Facebook Business Model [PDF]

Zitiervorschau

AN ASSIGNMENT ON THE BUSINESS MODEL OF

SUBMITTED TO:- PROF. SNEHAL DESAI COURSE:- MBA FB&E

SUBMITTED BY:MEET THAKKER (114229)

INDEX 1.

WHAT IS A BUSINESS MODEL….??

2.

FACEBOOK

3.

HISTORY OF FACEBOOK

4.

THINGS YOU CAN DO ON FACEBOOK

5.

FACEBOOK FACTS

6.

THE BUSINESS MODEL OF FACEBOOK

7.

CONCLUSION

WHAT IS A BUSINESS MODEL....?? A business model describes the rationale of how an organization creates, delivers, and captures value (economic, social, or other forms of value). The process of business model construction is part of business strategy. In theory and practice the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies. The literature has provided very diverse interpretations and definitions of a business model. A systematic review and analysis of manager responses to a survey defines business models as the design of organizational structures to enact a commercial opportunity. Further extensions to this design logic emphasize the use of narrative or coherence in business model descriptions as mechanisms by which entrepreneurs create extraordinarily successful growth firms. Whenever a business is established, it either explicitly or implicitly employs a particular business model that describes the architecture of the value creation, delivery, and capture mechanisms employed by the business enterprise. The essence of a business model is that it defines the manner by which the business enterprise delivers value to customers, entices customers to pay for value, and converts those payments to profit: it thus reflects management‟s hypothesis about what customers want, how they want it, and how an enterprise can organize to best meet those needs, get paid for doing so, and make a profit. Business models are used to describe and classify businesses (especially in an entrepreneurial setting), but they are also used by managers inside companies to explore possibilities for future development. Also, well known business models operate as recipes for creative managers. Business models are also referred to in some instances within the context of accounting for purposes of public reporting.

FACEBOOK Facebook is a social utility that helps people communicate more efficiently with their friends, family and coworkers.

HISTORY OF FACEBOOK  In February 2004, Facebook was created by Mark Zuckerberg (with Dustin Moskovitz, Chris Hughes and 2 other Harvard students).  Initially, the membership was restricted to students of Harvard University.  Since September 11, 2006, it has been available for any email address globally, but the interface is in English only.  On May 24, 2007, Facebook launched the Facebook Platform. It provides a framework for developers (anyone) to create applications that interact with core Facebook features.  As of Sept. 25th 2007, with 42 million active users, FaceBook is the second largest social networking site globally after MySpace Source.

THINGS YOU CAN DO ON FACEBOOK 1. Keep in touch with your old friends and meet new ones  Private and public messaging options .  Keep tabs on what your friends do via their News feed .  Find friends using the search feature. 

User groups let you discuss with others who share your interests .

2. Keep them informed about what you do • Update your status. • Share your pictures, blog messages and videos • Promote events you are organizing or planning to attend.

3. Access a wealth of applications made for all purposes  Fun, interactive applications.  Applications that let you publish content (photos, videos, notes,…).  Applications linked to other platforms (Flickr, Pownce, Twitter,…). 4.Retain your privacy  Control what strangers and friends may see and read about you.

FACEBOOK FACTS 1. General Growth • More than 250 million active users • More than 120 million users log on to Facebook at least once each day. 2. User Engagement • Average user has 120 friends on the site • More than 5 billion minutes are spent on Facebook each day (worldwide). 3. Applications • More than 1 billion photos uploaded to the site each month • More than 10 million videos uploaded each month. • More than 45 million active user groups exist on the site 4. International Growth • More than 50 translations available on the site, with more than 40 in development • About 70% of Facebook users are outside the United States.

5. Platform • More than one million developers and entrepreneurs from more than 180 countries • Every month, more than 70% of Facebook users engage with Platform applications • More than 350,000 active applications currently on Facebook Platform. 6. Mobile • There are more than 65 million active users currently accessing Facebook through their mobile devices. • There are more than 180 mobile operators in 60 countries working to deploy and promote Facebook mobile products

THE BUSINESS MODEL OF FACEBOOK

Business model is the mechanism by which a business intends to generate revenue and profits. It is a summary of how a company plans to serve its customers. It involves both strategy and implementation. It is the totality of: • How it will select its customers • How it defines and differentiates its product offerings • How it creates utility for its customers • How it acquires and keeps customers • How it goes to the market (promotion strategy and distribution strategy) • How it defines the tasks to be performed • How it configures its resources • How it captures profit There are many different types of business models as some are more complex than others depending on the service. A few examples of types of business models are as follows: • The subscription business model

• The razor and blades business model • The pyramid scheme business model • The multi-level marketing business model • The network effects business model

Facebook fits into the network effects business model, which was pretty common in the dot-com boom of the late 1990s. This type of business model is based on the network effect which causes a good or service to have a value to a potential customer dependent on the number of customers already owning that good or service. Facebook fits this model because the more registered users there are on the site, the more useful the site is. In this paper I will discuss Facebook’s business model using the eight criteria above.

