How Facebook Earns Its Revenue - Assignment Example

Face book Assignment [Name] [Course] [Instructor] [Institution] [Date] Table of Content Introduction……………………………………………………………………………….1.0 Background ……………………………………………………………………………….2.0 How the Company Earn Revenue…………………………………………………………3.0 Members…………………………………………………………………………………..4.0 Business Environment……………………………………………………………………5.0 SWOT Analysis…………………………………………………………………………..6.0 Pestle Analysis……………………………………………………………………………7.0 Conclusion………………………………………………………………………………..8.0 Face book Assignment 1.0 Introduction Face book is a website that was launched in the year 2004 and Mark Zuckerberg was responsible for this innovation. Mark was helped by his friend Eduardo Saverin and a few other course mates and roommates. The name Face book originated from the book that the friends had been given while still at school (Aune, 2007 p. 1). The main aim was to serve the purpose of connecting people socially. According to the analysis that was conducted in the beginning of the year 2011, the total members who had registered were around 600 and were utilizing the site actively (Carlson, 2010 p. 1). The website was initially accessible to university students but it was later expanded and allowed the entire public. Once a person attains membership, he/she is required to create a personal profile then they may search for friends. Then after their friends requests are confirmed, they are able to freely exchange messages that are automatically notified. The compete.com study ranked the face book group as the link that was mostly being used all over the world by the January of year 2009, for socializing and networking services by the users who could pay their worldwide monthly bill. This trend is continuous and according to a survey conducted by the social Media today, by April of 2010; at least 41.6% of the U.S population had registered as members (Carlson, 2010 p. 1). This paper aims at reporting on the way face book conduct its business. 2. 0 Face book Background During the 2004 summers, face book was incorporated by the businessman by the name Sean parker, who was the adviser of Zuckerberg. He later became the company’s president and it operation was shifted to Palo Alto in California. Its first investment was from pay pal which was co-founded by Peter Thiel. The major personnel’s who were involved in management of the company comprised of Chris Cox, Sheryl Sandberg and Donald E. Graham who was the chairman. According to the survey conducted in April 2011, the company had employed over 2000 people and they had established offices in around fifteen countries (Carlson, 2010 p. 1). 3.0 How the Company Earns its Revenue The face book company mainly makes money from the advertisements that are placed through the website. Banner advertisement is mainly used by face book through the partnership of Microsoft adversory inventory. Another strategy of attracting more members is by providing the lowest click Through Rates (CTR) than any other major website. The manager in charge of operating the company commented that the most appropriate advertising campaigns should have rates that are between 0.05% and 0.04% to enable effective competition between the company and that of other similar companies like MySpace (Carlson, 2010 p. 1). On the pages with products and brands, certain firms have managed to acquire sales as high as 6.49% whereas face book had by July 2008 attained only a CTR of 0.7%. On the other hand, for the video advertisements, about 40% of their users viewed the whole video and the company made 25% of the in banner video ads. The following table displays the trend of the revenue that the company had managed to get from the year 2006 to 2010 (Clara, 2009). year revenue Growth 2006 $52 - 2007 $150 188% 2008 $280 87% 2009 $775 177% 2010 $2000 158% (The estimates were in millions US$) 4. 0 Members So far face book has managed to attract people with common interest to learn about each other and exchange ideas. These people possess similar theme which is communication and they can manage to share the contents. One achievement that the industry has attained is that the company has managed to bring thousands together. Their only disadvantage is that their monetization is difficult to conduct. Face book members can be able to create their profiles and customize them according to their desires (Goldfarb, 2010 p. 10). Numerous activities are available that members can do on face book such as joining a particular group, reporting and organizing events, poking friends, exchanging photos, attachment of documents and other communication services. (Goldfarb, 2010 p. 14). Security to personal information is very important and as such face book has put up measures and policies to protect its members. Face book does not impose fees when one is registering and thus one can join at their free-will. When comparing face book to another popular social network that is known as MySpace, face book is observed to have better customization. Face book monitors most of the information provided when one is registering to ensure that nobody uses another person’s details and thus ensuring more security (Goldfarb, 2010 p. 11). When compared to those visiting MySpace, face book fails to permit its customers to color their status or even the messages but only allows for a plaintext to be sent without many complications. Most individuals are being observed to prefer face book to other social sites. The April 2010 report claimed that the highest figure of users was found in the United Kingdom, where around 24 million of the members had registered while Indonesia was the second with around 10% of the countries’ population (Goldfarb, 2010 p. 12). Besides having many users, face book has encountered criticism and ban in some states and nations. Examples of nations which have blocked its use include “Vietnam, Syria, Bangladesh, Iran, Uzbekistan and China” among others. Russia is an example of a state which has also experienced the ban. There are many reasons why it is banned depending on the state or nation although the main reason is security threats and privacy issues (Face book Banned Countries, 2011 p. 1). Another issue associated to the ban is that employees invest much time on face book than in their duties. Face book traffic break-up The graph reveals the figures of nations using face book and the difference in the percentage. Europe is leading while America is tailing. 