 2014, based on media spending, and just after the US (IAB, Oct 2011), with a
CAGR of 14.6% (Fig 2.4).
Fig 2.4
15. 10
2.3 Global online advertising market
2.3.1 Definition
Ratliff and Rubinfield‟s work in UC Berkeley on defining the online advertising market
mentions that “there appears to be no consensus on precisely when advertising on the
Internet began.”, and while they admit their work is inconclusive in defining the market,
have at least given a direction to it. Demarcating the online advertising market between
search advertising, dominated by Google with its Adwords service, and non-search
advertising would be a natural way of defining the market. Differentiating between the
online advertising “SKUs” is really a case of choosing the different types of “graphic
format”, the approach to targeting and the “basis of payment” (Ratliff, Rubinfield). The
online advertising formats continue to rapidly evolve and innovation is ripe in this media
category, as changing consumer behavior on devices, privacy concerns and Internet
consumption patterns forces the industry to evolve.
More traditional industry sources like Interactive Advertising Bureau (IAB) and
eMarketeer, help to further break down non-search categories into units that online
marketers are familiar with buying and tracking, like banner/display ads, mobile, email,
rich media, sponsorships and lead generation.
2.3.2 Interactive advertising market and Users outlook
In 2010, the US had a 40% share of the total global interactive advertising market, with a
market size of $ 26B, and projected to grow to $58B in 2017 (Digital TV Research). Data
for the other key interactive advertising markets is in the table below (all in USD).
Online advertising spending globally is expected to increase its proportion of the total
advertising spend, with advertisers spending $80.2B globally, a growth of 17.2% from
2010 to 2011 (eMarketeer).
Market Market size (2010) Market size (2017)
US $ 26B $ 58B
UK $ 11.7B
China $ 2.6B $ 10.8B
Mobile advertising growth rates, which are not included in the data above, are very
healthy, growing by more than 100% from 2011 ($1.23B) to 2012 ($2.4B).
16. 11
A breakdown of the internet advertising market performance for the largest markets (US,
Japan, UK and China) is included in the following sections.
2.4 Interactive advertising market - United States
The projections for the US are for digital ad spending to grow, with budgets totaling
$42.5B in 2013 and increasing to $ 55.25B in 2016. (eMarketeer, September 2012) (Fig
2.5)
Fig 2.5
The largest revenue segments are search followed by display ads (PwC Outlook). The
$8B search segment and $3.6B display ads segment continues to grow at very strong
rates (18.8% and 10.9% respectively). Both mobile and video ads are new categories
starting from a comparatively small revenue base, with strong growth rates. In 2013,
mobile advertising is expected to grow between 55 to 65%, reaching a market size of $ 7
Billion.
For 2012, “Facebook ended the year on top, clearing $234 million on mobile display ads,
followed close behind by Pandora at $229 million, the firm reports. Twitter came in at
third place, selling $117 million worth of mobile display ads.” (IDC, Clickz)
For social networks, online advertising revenues come from all advertising format
categories, with the exception of the very lucrative and high growth search segment,
which is dominated by Google, Yahoo and Microsoft.
17. 12
2.5 Interactive advertising market - Japan
Japan‟s homegrown social network, Mixi, started in 2004 to capture the social network
opportunity, and has been a public company since September 2006 on the Japanese
stock market with dominant market position among Japanese consumers for a long
period of time. Facebook has, however, developed strong momentum over the last few
years, growing from 2 M users in January 2011 to 15 M users by September 2012,
overtaking Mixi‟s user base in the process (Jonathan Espinosa).
Mixi, meanwhile, has seen a sharp decrease in their monthly active users (MAUs) with
changes in local laws and competition from local mobile gaming players like GREE and
DeNA (DrSerkan Toto). Mixi‟s quarterly advertising revenue was US$ 13.3M (JPY 1269
M) (Dentsu) which can be used as a proxy for the potential advertising revenue
Facebook can achieve.
In 2011, 10.8% of the total advertising and media spend in Japan was on the internet,
accounting for $6.07B (JPY 616.637 B). (Dentsu)
2.6 Interactive advertising market - United Kingdom
Facebook revenue estimates in the UK are at £180M in 2011, with projections at £288M
for 2012 of a total online advertising market projected to cross £5B(Mark
Sweney).Mobile advertising grew by 157% to £203M in 2011. 58% of the total online
advertising spend is attributed to search at £2.77B, with display advertising achieving
£1.13B.
It must be noted that the UK is the most advanced online advertising market, with 28%
of the total advertising spend of £16.99B being spent online, and showing absolute
growth at 16.8% in 2011 (IAB UK).
2.7 Interactive advertising market - China
China has several homegrown social networks that have been very popular and growing
at astounding rates. Tencent, a leader with a long history and a strong brand among
local consumers, is a public company with recent valuations of $62B, and with an
international service, WeChat, reaching more than 300M users globally (Christopher
Mims, Quartz). 7.7% of Tencent‟s well-diversified revenue stream comes from online
advertising, a total of $544.6M (RMB 3.382 B) (Tencent).
18. 13
The November 2012 IPO of a new Chinese social network, YY.com, also continues to
build momentum in the social networking industry. YY.com boasts 400M users and is a
“leader in the "sticky" activity of group voice chat” (Ryan Tate).
“…the typical user of its "YY Client" chat system spent 52 hours on the system in
September, roughly nine times as much the typical American Facebook user spent on
Facebook.” (Ryan Tate)
Google China, in a well-known 2010 public event, stopped operations in China after
refusing to censor its search results. One estimate in December 2011 from Forbes
mentions that Google may still be making $640M from its China operations despite
having left the country (Eric Jackson). Google‟s AdMob acquisition helped it to continue
operations in August 2012, and they are now registering revenues from advertising on
mobile phone apps. At the same time, even though Facebook is officially banned in
China, consumers have found ways of accessing and using the service. As a result,
Facebook has 611,000 users in China, as of September 2012. (Jon Russell)
2.8 Consumer Response to Advertising
The consumer attitude towards the appearance of online advertising within social
networks will be expected to constantly evolve and change.Today, 15% of US
consumers share advertisements, 26% like these advertisements and up to 14% actually
buy a product as a result of exposure to these advertisements. (Nielsen‟s Social Media
2012 Report)
2.9 Valuing a Social Network Consumer
Determining the value of a „like‟ or a „fan‟ on your Fan Page in Facebook would be
extremely valuable to marketers in understanding the value of their marketing
investment in social networks. One study by Syncapse says a “Facebook fan is worth
(an average of) $174 to a brand, up 28% since 2010 and the value varies depending on
the exact nature of the brand.
2.10 Strategic Challenges and Thrust
Eric Clemons defines the online advertising scenarios within social networks as a
“complex problem of monetizing…”, outlining different scenarios for paid services and
online advertising. Though it seems like the framework for monetization developed by
Eric Clemons may have been supplanted with the revenue momentum that Facebook is
19. 14
demonstrating currently, his belief that the real opportunities are still being discovered is
likely to be valid as the evolution of online advertising in particular, and on social
networks specifically, continues.