1. HOW IT WILL SELECT ITS CUSTOMERS • Facebook‟s selection of customers is a very important part of the company‟s business model. •

Social networking sites have been on the rise in the last decade and many are in existence today including MySpace, Friendster, and LiveJournal.

•

Most of these social networking sites are not very specific and have a variety of users. This fact is what makes Facebook‟s selection of customers so important.

•

Zuckerberg developed a personal niche for his site in making it specifically for high school (recently), college and university communites, primarily in the United States.

2. HOW IT DEFINES AND DIFFERENTIATES ITS PRODUCT OFFERINGS • The second aspect of a business model is how the company defines and differentiates its product offerings. • One of the key elements to Facebook‟s success is differentiation, particularly from the other social networking giants.

• Facebook is the only brand of these sites that is for students and students only. • Its main features are: • News feed • Mini-feed • Share • Wall • Lexicon • Mobile • Public listing search

3. HOW IT CREATES UTILITY FOR ITS CUSTOMERS • The utility that Facebook creates for its customers is essential in creating traffic. • Online social networking companies like Friendster have failed in the past for being too one-dimensional and unreal. •

Facebook was able to recognize these mistakes and capitalized greatly in forming a very real online social network.

• Facebook is useful in a variety of ways including: • Forming study groups • Keeping in touch with friends at distant schools • Finding others with like interests • Keeping up with social events

4. HOW IT ACQUIRES AND KEEPS CUSTOMERS • Facebook is able to easily acquire and keep customers due to its increasing popularity. • Networking is very important in college and Facebook helps students to establish these with little effort on their part. • Facebook acquires customers as students realize their personal need for online networking, a need that is becoming more and more necessary every day. • When students meet they often tell each other to facebook them as a means of furthering a friendship. Someone without an account misses out on this completely. • Keeping the customers is a very easy task once they are on Facebook. • Users continue to visit the site to partake in one of the newest activities, “facebooking.” • Facebooking defined is the act of simply browsing though facebook.com with no specific purpose. • More specifically, the verb “facebook” (as in “to facebook”) is used across campuses for the looking up of a certain individual and a) adding him/her as a friend, b) sending him/her a message, c) „poking‟ him/her, or d) writing on his/her „wall.‟ • These features bring about major opportunities for the communication that college students are looking for.

5. HOW IT GOES TO THE MARKET Distribution Strategy • Zuckerberg‟s distribution strategy is the key element behind his idea, the internet. •

Facebook provides a service that connects college students through a few clicks of the mouse. This strategy is new as it‟s not used by many social networking sites.

Promotion Strategy • Promotion hasn‟t been a major issue due to Facebook‟s instant success. • Facebook has not funded any major advertising campaigns in order to increase awareness because the awareness was there from the start. • The promotion of the site has been mostly by word of mouth.

6. HOW IT DEFINES THE TASKS TO BE PERFORMED • The tasks to be performed were very simple from the beginning in creating Facebook. • Essentially, it would be an online directory comprised of college students for their use and benefit . • Through classes, groups, interests, and friends the site notifies the user how he/she is connected. •

Another major task was setting social network site apart from the others. In order to demand traffic a site must be unique in one way or another.

• This task was performed by making the site exclusive to ones college, forming a more intimate community.

7. HOW IT CONFIGURES ITS RESOURCES • The major resources of Facebook are the servers that keep the site running despite the heavy amounts of traffic. • These servers are very essential because the services and operations of Facebook depend solely on the website. • Facebook is the second most-trafficked PHP site in the world, and one of the largest MySQL installations anywhere, running thousands of databases. • Facebook has built a lightweight but powerful multi-language RPC framework that allows the company to seamlessly and easily tie together subsystems written in any language, running on any platform.

8. HOW IT CAPTURES PROFIT • The big question behind Facebook and many other free online networking sites is: how do they actually make money? • The answer is mainly advertising. Advertisements on Facebook are very valuable considering the amount of traffic the site is able to generate. • Facebook offers three different ways to advertise: •

banner ads,

• sponsored groups, and • text announcements

CONCLUSION • Facebook has a very specific and strong business model that will bring the company continued success in the future. • The site is growing every day in many categories and is drawing more and more attention. •

Major corporations are seeking out the Harvard dropouts for a possible deal, but these guys are just having fun for now.

• Their main concern is providing a useful service.