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Facebook is the worlds largest social networking platform, focusing on features that helped users strengthen their off-line relationships. Facebook's uniqueness comes with the fact that it provides its users extensive control over the profile and album privacy. Facebook also created great value with the help of its Facebook platform which enabled third party application developers to make applications that could be used by users. Some of the applications are games such as Farmville, Mafia wars etc which have helped Facebook create a unique space in the social networking platform. These applications have helped in increasing the number of active users and made them more engaged. Facebook had grown to 175 million users in just 4 users.
However despite the popularity, Facebook was not generating enough revenues. Facebook essentially follows and advertising revenue model rather than a subscription revenue model. The advertisements were made more relevant and directed towards the users with the help of the beacon program, which however received flak from the users due to its intrusion of privacy. The other revenue option was from businesses connecting to Facebook with the Facebook Connect option by which members could use Facebook credentials to log onto third part websites and bring their social network with them.
Zuckerberg had the tools to give Facebook an unprecedented amount of revenue; however he had still to make a few decisions regarding the generation of revenue. The future of Facebook depended on the decisions he would make for this revenue generation.
Business Plan Template (Do this second)
What is your mantra (3-10 words on why your company should exist)?
We help users strengthen their offline relationships.
What is the overall mission of the business (1-3 sentences on what your company does or will do)?
We intend to give the people the power to share and become and make the world more open and connected. We want to become the world's number one social network platform, subsequently become an online operating system.
How will you make money in terms of product differentiation and/or being the low cost producer?
We will generate revenues through advertising, banner advertising relevant to subscriber profiles, Page relevance etc.
We will generate revenues through sales to third party application developers who will use Facebook's Open platform to develop applications.
We will generate revenues through alliances with cellular service providers and handset manufacturers to provide facebook ready applications and services.
We will generate revenues with the use of Facebook Connect by linking with third party website, enhancing the experience of the users and provide consultation for the same.
What are your goals & objectives over the next 3 months to year (2-6 phrases on precise performance intentions)?
To increase subscriber base by 50%
To increase the active users by 25%
To increase the number of Facebook Mobile users by 25%
To increase the number of third party website using Facebook Connect by 25%
What tactics will you use over the next 3 months to a year to reach your objectives and mission (2-6 phrases)?
Make Alliances with cellphone service providers and handset manufacturers.
Increase the number of active users by adding more applications and the use of Facebook credits points system.
Alliances with companies similar to EA to develop Facebook games, eg Ubisoft, Sierra, Konami.
Increase the number of applications developers by making the platform more user friendly.
Tie up with Apple Itunes applications to create seamless interlinkage between Iphone users and Computer users.
Develop more international applications considering 70% of Facebook users are outside the US.
Create a consulting service for helping third party websites use Facebook Connect feature and derive revenue from the same.
Organizational and Industry Analysis Template (Do this first)
Give a brief description of your business model including what products or service you are producing or will produce?
We intend to become the world's most active online social networking platform that provides a virtual Operating System kind of environment.
Describe your customers?
Students, Entrepreneurs, The average Joe looking to make new friends and stay in touch with old ones.
List and describe your current competitors?
Orkut- One of the early examples of Social Networking Platform. Orkut suffers from severe server problems due to which it has low popularity in US. However orkut is popular in India and Brazil. However popularity seems to be declining in these countries. Orkut has low number of applications and complicated interface.
Myspace- Most popular among social networking platforms. MySpace provides an easy to use interface, more features and a better multimedia interface. MySpace became the most common marketing tool for famous celebrities and Music artists.
Twitter- Twitter has an increasing subscriber base. It is Popular among celebrities. Unique concept of tweeting "short messages"
List and describe your potential competitors?
Apple ITunes Apps- Another platform that allows mobile users to run applications on mobile. Facebook may not be able to enter Mobile market with the current strong presence of ITunes.
Who will you purchase materials, components or other inputs from?
In-house developers can develop the facebook platform elements and also other features, Facebook Platform allows third-party application developers to develop their own applications by using the application programming interface ,query language and markup language.
SWOT (consider human resources, R&D, marketing, procurement, manufacturing, distribution, engineering, IT, finance, accounting, and legal)
What are your strengths (products, R&D, supply chain, brand, pricing core competencies, resources, infrastructure, scalability &interfaces)?