Facebook
“The dramatic decline in growth rates means that Facebook will need to radically grow
its payments business to please future shareholders and continue to post strong annual
revenue gains.” Jennifer van Grove, Feb 2012
This statement published in VentureBeat, created pre-IPO, paints some of the
challenges Facebook faces in growing at a pace and scale that will satisfy the
expectations of a public company. The payments business, bulk of which is a levy
charged to games providers for leveraging the Facebook platform, is mainly a PC based
business. As users move most of their usage to mobile devices, there have been
questions raised on their payments business and their ability to monetize their traffic
from users accessing Facebook through a mobile device. The acquisition of Instagram in
September 2012 changed the dynamic and helps with their credibility somewhat, and the
latest Q4 2012 earnings report had them reporting 23% of their advertising revenues
from mobile (Facebook).
From Mark Zuckerberg‟s Q4 2012 earnings call, “there are three main parts of our
strategy. Building the best mobile product, build a platform and services that leverage
the social graph, and build a really strong monetization effort – engine.”, the challenges
with monetization and mobile are clearly highlighted.
It is too early to tell if the acquisition of the Atlas Advertiser Suite platform from Microsoft
in February 2013, an attempt to demonstrate better total returns on investment from any
online marketing campaign, will make a significant impact to the overall online
advertising spend from clients and create significant upside.
Facebook has also clearly highlighted the following set of risks from its S-1 filing (JBat),
which continue to hold true post-IPO in 2013: user retention and engagement, strong
dependency on advertising revenue, mobile usage and monetization and competition,
among others.
20. 15
LinkedIn
“We continue to add approximately 2 member sign-ups per second.” Jeff Weiner, CEO,
Q4 2012 earnings call
LinkedIn is focused on social networking for professionals and has a more diversified
revenue base, consisting of online advertising (called “Marketing Solutions”), revenue
from paid services from recruitment solutions and direct subscription revenue from
users, with advertising constituting about one-third of the revenue. The focus on
consumer solutions and monetization for mobile devices is very evident in their quarterly
reports. As LinkedIn continues to grow rapidly past their 200M user base, and increases
focus on their online advertising efforts, their online advertising revenue stream might be
a good comparative for Facebook.
Imminent IPO and Valuation of Twitter and Pinterest
Both Twitter and Pinterest have been rumoured to file for IPOs in 2013. Twitter‟s rapid
rise to 500 million users and projected $583 M revenue, with growth by 100% year on
year (ShiraOvide), has made it a contender for advertising spend with agencies, as their
relatively young user base are a lucrative target for marketers.
Pinterest has grown to 10 M users within a very short time and is a contender for
attention with users that is worth tracking in the medium term. Their engagement level
with consumers is highest of the three social networking sites and may be interesting
from Facebook and Twitter to learn from.
“When it comes to time spent online in 2013 across social networks, it‟s quite astounding
to note that Pinterest users spend over an hour on average which is almost unheard of.
When compared with Twitter‟s 36 minutes and Facebook‟s 12 minutes, this is unusually
high……..” (Job Stock)
Google‟s Dominance
Despite the dominance of local Asian social networking sites in China, Japan and Korea
in their respective markets, 44% of the global online advertising revenue is attributed to
Google (Miranda Miller), and its product superiority, default usage for many consumers
and the strength of its business model continues to point to them keeping their market
share. In the absence of a search offering, and with the barrier to entry extremely high to
21. 16
creating a search offer for consumers, as evidenced by Microsoft‟s Bing search product
being unable to gain significant ground in search against Google despite billions of
dollars of investment, social networks, including Facebook, will only be participating and
competing for the rest of the 56% of the online advertising revenue pie.
22. 17
3. Research Methodology
3.1 Introduction
This chapter describes the research methodology behind this study. A conceptual
framework that will help with the research design and approach is first detailed,
addressing the need to obtain industry, consumer and internal company perspectives on
usage of the networks, the efficacy of the online advertising model and the impact of
new commercial initiatives, beyond online advertising, on the medium and long term
revenue model. The approach to conducting primary and secondary research, including
the sample questionnaires and data collected, is then outlined in detail.
The methodology is designed to achieve the aims of answering the following research
questions:
1. What is the consumer attitude and level of engagement with social networks, and
how do consumers respond to online advertising on social networks?
2. What is the current state of monetization through online advertising on social
networks?
3. What is the perception of marketers and advertisers of the effectiveness of the
online advertising solutions provided on social networks?
4. What possible scenarios exist for top line growth for online social networks, and
can the advertising model support the growth to justify market valuations?
23. 18
3.2 Conceptual framework
Fig 3.1
The conceptual framework (Fig 3.1) shows the impact of several key “outside-in” and
“inside-out” factors on the success of online social networks‟ online advertising revenue
model, and has helped drive the design of the research. The key “outside-in” factors
relate to engagement of key players in the online advertising ecosystem, both
consumers who consume services, engage and interact with the social networks, and
marketers, agencies and partners who sell and purchase online advertising, or build
services and products on the social network platform. The “inside-out” factors relate to
risks and challenges of being a public company and responding to market pressures,
and the ability to keep the pace of innovationnecessary to keep consumers engaged and
providing value to the players in the various parts of the value chain. At the same time,
executing on the vision and talent retention is critical to success.
Continued engagement by consumers with social networks is critical to the success of
the business model and monetization. Hence, gaining a deeper view of the current
perception of social networks and present and future usage patterns is crucial to
understand the impact on the potential for continued growth.
Areas that require further investigation relate to perceptions relating to how important
social networks are to a consumer, tenure, comparative frequency of use and response
to online advertising.
24. 19
For marketing agencies and marketers, a more in depth understanding of their
experiences with selling and leveraging marketing solutions incorporating online social
networks was required. In particular, investigation into how important social networks
were in the marketing mix, which ones are delivering on the requirements and are being
recommended and a view of what is needed in the marketplace by customers was
required.
Perspectives and insights from experts on the areas of online advertising that are
delivering results, and further investigation into new opportunities for differentiation and
innovationand their impact on the revenue mix and the online advertising model, is also
required to complete the understanding of the overall revenue landscape.
3.3 The hypothesis
The main hypothesis for this paper is that the online advertising model alone can allow
for continued growth and justify the market valuations of social networks, by harnessing
continued consumer engagement and tapping into new revenue opportunities to
accelerate further growth.
3.4 Methodology
The research methodology (Fig 3.2) is based on a combination of:
a. Online survey among consumers to understand the engagement level with social
networks and response to online advertising,
b. Interviews with industry practitioners to understand the specific challenges and
opportunities faced by social networks, and
c. Secondary research from a combination of academic and opinion sources to
supplement insights gained from consumers and industry leaders.
25. 20
Fig 3.2
3.5 Research Design
3.5.1 Consumer Online survey
Geographical coverage
The mass penetration of online social networks among consumers in almost all countries
has made it a universal and often used tool. Differences across age groups and
penetration and adoption of technology would directly impact social network adoption
and would require further investigation. This research is, however, focused on learning
from a random sample of consumers, without controlling for age groups or any other
factors.
The US – with its size of the population, the level of Facebook penetration as a global
social network and technology adoption levels, together with the unique local social
network and services in China, Korea and Japan – was focused on as a separate region
for analysis from the rest of the world (ROW). The primary quantitative research with
consumers was hence divided into two large geographic areas of focus: US and rest of
world (ROW).
Individual data for each sample group from each of the two geographic areas of focus
was collected and analysed. Since the sampling of consumers across both the US and
ROW research was randomly conducted, the results from both the research studies was
then combined to create a global view of the research.