5.0 Business environment In the current world, face book and many other networking websites have ensured that physical separation of people does not mean that they do not communicate any more. Face book similar to other companies is faced with competition from other social sites like twitter and MySpace. Hence, its environment is full of competition and thus has to strategize on how to thrive in such an environment. Through the social network, the company is able to extend their business branding through the advertisement and through the friendship networking, there is a great family that is established. Through the pages on the face book site and groups, the services offered by the company can easily be identified by the users who are the main clients in this entire country (Kharif, 2007 p. 1). The company practices the principle of organization and the user is able to view the information more vividly. Through the marketing campaigns, the individual is able apply what is learned to the personal profile where the user who could be interested with purchasing the products does so online (Lawson, 2007 p. 1). The disadvantages that are associated with the business are that the personal profile of the user is linked to the business pages and all the contents then become public. What is required is for the user to ensure that they are in a position to create a good page so that the regulation and monitoring of the information is made possible. The business is analyzed in terms of both PEST (which comprises of external factors) and the SWOT (looks at the internal factors), which are discussed in depth below 6.0 PEST analysis The PEST approach measures the business’s market or the trend in which face book is following. PEST analysis is best applied when making all the plans that pertain to the maximization of profits. In face book, the factors that have been identified to be affecting the trends are divided into four categories. These include political, economic, social and technological factors (Best, Dalton & Allan, 2005 p. 18). To begin with are the political factors in which case face book is faced with political pressure to reduce predation on kids. This pressure may affect its operation in a negative manner. Another political aspect that can affect face book is the issue of privacy which is over emphasized by politicians. The other political influences that can be there on face book are taxes imposed by the government. Some laws that the government could form could also affect the company by putting unnecessary pressure. The other factor is economic in which case the affluence of individuals is increased thereby leading to more online users. The economic factors would include interest rates as well as inflation rates of some products. Unemployment is another factor that could affect face book because when the face book users do not have enough Internet fees, then the business also go down because of reduction of users. Social factors are also analyzed in a PEST analysis in which case the county has undergone drastic population growth. There are numerous age groups who are attracted to face book most especially the young generations. The fact that everyone is on it influences other individuals who also want to become associates. The fourth factor is technology which has enhanced the use of online communication by increasing the connection speed as well as reducing the bandwidth. The latest technology has introduced an era of automation where the machines do almost every activity and working with computers and the Internet, there has been several innovations and face book is one of them (Clara 2009). However, face book is disadvantaged by the interruption caused by the mobile connection where people will prefer to communicate through the wire than through writing short messages on the face book status box. 7.0 Face book SWOT analysis SWOT encompasses the analysis of the internal factors and it is divided into four parts. It is the assessment that is carried out in a business organization to be able to understand how the company is run, the nature of how it is represented and when discussions are done as well as making of decisions. The first part is made up of the strengths in which case face book has distinct expertise in marketing which can be attributed to the technological know-how. The fact that the culture of face book is aggressive gives it advantage over similar firms. The idea that it is a new innovation also serves as an advantage. The other strength is the diversity it enjoys because of being located in almost 15 countries. Face book offers procedures together with processes of high quality. Additionally, face book managed to partner with helpful companies like Microsoft (Daft & Mark, 2010 p. 165). The second part is made up of weaknesses; management is problematic due to the increasing demands of the growing number of users. This serves as the major limitation for face book. Some areas have poor Internet accessibility and this serves as a setback for face book as an online firm (Daft & Mark, 2010 p. 165). The third category comprise of the opportunities that are available for face book as an organization. One of chances that face book has is the upcoming market such as developing an improved home page. The other opportunities include the availability of mergers who are ready to partner with face book. Similarly, certain international markets have emerged and some markets have not yet been discovered and hence face book has the opportunity to discover them. Threats make up the fourth part of analysis; the organization’s expenditure still exceeds the revenue being recorded (Daft & Mark, 2010 p. 165). Face book is faced with competition from other incoming social websites that may have new and better products. Last but not the least is the threat of developed distribution channels by face book competitors (Perez, 2007). 8.0 Conclusion Face book has emerged as one of the most preferred site for communication and advertisement site for the users. It has managed to overcome the other competing sites because of the great organization of the company and the co-operation from the stakeholders and the members. This report has analyzed the environment in which face book operates plus conducting an analysis on the factors affecting its activities. 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Kharif, O 2007, Google’s Orkut: A World of Ambition, Business Week, retrieved from http://www.businessweek.com/technology/content/oct2007/tc2007107_530965.htm Lawson, S 2007, Face book, RIM Team to Bring Social Networking to BlackBerrys, CIO, retrieved from http://www.cio.com/article/148550/Facebook_RIM_Team_to_Bring_Social_Networking_to_ Perez, J 2007, Face book Admits Ad Service Tracks Logged-Off Users, PC World, retrieved from http://www.pcworld.com/article/id,140225-c,webservices/article.html Read More