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