26. 21
Questionnaire design
The same sets of questions were posed to both the US and the ROW audience. The US
audience was recruited from the Survey Monkey Audience tool for a random sample
across the population. The ROW group was recruited via online emails and Facebook,
specifically ensuring that the people who responded were non-US based but not
controlling for any other factors.
The sample size for this research paper was determined predominantly by the budget
and timing constraints for the project, and a larger sample size may impact the results
and may be valuable to explore for a future research project.
The questionnaire was designed to include all the popular social networks that
consumers are aware of (Facebook, Twitter, LinkedIn, Pinterest, Google+), getting users
to pick their favorite or most popular network and to answer additional questions on the
most used network. A combination of emotional responses as well as usage and activity
responses were collected, based on a set of 16 questions consisting of single answer
choice among several options, several answer choices and questions for which open-
ended questions were allowed. The survey questions were designed by the author and
were in the following categories:
Engagement with social networks: How critical social networks were to their
lives, compared to usage a year ago
Online advertising: Engagement with online advertising
Usage: Frequency and depth of usage of the various social network sites
In total, a sample of 61 US respondents and 67 ROW respondents participated in the
online survey conducted via the online Survey Monkey tool over a period of 6 weeks. A
copy of the questions used in the online survey is attached in Appendix A.
3.5.2 Expert Interviews
To investigate the external factors that impact marketing agencies and marketers‟
choices of social networking tools, and the internal factors that affect the social networks‟
ability to differentiate and innovate, ten high-profile industry practitioners were chosen for
one-on-one in-depth interviews, lasting for about an hour and conducted face-to-face or
on the phoneover a period of 4 months. These industry practitioners were profiled based
on the contacts in the author‟s network and on their ability to provide an opinion on
27. 22
online advertising efficacy with advertisers, social networks monetization efforts as well
as opportunities for diversification into new revenue streams and business opportunities.
The 10 industry leaders range from head of marketing agencies, marketing professionals
in various roles working directly with advertisers, veterans in the online advertising
industry and small business owners, and were also chosen to represent several
geographies.
A copy of the questionnaire used as a guide during the interviews and a list of the
interviewees are attached in Appendix B, and a copy of the transcripts from the
interviews are available on the CD-ROM.
3.5.3 Secondary research
A wide range of academic and opinion sources were explored to substantiate the
collection of data and insight from the quantitative and qualitative research, ranging from
books to online analyst and research reports. The primary goal was to:
Understand the dynamics and sizing of the online advertising market from
sources like eMarketeer and the Interactive Advertising Bureau (IAB),
Gain insights into consumer usage of technology from Search Engine Watch and
IDC,
Get industry viewpoints, opinions and news from online technology sites like
Techcrunch, The Next Web and Mashable, and
Financial Reports from the Investor Relations sites
A key learning from the secondary research is how widely the projections for the online
advertising market vary, and how new formats and approaches have been rapidly
introduced in the last 5 years, since the online advertising segment is one of the fastest
growing segments of the total advertising spend globally.
There are also lines being blurred between the various categories of online advertising.
As an example, search advertising is now making display advertising much more
relevant as a result of key players and partnerships entering the market, Chango‟s deal
with Facebook in late 2012 being one example.
28. 23
3.6 Summary
Using a combination of quantitative research to better understand the consumer of social
network services, and qualitative research from interview industry leaders, provided a
rich set of data points to start analyzing how the virtuous cycle of consumer engagement
and marketers adoption can impact the online advertising business model. New areas
that could be explored as additional revenue sources were discovered and will surface
during the data analysis in the next chapter.
29. 24
4. Analysis
4.1 Approach to Analysis
Fig 4.1
The approach to the analysis is outlined in Fig 4.1. Consumer survey results from the US
and ROW surveys are analysed for insights into emotional connection with social
networks, tenure and usage and interaction with advertising. A global view, aggregated
from the US and ROW data, is then created and analysed, and cross-tabulations were
done for specific areas to understand if there were additional useful correlations.
To create a map of the potential revenue opportunities, a SWOT analysis to understand
the internal capabilities that can be leveraged, and a value chain analysis to uncover
untapped opportunities, was conducted. Insights from the interviews were then
combined with the analysis to create a map of revenue opportunities, which have been
modeled for three years using a combination of publicly available market and
competitive data.
30. 25
4.2 Consumer View
One of the 3 key pillars of the conceptual framework created earlier is consumer
engagement, and one that is fundamental to Facebook‟s momentum and revenue
model. The quantitative research with consumers in both the US and ROW provides
responses which gauge the emotional connection as well as variations in response
related to tenure with the social networks. Another key external viewpoint that is critical
to the success of Facebook is the experience marketers have with the marketing
solutions that Facebook provides. The third perspective in the external view is the value
chain that Facebook operates in, that impacts the control and the influence it has over its
activities. The consumer and marketer perspectives, as well as the value chain, are
analysed in this section.
The consumer research was focused on gaining an understanding of the usage pattern
and emotional connection to social networks compared to a year ago and response to
advertising that they experience on these social networks. Two levels of analysis were
conducted based on the data collected:
1. A side by side comparison of the aggregated responses on all questions from 61
respondents from the US, an advanced market for Internet consumer behavior,
and 67 ROW respondents; and
2. A combined global viewpoint of the 128 respondents.
A copy of the consolidated consumer research results (for the US, ROW and
consolidated Global results) is available in Excel on the CD-ROM (Market Research
Summary Global Online Survey).
4.2.1 Emotional Connection
Response to Question 2: To what extent do you agree/disagree with the statement:
Online social networks are an important part of my life.
Both US and ROW respondents feel a strong emotional connection to social networks,
with 65.5% of US respondents and 78% of ROW respondents agreeing or strongly
agreeing with this statement.
31. 26
US ROW
Disagree/Strongly Disagree 32.9% 20%
Agree/Strongly Agree 65.5% 78%
Response to Question 14: “If my favourite social network disappeared, I would not be
bothered.”
There is a strong bond between consumers and their ”favourite” or most used social
networks, as evidenced by 56% of US respondents disagreeing or strongly disagreeing
with the statement, and 60% of ROW respondents.
Response to Question 15: “What would you do if they disappeared?”
Most people will move to their social activity to another site where their friends are (49%
ROW, 42% US) while also potentially moving to the next big thing that will come up
(17% US, 26% ROW).
68% of US and 74% of ROW respondents do not believe that social networking is a
passing fad.
4.2.2 Tenure and usage pattern
Response to Question 3: “Which social networks do you currently have an account
with?”
Facebook and Twitter are highly used both in the US and ROW, garnering 95% and
40%+ responses. For Pinterest, the usage is much higher in the US compared to the
ROW, almost double in usage. LinkedIn, on the other hand, has almost double the
number of respondents in ROW compared to the US.
Response to Question 4: “When did you join these social networks?”
Twitter users in ROW have a longer tenure (2 or more years) compared to the US
(almost double in percentage terms). A similar trend applies on LinkedIn, where the
difference is much more pronounced for those respondents with >2 years with the
service (almost triple in percentage terms). 30% of Google+ users in ROW are recent
joiners, having only started using the service in the last six months.
32. 27
Response to Question 5:“Are you using it more often, less often or the same, compared
to a year ago?”