Large number of applications allows for greater engagement
News feed and other such features brings in more subscriptions.
Facebook Platform provides third party application developers freedom to develop more applications
Facebook search features.
Large Subscriber base that is growing
Microsoft funding and other such sources of income
Natural marketing tool
What are your weaknesses (products, R&D, supply chain, brand, pricing, core competencies, resources, infrastructure, scalability &interfaces)?
Lower engagement as compared to competitors such as MySpace.
No specific target audience as compared to LinkedIn.
Controversies surrounding privacy which keep reoccurring, e.g. Newsfeed, Photo Album settings etc.
Complicated interface as compared to similar platforms.
Chat function weak as compared to Google.
What are the opportunities (growth, market share, product lines, Blue Ocean, complimentary products, lock-in, brand, &first mover adv.)?
Growth in subscriber base.
More applications possible.
Venture into mobile platform through alliance with mobile network and handset producers. Eg, Vodafone, Micromax( India)
Lock In subscribers with more engaging features and better interface.
Facebook has become a world renowned brand, recently named as India's Buzziest brand according to a survey.
What are the threats (substitutes, emerging technologies, new entrants, economic climate, government regulations, and social/culture issues)?
Government policies banning Facebook, eg North Korea, China, Pakistan etc.
Growing cases of Internet Sex Offenses and other similar crimes.
Diminishing work outputs in offices due to social (networking) loafing.
General image as a time waster.
Strategy canvas for existing products compared to competitor or industry
My Space, Twitter
If appropriate, complete strategy canvas for new product compared to competitor or industry
Business Opportunity( third party)
Establishing alliances with Cell phone service providers and Handset manufacturers.
Facebook is increasingly becoming the ultimate online social network platform. Users are increasingly finding Facebook as a great way to share data as well as their own opinions about things, through status messages, comments and wall posts. Making Facebook available in mobile is ideal for making the users more active and engaged. Even mobile service providers and handset manufacturers also understand the need to make facebook available on their service portfolio. Facebook should leverage this interest and make strategic alliances with these service providers and handset manufacturers. This will also act as a great revenue source, per connection, per handset.
Consolidate the directed advertising campaign
Facebook has already pioneered the directed advertising campaign with the use of the Beacon program. It must now concentrate on consolidating this directed advertising campaign to a more sophisticated level. The more relevant an ad is to a user, the more the chance that the ad will be clicked on. Facebook will also thus increase the click-through rates for its site; this is where search engines have succeeded due to their higher relevance in ad placements and higher click-through rates.
Enable more customization and multimedia on the website
Facebook is more or less a bare necessity platform which is successful essentially due to the applications. However the platform itself should be more customizable. For e.g.: the back ground colours, the type of applications that should be running. Enabling applications such as Sonific Song spot which h would help run music on your Facebook page. Such applications, though high on bandwidth requirement are more or less becoming the norm for the social network sites such as MySpace. People wish to create a specific identity online and this level of customization will help do that.
Provide Consulting for Connect: Facebook connect is perhaps the greatest venture of facebook which allows facebook users to connect to third party websites using facebook credentials. This enables the third party websites to leverage the large network of facebook and facebook in turn receives revenue from the same. This makes the whole internet experience a seamless transition between websites. Facebook however has the difficulty of creating these alliances as these websites themselves don't have the know-how to start using Connect. Facebook can provide consulting to these companies to create the link-up. This would also give Facebook the opportunity to procure additional revenue through consultation fees. Facebook should designate a separate department that deals with the Facebook Connect application.
Summary of Recommendations
Facebook should capitalize on the growth of the mobile segment and create alliances with mobile service providers and handset manufacturers to make facebook ready mobiles and special packages for facebook. Facebook should also concentrate on increasing its revenue from ads by consolidating its directed advertising campaign which would increase the click through rates. Facebook should make its profile pages more customizable and provide options such as background colors, music etc which would help users create a special identity in the page. With the help of these measures Facebook would increase its revenues through application sales, subscription charges on mobile and advertising. Facebook would also counter any new social networking platform that provides higher degree of customization thereby retaining its users. Facebook should leverage on the success of its Connect application by providing consulting services for third-party websites. Creating a separate department to do the same would also help Facebook generate additional revenue through Consultation fees.