Launched in 2004, Facebook’s Evolution and growth have been remarkable. What started out as a closed networking platform between a bunch of Harvard students has grown into one of the most powerful online social networking tools on the planet. The interesting question is how they got to this point and what the future holds for the social giant.
I joined Facebook about 4 years ago. At the time, my friends and I joined it because it was fun; to organize parties, events, entertain ourselves and post interesting stuff. We realized the power we could harness by using a popular social network to organize and share whatever we wanted. From an analytical point of view this was Facebook at the time.
A friendly user interface made it simple to navigate, find friends, share homework or whatever. What started out as an exclusive network between U.S. schoolers became open to the public through an open source network.
A few years later, as more appealing applications were added, a new group of fans joined the network. Planned or unintentional but Facebook managed to tap this market. The audience was an older crowd: PR executives, bloggers, techies, and social interest groups. These people were typically older (40’s), and they used Facebook to promote their businesses, brands, organize political events, find like minded people, and even lobby. This was a whole new approach to using Facebook. Both group (20’s and 40’s) were also never really aware of the others intentions. The funny thing is that we only became aware of this when we had to make this transition from being a youth to a working professional, and thus used Facebook for different purposes. This market broadening, to me, marks the initial evolution of Facebook; from a fun friend seeking and exchange network to a platform that allows you to move people.
The saga continues however, and only becomes more prolific. Not to sound too dramatic, but it was during this time that many countries (including Iran, Pakistan, Syria, China, Vietnam, and others) realized the potential threat of this dangerous weapon against their precious government. The danger brought about by organized collusion (by the people) had compelled these governments and others to sporadically block the site.
On the lighter side, a third group of people found interest in the social network and joined. Once again, I we have all experience this new phenomenon. When you receive a friend request from your Aunt Cindy (or Uncle!) sends. Wow, I’m sure this has happened to all of us ALOT. Suddenly there is a dilemma, what do you do? Expose your alter ego (which they know nothing about), or have them question you at every single lunch. It’s a catch 22, basically you’re screwed either way. The good news however, is that this group is the least harmful (in terms of moving the masses of course). They chat, send messages, find old friends, and basically discover the fun and excitement of using the internet.
Having scrambles the first part of my blog (how did Facebook become what it is today), we move on to the next question; Where is Facebook going? The obvious speculative response on everyone’s mind is that they will probably go for an IPO. According to Mark Zuckerberg however, this is not part of their business strategy. They prefer to keep the business private, and have resisted many offers to sell. Their only equity offering was a meager 1.6% to Microsoft in preferred shares, basically eliminating any possible of voting rights. In exchange Microsoft was granted exclusive banner ads on Facebook.
In term of their financial standing and future outlook, Facebook needs to re-examine their revenue streams. While the company has finally reported a net profit (an upside from their continuous streak of losses), their future financial stability is still looking bleak. Banner ads, referral marketing, and casual gaming advertisements are certainly not going to cut it. Their business model needs to be revised, and they know it. The trick is innovative marketing (what Google did with Adwords), and they still haven’t found it yet.
Another speculative alternative would be for Facebook to monetize on its source crowding abilities. This suggestion however is predictably risky (diminishing consumer confidence, privacy issues, etc.) and would have to be done in an extremely innovative and discrete way. A recent article I stumbled upon mentioned a Facebooks Data Team, which is constantly collecting information on users and monetizing this information through graphs, charts, demographics, etc. Not to bring in too much conspiracy theory, but based on an internet marketing research company (Comscore.com), they estimate that Facebook collects as much data from users as Google and Microsoft. In anycase, it’s not too far fetched, with appox. 400 million users and a privacy policy that is becoming more permissive, the Social Giant has certainly captured its market, and looking forward to make use of it.
I joined Facebook about 4 years ago. At the time, my friends and I joined it because it was fun; to organize parties, events, entertain ourselves and post interesting stuff. We realized the power we could harness by using a popular social network to organize and share whatever we wanted. From an analytical point of view this was Facebook at the time.
A friendly user interface made it simple to navigate, find friends, share homework or whatever. What started out as an exclusive network between U.S. schoolers became open to the public through an open source network.
A few years later, as more appealing applications were added, a new group of fans joined the network. Planned or unintentional but Facebook managed to tap this market. The audience was an older crowd: PR executives, bloggers, techies, and social interest groups. These people were typically older (40’s), and they used Facebook to promote their businesses, brands, organize political events, find like minded people, and even lobby. This was a whole new approach to using Facebook. Both group (20’s and 40’s) were also never really aware of the others intentions. The funny thing is that we only became aware of this when we had to make this transition from being a youth to a working professional, and thus used Facebook for different purposes. This market broadening, to me, marks the initial evolution of Facebook; from a fun friend seeking and exchange network to a platform that allows you to move people.
The saga continues however, and only becomes more prolific. Not to sound too dramatic, but it was during this time that many countries (including Iran, Pakistan, Syria, China, Vietnam, and others) realized the potential threat of this dangerous weapon against their precious government. The danger brought about by organized collusion (by the people) had compelled these governments and others to sporadically block the site.
On the lighter side, a third group of people found interest in the social network and joined. Once again, I we have all experience this new phenomenon. When you receive a friend request from your Aunt Cindy (or Uncle!) sends. Wow, I’m sure this has happened to all of us ALOT. Suddenly there is a dilemma, what do you do? Expose your alter ego (which they know nothing about), or have them question you at every single lunch. It’s a catch 22, basically you’re screwed either way. The good news however, is that this group is the least harmful (in terms of moving the masses of course). They chat, send messages, find old friends, and basically discover the fun and excitement of using the internet.
Having scrambles the first part of my blog (how did Facebook become what it is today), we move on to the next question; Where is Facebook going? The obvious speculative response on everyone’s mind is that they will probably go for an IPO. According to Mark Zuckerberg however, this is not part of their business strategy. They prefer to keep the business private, and have resisted many offers to sell. Their only equity offering was a meager 1.6% to Microsoft in preferred shares, basically eliminating any possible of voting rights. In exchange Microsoft was granted exclusive banner ads on Facebook.
In term of their financial standing and future outlook, Facebook needs to re-examine their revenue streams. While the company has finally reported a net profit (an upside from their continuous streak of losses), their future financial stability is still looking bleak. Banner ads, referral marketing, and casual gaming advertisements are certainly not going to cut it. Their business model needs to be revised, and they know it. The trick is innovative marketing (what Google did with Adwords), and they still haven’t found it yet.
Another speculative alternative would be for Facebook to monetize on its source crowding abilities. This suggestion however is predictably risky (diminishing consumer confidence, privacy issues, etc.) and would have to be done in an extremely innovative and discrete way. A recent article I stumbled upon mentioned a Facebooks Data Team, which is constantly collecting information on users and monetizing this information through graphs, charts, demographics, etc. Not to bring in too much conspiracy theory, but based on an internet marketing research company (Comscore.com), they estimate that Facebook collects as much data from users as Google and Microsoft. In anycase, it’s not too far fetched, with appox. 400 million users and a privacy policy that is becoming more permissive, the Social Giant has certainly captured its market, and looking forward to make use of it.
Hey Rifai,
ReplyDeleteNice post. Good description of Facebook story. I couldn't imagine that Facebook is collecting as much information as Google. After today class I couldn't imagine that ;)