Engagement levels have increased for Facebook for ROW users (63% using more
often), whereas in the US, equal numbers are using Facebook more often or at the same
rate as a year ago. Twitter and Pinterest seem to be losing engagement with consumers
in ROW (58% using Twitter less than a year ago, 43% for Pinterest). US users mainly
using LinkedIn at the same level as a year ago, while proportionately, LinkedIn has
increased engagement with ROW users (29% use more often).
Response to Question 6: “Which social network do you use most often?”
There was an overwhelming response to Facebook (85%+) as the social network that is
used most often, across both the US and ROW. Twitter also has a reasonable number
of users using the social network in the US, whereas both LinkedIn and Google+ came
in second in terms of responses for ROW.
Response to Question 7: “How often do you use your most frequently used social
networking site”?
There were similar usage trends across both US and ROW, with more than 68% using
their frequently used site at least once a day and more than 21% using it several times a
week.
Response to Question 8 on what do you do most often:
Usage patterns are similar in both the US and ROW, with the top activities being
browsing and posting “like” and comments, followed by chatting with friends and playing
games.
Response to Question 9 on ranking what you like most and least about activities:
There are some slight differences in the response to the favourite things to do on the
most frequently used social networking site (as seen in the table below). US
respondents use these networks more for social connections with friends and brands;
while using the channel as a form of expression, ROW users also tend to use this
channel as a way of keeping updated with news and discovering new things.
33. 28
Answer Options US ROW
Keeps me connected to people 1 1
Allows me to interact with my favourite brands 2 3
Allows me to voice my opinion 3 4
Keeps me updated on the latest news 5 2
Allows me to discover new things 4 3
Allows me to make new connections 6 5
4.2.3 Response to Online Advertising
Response to Question 10: “To what extent do you dislike the following?” and Question
11: “Have you noticed any advertising on the site?” and Question 12: “Have you clicked
on any of these advertisements?”
More than 80% have seen the advertising on the sites across both the US and ROW,
and about 28% have clicked on these advertisements. US and ROW respondents dislike
the fact that there are too many ads on the site, an ongoing concern for services which
are advertising-supported.
There are also some pain points around the mobile site and the fact the site is slow.
Response to Question 13: “Why do you not use the other social networking sites?”
US respondents believed there was no value to them from these other social networks
(68%), and some do not use others because their friends don't use it (38%).
Some US respondents provided other reasons for not using other social networking
sites:
Lack of time “I have at most 30 minutes a day”
Unfamiliarity
Use most of social networks simultaneously
Inferior
Running my business for free
For the ROW, the main reasons were spread evenly across the lack of personal value,
their friends were not using it and to the fact that the other sites do not make them feel
as connected.
34. 29
Several ROW respondents provided alternative points of view for not using other social
networking sites:
Perception of Twitter – “Can‟t spend too much time “tweeting” about nothing”
Practical: accustomed to one, busy, no need to manage too many personas
Too many options
4.2.4 Conclusion - Consumer Audience
Those responses that garnered more than 60%aggregated scores were considered
strongly directional. Based on those criteria, engagement levels have increased with
consumers compared to a year ago, and agree that social networks are an important
part of their life. Consumers also do not believe that social networks are a passing fad,
and will be a part of their lives.
A summary of the responses from the global data is shown below.
4.3 Marketers
Some concerns raised by marketers and those representing marketing agencies related
to:
a. Ensuring that advertising remained non-intrusive, with the example of Facebook
publishing advertising within the news feed. While the data from Facebook
seems to indicate that usage has not dropped since the introduction of the new
ad format within news feed, marketers still felt it was intrusive,
b. Complexity of the buying process for marketers with new ad formats being
constantly introduced,
Emotional Connection
2 Important part of my life 72.3%
14 Would bother if disappeared 58.4%
15 What would you do if disappeared? 45.6%
Go to where my friends are
T enure and Usage
4 Tenure (>2 years) 74.4%
5 Frequency of use - increased 52.4%
Frequency the same 34.1%
7 At least once a day 70.6%
Interaction with Advertising
12 Clicked on Ads? 28.0%
35. 30
c. ROI on social media investments: Marketers cited the example of creating
content pages on Facebook, but not being able to capture user information to
create a user database from the “Likes” that are obtained, plus the additional
investment needed to keep content updated to get user engagement, and
d. There is also the concern about the hype among marketers using social media
(BRW article, Mark Kitson). 50% of the coverage in marketing media centred
around social Media in Australia, while actual spends were closer to only 5% of
total spend. There are quite a number of other opportunities that are being
missed by marketerswhile being distracted by social media.
“Young people are starting to leave Facebook. Facebook, despite all the messages
about the young ones leaving and being bored with it, still has >1 Billion users, which is
a big population on any account.” Nelson Wee
Facebook‟s sheer size of the user base does give it credibility to at least get spending
from marketers for experimentation and learning.
4.4 Value Chain
Fig 4.2
36. 31
Facebook thrives on innovation. The hacker engineering culture prevalent in high
technology Silicon Valley companies is core to Facebook‟s “Move fast and break things”
culture (David Kushner), and is central to how Facebook develops products.
There are three key parts to the product: development of the core Facebook service, the
open platform that third parties leverage to build their services and the users generating
their posts and likes (user-generated content) that adds to enrich the Facebook service.
All the components of production related to the product as well as the advertising and
monetization platform drive the revenue model. Marketing and sales is done both by
word-of-mouth owing to the strength of its brands and also the agencies who deliver
campaigns on behalf of their clients.
Distribution of Facebook is via several channels: the website, the mobile application, by
partners redistributing Facebook content and also through individual Facebook
properties being distributed (as an example, the Instagram mobile photo-sharing
application).
From this analysis, opportunities do exist to open up to third parties to build and enrich
the platform, although monetization potential is unclear.
4.5 SWOT
The SWOT analysis below is done with the distinct need to uncover qualitative views
that may impact Facebook‟s ability to further build the revenue model.
Strengths:
Facebook has a large user base (more than 1 Billion users) that is actively
engaged with the network.
Facebook‟s brand strength and recognition is high, among consumers and within
the industry.
Facebook financial position is strong – both with cash ($ 9.626B cash and short
term investments in 2012) and quarterly operating margins (generating $1B in
net income in 2011 and $53M in 2012, even while being in investment mode)
The culture of innovation (called the “hacking culture”) is very strong and unique,
and widely acknowledged as crucial to its success, along with the talent pool and
37. 32
management bench. In addition, several acquisitions for talent (Teresa Novellino)
have been made which have helped the company.
The profile of key executives within the company (Mark Zuckerberg as youngest
CEO in the Fortune 500 and Sheryl Sandberg, COO) is very high in the industry
and it is critical to their PR and image management for the company.
Continued momentum in online advertising with agencies and marketers is
helping Facebook to show good quarterly results.
Industry partnerships, in particular with Microsoft, have helped to bolster both the
technology and the innovation potential in the organization.
Weaknesses:
The non-diversified revenue model focused mainly on online advertising could be
a high risk area and one that requires focus.
High levels of innovation are expected from Facebook to keep consumers
engaged and marketers keen to keep investing in Facebook.
As a public company, the expected growth trajectory is very high, which raises
added pressure on the organization and employees.
Opportunities:
Facebook has a reputation for being an innovative company and this should be
harnessed for industry partnerships and in all marketing efforts.
Monetisation opportunities around more targeted and contextual advertising
efforts, plus mobile traffic, are lucrative for Facebook to capitalize on.
Search, and search-related advertising offers, is an area largely unexplored by
Facebook. Since it is a very lucrative segment and once largely dominated by
Google, and with typical advertising spends having 50% spend on search related
advertising, this is an area worth exploring.
Emerging markets growth, including China where Facebook is largely non-
present, would be valuable to tap into.
In the high growth, high technology area that Facebook plays in, acquisitions are
potentially leveraged as a way to acquire talent or technology that can support
internal efforts.
38. 33
Threats:
Keeping talent who has become rich from the Facebook IPO will affect the
operations of a fast growth company like Facebook.
Consumer privacy continues to be a concern as consumers gain in awareness.
Reducing youth engagement is an area that must be watched carefully as this
audience is valuable for the marketing community.
There is a delicate balance in the online advertising ecosystem where partners
can quickly become competitors. As an example, Microsoft is a strategic partner
and investor in Facebook, but also builds many sub-products and services (like
MSN.com) that can potentially compete with Facebook.
The public company pressures coupled with the long term investment needs that
Facebook is a very delicate balancing act that can easily threaten the company if
quarterly results do not match expectations.
4.6 Modelling the Revenue Opportunity
From the SWOT and value chain analysis as well as the interviews with industry experts,
the following opportunities for Facebook to grow revenue were identified:
Consumer Focused:
Advertising:
o Mobile advertising , including Instagram
o Online Advertising, including video Ads
o “Search”
Commerce:
o Social Commerce
o E Commerce
o Pay-for services
User growth, including emerging markets
Business and Partner focused:
o B2B
o Platform for third parties
o Acquisitions
39. 34
The sections below start the scenario planning process for multi-year revenue potential
in each of these categories, and a combined section at the end summarises the
possibilities for Facebook over the next several years.
Most of the opportunities are modeled over the next 3 years using comparatives, and
assumptions about Facebook‟s ability to capture the opportunity. In most of these cases,
the assumption is that the cost structure, and hence margins, are maintained and
revenue multiples can be used as a proxy for value in the marketplace.
A copy of all the models built for this analysis is available in Excel (Models for Analysis
and Facebook Ratios) on the CD-ROM, and summaries of the models are attached in
the following sections.
4.6.1 Mobile Advertising
The monetization opportunity for mobile services is broken down into several categories:
mobile advertising (both display and search), in-app (both advertising and downloads)
and mobile games. Several mobile advertising networks (like AdMob) have been in
operation for a while, but with Facebook‟s dominant usage and engagement for mobile
(“comScore put out a report saying that Facebook is now 23% of all time spent on apps
in the U.S. And one of the next biggest apps is Instagram at 3%.” Mark Zuckerberg, Q4
2012 earnings call) and the high mobile advertising traffic levels, the opportunity is
largely nascent and a real opportunity exists for Facebook to capture significant revenue.
A few key trends drive the value capture opportunities for Facebook:
Size of the market in each of the categories – mobile advertising is the fastest
growing segment
US Market ($B) 2010 2011 2012 2013
Total Mobile Ads 4.5 7
Mobile – Display 1.7
- Facebook 0.234
- Pandora 0.229
- Twitter 0.117
Mobile – Search 0.7 1.6 2.8
- Google 2.166
Source: IDC, Clickz.com
40. 35
Trends of mobile display advertising moving from mobile advertising networks
(like AdMob) directly to niche sites like Facebook (IDC, April 2013)
Mobile advertising publishing standards are still being developed and there is a
real opportunity for innovation
An opportunity in emerging markets to lead with the mobile being the first
experience on the Internet for a lot of users and where growth and usage of data
services continues
Strong growth in the use of Instagram on mobile devices for Facebook
The key challenges, surfaced from the interviews, continue to revolve around advertising
innovation to fit a very small screen, advertising effectiveness and ROI for advertisers,
growing into the emerging markets who are experiencing tremendous growth and the
relative size of the mobile advertising market compared to overall online advertising,
although this is changing rapidly.
Scenarios
Summary:
Base Case - Facebook revenue
Facebook retains mobile display market share
In-app advertising revenue Growth
2012 2013 2014 2015 2016
Mobile Display 488.0$ 571.0$ 676.5$ 913.3$ 1,228.0$
In-app 14.4$ 20.7$ 29.7$ 42.6$ 61.3$
Total 502.4$ 591.7$ 706.2$ 955.9$ 1,289.3$
% Mobile Display 97.1% 96.5% 95.8% 95.5% 95.2%
% In-app 2.9% 3.5% 4.2% 4.5% 4.8%
Optimistic Case
Facebook grows mobile display market share at 0.5% per year
Revenue shift increases to mobile to correspond to time spent
2012 2013 2014 2015 2016
Additional Mobile Display -$ 57.1$ 135.3$ 274.0$ 491.2$
Revenue shift - time spent 80.0$ 160.0$ 240.0$ 320.0$ 400.0$
Total - Additional Mobile Display 80.0$ 217.1$ 375.3$ 594.0$ 891.2$
Total Mobile Display 582.4$ 808.8$ 1,081.5$ 1,549.9$ 2,180.5$
% Total Mobile Display - new 97.5% 97.4% 97.3% 97.3% 97.2%
% Total In-App 2.5% 2.6% 2.7% 2.7% 2.8%
41. 36
Detailed model:
Mobile advertising - US (source: IDC)
Millions 2010 2011 2012 2013
Mobile advertising - US (source: IDC) 4,500$ 7,000$
Mobile display ads 1,700$
Mobile search ads 700$ 1,600$ 2,800$
Mobile display - Facebook 234$
% of display market 14%
% of overall market 5%
Mobile search - Google 2,166$
% of search market 77%
% of overall market 48%
Mobile advertising - WW (source: Gartner)
Millions 2012 2013 2014 2015** 2016
North America $ 3,182 $ 3,826 $ 4,695 $ 8,866
Western Europe $ 1,601 $ 1,941 $ 2,368 $ 4,445
Asia/Pacific and Japan $ 4,333 $ 4,865 $ 5,507 $ 9,480
Rest of the World $ 644 $ 788 $ 961 $ 1,768
Total $ 9,759 $ 11,420 $ 13,530 18,266$ $ 24,560
Growth 17% 18% 35% 82%
Using share information from IDC as proxy: 2012 2013 2014 2015 2016
A Facebook retains share of overall market (5%) 488$ 571$ 677$ 913$ 1,228$
Google retains share of overall market (48%) 4,684$ 5,482$ 6,494$ 8,767$ 11,789$
Assumption:Mobile advertising is a separate category outside the traditional online advertising categories
In-app Advertising ('000s) 2011 2012 2013** 2014** 2015
B Market size (source: Juniper, Whitepaper) 970$ 2,400$ 3,444$ 4,942$ 7,100$
Growth 147% 44% 44% 44%
** 2013 and 2014 data are straightline projections from 2012 data
Assume 2016 projection is the same growth at (1.44*7100) = $10,224
CTR for Social and IM (source: Hillel Fuld, inneractive) 0.60%
Potential revenue 5.8$ 14.4$ 20.7$ 29.7$ 42.6$
Assume 2016 revenue is (0.006*10,224) = $ 61.34
C Revenue from additional shift of dollars closer to time spent
Assumptions - Mary Meeker - 2011 data (Dec 2012 report)
10% of time spent in media is in mobile; 1% is monetised
Every 1% is worth an additional $1.6B
Assume 1% additional per year shift of media spend closer to time spent
2012 2013 2014 2015 2016
Market size 11,359.10 13,020.00 15,130.00 19,865.50 26,160.10
Assuming Facebook retains its 5% market share,
Additional revenue from shift 80$ 160$ 240$ 320$ 400$
D If Facebook grows share of mobile display market by 0.5% per year
2012 2013 2014 2015 2016
Facebook revenue share 5% 5.5% 6.0% 6.5% 7.0%
Facebook revenue 488$ 628$ 812$ 1,187$ 1,719$
Mobile Games - Google's payments business - has not been modelled. Assumption is this is replaced by other
revenue streams, like in-app advertising, over time.
** 2015 data is a straight line projection from 2014 data.
42. 37
Two scenarios were developed for the mobile revenue streams, as seen above. In both
scenarios, it was assumed that the in-app advertising opportunity remained the same at
a low 0.60% click through rate (which was used as a proxy for Facebook‟s market share
with Apple, Google and Amazon as strong competitors), in line with current estimates for
social online advertising click through rates.
For the optimistic case, in additional to Facebook‟s market share growing per year, an
accelerated revenue shift to mobile spending to close the gap with time spent was
modeled.
In both cases, mobile display revenue dominates the total mobile revenue opportunity.
4.6.2 Online Advertising and Search
“So even if they (Facebook) get double the number of people to click on their ads, and if
they can double the amount of money they can get for each click now, that’s four times
more venue than they can get now, right, which is significantly large.” SriramAdukoorie
The opportunities for online advertising are centered around improving the relevancy
and contextual nature of online advertising to improve targeting and hence be able to
charge higher rates (cost per click or CPC), while at the same time building new
revenues around innovations like video advertising. Facebook already captures a very
significant portion of all the advertising impressions on the Internet – about one third.
While Facebook does not have a search product, the partnership with Chango will start a
search revenue stream for Facebook and is critical to “enhance its own core search
functionality and advertising”.(Zach Rodgers, Jim Edwards).
Yet, challenges among marketers adopting online advertising and social media remain:
On the conversation with the CMO of Johnson & Johnson about using social media and
social networks: “We’re kind of all in the same position trying to figure stuff out, and you
only hear the success stories.” JawazIllavia
43. 38
Scenarios:
Maintaining market share, growing market share at 1% per year and the impact of the
Chango deal on a new “search” revenue stream were the scenarios developed. The
online advertising revenue opportunity is the largest opportunity and will give Facebook
the biggest mileage if the opportunity can be scaled quickly.
Scenario A: Facebook maintains share of total global online advertising revenue at 2012 level (6%)
Millions 2010 2011 2012 2013** 2014** 2015**
Facebook advertising revenue - Global 1,860 3,710 5,089 5,904 6,841 7,501
Growth 99% 37% 16% 16% 10%
Google advertising revenue - Global 29,321 36,531 43,686 50,837 58,906 64,585
Growth 25% 20% 16% 16% 10%
** 2013-2015 projections are based on Facebook maintaining online advertising share of 6.0% in a growing market
Internet Advertising revenue - Global 63,979 72,842 84,267 97,764 113,281 124,202
Growth 14% 16% 16% 16% 10%
Facebook - % of total 3.1% 5.1% 6.0% 6.0% 6.0% 6.0%
Growth 64% 19% 0% 0% 0%
Google - % of total 44.1% 50% 52% 52% 52% 52%
Growth 14% 3% 0% 0% 0%
User base
Facebook - Monthly Active Users 500 802 1010 1141 1255 1343
Growth 60% 26% 13% 10% 7%
Facebook - Revenue per user 3.72$ 4.63$ 5.04$ 5.17$ 5.45$ 5.58$
Growth 24% 9% 3% 5% 2%
Google - Unique Users 156 173 181 190 200
Growth 11% 5% 5% 5%
Google revenue per user 24$ 43.16$ 43.16$ 43.16$ 43.16$
Source: Google Investor Relations site http://investor.google.com/financial/2010/tables.html
Source: Global Online Ad Revenue to reach $106B by 2017 http://www.digitaltvresearch.com/press-releases?id=21
Source: Compete SiteAnalytics http://siteanalytics.compete.com/google.com/
Source: Global Online Ad Revenue to reach $106B by 2016 http://geobrava.wordpress.com/2011/10/27/global-online-ad-revenue-to-
reach-106b-by-2016/
44. 39
4.6.3 Social Commerce and E Commerce
No universally definition of social commerce exists (Wang and Zhang), but most
discussions to date center around the combination of aspects of electronic commerce
and social networking to enhance the buying experience. While the concept of social
commerce has been around since around 2005, the market is still very nascent and no
major success stories exist.
The sizing of the market opportunity varies considerably from various sources, and for
the purposes of this analysis, Booz &Co‟s report and its projections of the market size is
used. Globally, estimates are $9B in 2012 and for the market to grow to $30B by 2015.
Facebook‟s efforts in social commerce are centred around both the payments platform
and Facebook Stores, Credits and Fan Pages, and estimates for 2012 revenue are $40
M (Trefis.com).
The key challenges for Facebook in the social commerce arena are best encapsulated
by the following quote from the interviews:
Scenario B
Facebook grows market share (organic based on sales efforts), Google retains market share
Additional 1% a year 2013 2014 2015
Facebook - % of total 7% 8% 9%
Google - % of total 52% 52% 52%
Facebook Advertising Revenue (incremental) 978$ 2,266$ 3,726$
Google Advertising Revenue (incremental) - - -
Scenario C:
Facebook's partnership with Chango makes an impact - based on intent and first foray into 'search'
0.25% additional a year 2013 2014 2015
Facebook advertising revenue (incremental) 244$ 283$ 311$
Base Case - Scenario A
Millions 2013 2014 2015
Facebook advertising revenue - Global 5,904$ 6,841$ 7,501$
Growth 16% 16% 10%
Optimistic Case - Scenario A + B +C
Total Facebook Online Advertising Revenue 7,126$ 9,390$ 11,537$
Growth 40.0% 31.8% 22.9%
45. 40
“Social commerce could be an opportunity for Facebook, but the question becomes one
of how Facebook can extract value from providing the “social identity” platform for other
companies to build new services on top of. Should they build these services
themselves?” Nelson Wee
There will be constant tension between being a provider of the consumer service and
being a platform, which makes this area a challenge to predict.
While Facebook is a material driver of traffic to other websites,
“…..a year later, 29.1% of site traffic was from the social network (Facebook), Mullen
wrote in an email to Mashable.” Mashable, Feb 2012
the same article points to brands who have created storefronts on Facebook but are now
stopping their operations.
The two scenarios modeled above are keeping the market growth rate and maintaining
market share, and a more optimistic scenario of doubling the rate of growth in the
market.
4.6.4 Emerging markets – China
Compared to Facebook‟s global revenue per user of $ 5.04 in 2012, the $ 0.50 revenue
per user for Tencent(table below) seems very low, but this is more than compensated for
by the sheer number of users that are addressable with consumer services in China.
Facebook‟s $330,000 projected revenue for such a large market opportunity is
representative of the regulatory and competitive challenges it faces, along with other US
2012 2013 2014 2015
Market Sizing 3,000$ 5,000$ 9,000$ 14,000$
Growth 67% 80% 56%
A Base Case
Keep at market growth rate
Facebook Commerce 40.0$ 66.7$ 120.0$ 186.7$
Market Share 1.3% 1.3% 1.3% 1.3%
B Optimistic Case
Double the growth rate of the market
Facebook Commerce 40.0$ 93$ 243$ 512$
Market Share 1.3% 1.9% 2.7% 3.7%
Growth 133% 160% 111%
46. 41
based consumer companies like Google, and this limitation is restrictive to the growth
model, as penetration into developed markets reaches the 30 to 40% levels.
The emerging markets online advertising revenue opportunity is not modeled but it is
acknowledged that any successful foray, including joint ventures and partnerships, will
materially impact the business projections for Facebook‟s performance.
4.6.5 B2B
Penetrating the business-to-business market was an opportunity that was cited by a few
of the interviewees, although there was caution about trying to replicate the LinkedIn
direct model, and also acknowledging that LinkedIn‟ success with B2B is in a niche
segment mainly for corporate recruiters.
Optify‟s B2B report (US only) highlights the realities of the B2B market segment:
The biggest contributor of traffic to B2B websites was Google, driving 36% of the
total number of visits, and
On average, less than 5% of all B2B website traffic referrals was from social
media (which would include more than Facebook).
For the purposes of this analysis, a more rigorous model can be built that shows the
contribution and potential growth of B2B traffic referrals and monetization potential.
Since the Facebook monetization model for B2B is indirect through businesses placing
advertising on their site, it is assumed that the upside from B2B is built into the online
advertising model.
Millions
Tencent
Revenue 544.60$
WeChat User Base 300
QQ user Base** 798
Total Users 1098
Revenue per user 0.496$
**Source: Bloomberg
Facebook User Base 611,000
Revenue Projection (2012) 303,052$
Assumption is there is no overlap between WeChat and QQ
user base, since they are targetted to different audiences.
47. 42
4.6.6 Platform Play
The opportunity for Facebook to become a marketing platform and enabler, with the
amount of data on social habits, interactions and profile information, is a double edged
sword. One the one hand, it is clearly of value to advertisers and marketers who are
interested in understanding consumer behavior and hence tailoring solutions to meet
their needs. At the same time, the risks posed by invasion of privacy cannot be
underestimated, and an area Facebook will need to tread carefully.
“Commercialising privacy has always had the potential to challenge Facebook’s model.
Also “if you feel like you’re being watched”, this monetization of someone’s private feeds
can very quickly turn consumer wrath against Facebook.” Audrey Kuah
The other opportunity for the Facebook platform is for application and software
developers to build value to end consumers by leveraging the distribution potential and
platform from Facebook. No clear monetization potential exists for this area, other than
enriching the value for users and keeping engagement levels high, by having more third
party services on the Facebook platform.
Facebook‟s recent acquisition of a startup called Parse helps to build on the platform
idea by offering mobile development tools to software developers (who may be
businesses), thus creating a new pay-for-service subscription business for Facebook as
well, an additional revenue stream very different from the online advertising revenue
model.
“Instead, it’s a horizontal social and identity layer that runs through thousands of apps of
iOS and Android, in deep custom integrations in devices made by hardware makers like
HTC, and in its latest project, Facebook Home.” Kim-Mai Cutler, Josh Constine,
Techcrunch, April 2013
Horn-hann, Vishwanathan and Koh‟s research based work on the “Facebook App
Economy”, demonstrates the job creation potential of the Facebook platform, concluding
that conservatively, “at least 182,744 jobs were added to the US economy in 2011 as a
result of the Facebook App Economy” very much related to developers building new
services for the Facebook platform.
Since the value of the tools is relatively small in revenue terms compared to advertising,
and Parse is very much an early stage company acquired for its technology platform,
48. 43
this opportunity is not modeled into the scenarios, but one that can be evaluated for
future research.
“More than a million third-party sites, meanwhile, have integrated Facebook's open
platform to let members connect with friends and share their opinions on those sites: half
of comScore's Global Top 100 websites have integrated with Facebook.” Wired, January
2011
4.6.7 Social Gaming
Social gaming is another large industry on its own, and one that has been driving the
success of social networks in Japan for a number of years with GREE and DeNA. Japan
and Korea have well-established players in the social gaming arena with revenue
generation from both advertising as well as payment for virtual goods.
According to GamesBrief.com, an estimated 98 million Americans are social gamers,
who are active on social networking sites. However, a large number of these are likely to
be free social gamers who are interacting through the games for social reasons.
Facebook should be able to capture some value from this segment, but it is still unclear
if this is additive to the payments business, a reinforcement of the platform with no
additional revenue potential, or potentially a large part of Facebook‟s advertising
revenue in the future. Since a large part of the value is captured by the game producers
and developers, and there is upside modeled into the online advertising revenue model,
social gaming is not modeled as a separate opportunity.
4.7 Conclusion - Summary of opportunity
Base Case - % of total 2013 2014 2015
Mobile Display Advertising 8.7% 8.8% 10.6%
In-app 0.3% 0.4% 0.5%
Online Advertising 90.0% 89.2% 86.8%
Social Commmerce 1.0% 1.6% 2.2%
Growth 16.8% 12.7%
Optimistic Case - % of total
Mobile Display Advertising 10.0% 10.1% 11.4%
In-app 0.3% 0.3% 0.3%
Online Advertising 88.5% 87.4% 84.6%
Social Commmerce 1.2% 2.3% 3.8%
Growth 33.5% 27.0%
49. 44
Base Case:
Optimistic Case:
One of the clearest takeaways from this modeling exercise is the fact that Facebook is
likely to be heavily dependent on online advertising as a business model for the next
three years, and that while social commerce and in-app are not small revenue
generating opportunities on their own, their impact on the Facebook revenue is subdued
by the magnitude of the online and mobile advertising opportunities.
Comparisons with historical performance of competitors is needed, as well as
Facebook‟s prior performance, to help interpret the expected base case and optimistic
case revenue growth trajectories for Facebook over the next 3 years.
$-
$2,000.0
$4,000.0
$6,000.0
$8,000.0
$10,000.0
$12,000.0
$14,000.0
2013 2014 2015
Social Commmerce
Online Advertising
In-app
Mobile Display
Advertising
50. 45
The table above compares the historical performance for quarterly revenues over the
last ten quarters for Facebook, Google and LinkedIn. It is acknowledged that Google has
been a public company for the entire period, LinkedIn for nine of the quarters and
Facebook for the last 4 quarters, and therefore the experience of being a public
company and managing market expectations is in favour of LinkedIn and Google. The
comparison here is for revenue only and does not include all the other factors that need
to be considered in the evaluation of a company‟s performance.
Google has a much larger revenue base and has managed a very healthy average
quarterly growth rate of 5.8% and annual 2011-2012 growth rate of 32%, with a search
revenue model and high market share in the search category. While LinkedIn has a
diversified revenue stream with 30% of the revenue from online advertising, and a much
lower quarterly revenue base, the impressive average quarterly growth rate of 15.1% will
still be watched carefully, and comparisons to Facebook are inevitable.
Based on these comparatives, Facebook would need to be delivering on the optimistic
scenario over the next three years, to be considered as achieving its potential and
delivering the right revenue growth levels to please investors. The online advertising
revenue model is the core revenue stream for Facebook over the next few years,
andneeds to be well optimized to keep delivering the growth. At the same time,
Historical Growth Comparatives for Facebook, LinkedIn and Google
Source: www.ycharts.com
Source: http://www.forbes.com/sites/tomiogeron/2012/02/09/linkedin-q4-earnings-revenue-beat-street/
Facebook 2013-03 2012-12 2012-09 2012-06 2012-03 2011-12 2011-09 2011-06 2011-03
Revenue growth 1.46 1.59 1.26 1.18 1.06 1.13 0.95 0.90 0.73
Revenue growth -8% 26% 7% 12% -6% 19% 7% 22%
Average quarterly growth (2013 - 2015) 8.6%
Google 2013-03 2012-12 2012-09 2012-06 2012-03 2011-12 2011-09 2011-06 2011-03
Revenue 13.97 13.22 14.10 12.21 10.64 10.58 9.72 9.03 8.58
Revenue growth 5.7% -6.2% 15.5% 14.8% 0.6% 8.8% 7.7% 5.3%
Average quarterly growth (2013 - 2015) 5.8%
LinkedIn 2013-03 2012-12 2012-09 2012-06 2012-03 2011-12 2011-09 2011-06 2011-03
Revenue 324.70 303.62 252.03 228.21 188.46 167.7 139.48 121.04 93.93
Revenue growth 6.9% 20.5% 10.4% 21.1% 12.4% 20.2% 15.2% 28.9%
Average quarterly growth (2013-2015) 15.1%
Annual Growth Rates 2012 2011
Facebook 37% 88%
Google 32%
Linkedin 86%
51. 46
diversificationof revenue streams into opportunities like mobile advertising, social
commerce and in-app advertising are necessary to demonstrate the strength of the
Facebook platform. Delivering on all these priorities will pose both a strong strategic and
tactical challenge to Facebook over the next several years.
52. 47
5. Conclusion and suggestions for future research
5.1 Conclusion
Social networks can be now considered a mainstay with consumers and part of the
marketing mix with businesses. The momentum with Facebook‟s user growth and the
IPO has raised the level of scrutiny that public social networks,Facebook in particular,
receive in the press and popular media. Facebook increasingly is positioned as a
competitor to Google, the consumer search engine giant with a strong moat in its
monetization engine, and will continue to evolve and close the gap with the search giant,
with opportunities to optimize its online advertising model.
“Historically, any media, when starting out, has historically depended on advertising for
adoption and rapid growth (examples of TV, radio and print).” RohitDadwal
To understand the potential for the online advertising revenue model for a social network
like Facebook requires an understanding of the consumer adoption and engagement
with the network. Variations in usage levels are expected across age groups,
psychographics, tenure with the network and adoption levels of technology. While the
typical activities, “Like” and “Share”, would be common across all categories of users,
variations in engagement also would relate to the additional services that users use, like
third party games services and apps, as well as the amount of content created and
uploaded.
The second pillar critical to the success of the online advertising model are the people
who sell advertising to customers. Traditional and digital media agencies are all learning
and responding to customer requests to make sense of these social networks and the
impact on consumer behavior. Online advertising on social media is a format that these
agencies, and marketers within companies, cannot ignore and are learning to
incorporate into the traditional marketing mix. Self-service models for buying advertising
on this media creates additional opportunities for these social networks to reach small
and medium customers who are increasingly leveraging this low cost (relatively) to reach
consumers.
The industry around online advertising has evolved quickly over the last 10 years. In
some countries, up to one quarter of marketing budgets are spent on online advertising
as marketers realize the value and effectiveness of the medium in meeting their
53. 48
objectives. Online advertising on social networking (which would include all the
additional channels like mobile) is increasing in influence as a vast majority of
consumers start accepting advertising within their social network experience, as long as
it remains mainly non-intrusive.
This paper has presented a conceptual framework to explore these three legs of
consumer adoption, evangelism of social media solutions by marketers and the online
advertising revenue model that reinforce each other in a virtuous cycle, as a way of
developing a view of the future revenue potential of Facebook.
The research findings indicate consumers have an emotional connection with social
networks, have increased their levels of usage of social networks from a year ago and
now use them at least once a day. This bodes well for Facebook‟s future, and must at
the same time be interpreted with a word of caution. Any network is only as strong as its
set of interactions among its users, and this applies equally to social networks. As some
of the youth start leaving Facebook, or at least start using it less often, and as individual
niche services provided by startups draw some users away, this may pose a concern for
the Facebook revenue model in the medium to long term.
The three year revenue forecasts create a view of the potential impact of Facebook‟s
online advertising revenue growth, while exploring and building other new potential
revenue streams that Facebook could invest in for future growth and diversification
beyond online advertising. Valuations for the company were not specifically directly
evaluated in these models, recognizing that the analytical models built were focused on
the revenue top line and that a full financial model would be necessary to predict ranges
for potential market valuations and market sentiments. It is clear, based on the
assumptions around the revenue models built, that online advertising will continue to be
a major contributor to the overall revenue growth, and Facebook would need to perform
to the optimistic revenue scenarios, at the very least, to continue the momentum they
have achieved in the market and to justify its valuations.
Hence, while online advertising will support a large part of the growth model for
Facebook, opportunities around mobile advertising, search, social commerce and in-app
will need to be developed fully to support the growth necessary for Facebook to perform
to market expectations.
54. 49
5.2Limitations of the research
The research in this paper explored consumer sentiments via consumer surveys, a
holistic view of the online advertising model through interviews and secondary research
and a revenue model through a set of researched comparative data and assumptions.
There are, however, limitations despite the extensive research.
a. Sample size for consumer survey
The sample size for the consumer survey would be considered small (128 respondents)
and not fully representative of the global social network user population. The sample
size could easily be enlarged to get better insights, and further segmentation beyond the
two large regions of US and ROW is possible to help with deeper insights.
b. Snapshot view
The social networking and online advertising space are changing at a rapid pace, with
regular announcements of strategic moves by various players to gain competitive
advantage. This research was conducted and completed by March 2013 to allow
sufficient time for the analysis and reporting to be completed, and there are likely to be
key developments since then that may alter some of the results.
c. Interview bias
Personal bias towards particular services for the interviewees, as a consumer, may have
skewed some of the interview discussions and responses.
5.3 Future research recommendations
The expected IPO of two new popular social networking sites, Twitter and Pinterest, in
2013 is likely to shift the landscape for both social networks and the competition for
online advertising dollars. This study raises some further areas of research that are
worth exploring.
Increasing the sample size for the consumer research and running a global study
incorporating regional differences on engagement, frequency of use and advertising
affinity would create value in understanding social networking users better. In-depth
regional studies have been conducted for niche areas in selected regions, but no
comprehensive view globally exists.
55. 50
Modelling the lifetime value of the social networking user for marketers across the
regions could be helpful. While market research companies like Syncapse have done
some studies for the US, no clear academic view and research exists today.
Building a cost model for these social networks would be a challenging exercise and
worth exploring. Understanding the impact of costs on the top line projections would help
build a full P&L view of the operations of these social networks.
“Unbundling of social networks” was published as an article in May 2013 as the “greatest
threat” (Tomasz Tunguz). New services by startups, that address a subset of the needs
and services that Facebook provides, will draw users away over time. A study of the
impact and adoption of these new services and modeling user engagement would
provide for further understanding of the impact users have on the adoption of social
networks.
56. 51
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