Social Media Industry Analysis

Facebook: Will Wall Street Hit the?

1. Hossam Metawea2. Islam El-Zayat3. Khaled AbouZeid4. Khaled El-Ansary5. Mostafa Hegazy

Outline

Introduction

Industry Analysis

Internal Analysis

Problem Definition

Alternative Strategies

Selected Strategy & Implementation

FACEBOOK: WILL WALL STREET HIT THE “LIKE" BOTTOM? 2

Introduction

Social Network Sites

A Definition We define social network sites as web-based services that allow individuals to construct a public or semi-

public profile within a bounded system, articulate a list of other users with whom they share a connection, and view and traverse their list of connections and those made by

others within the system.


FACEBOOK

Startlaunched the site as a Harvard sophomore on February 4, 2004

NowNow, eleven years later, the site has become one of the biggest web sites in the world, visited by 1.35 billion people a month.

Vision People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.

MissionFacebook’s mission is to give people the power to share and make the world more open and connected.


Social Media History


PESTLEBureaucracy Issue

If your organization is assessing the possibility of operating in the Middle East or in some parts of Asia then the political dimension can be the most serious consideration of all.


PESTLEEconomical

If your organization is assessing the possibility of operating in the Middle East or in some parts of Asia then the political dimension can be the most serious consideration of all. The organization’s entry into the new territory may not be straightforward


PESTLE


Social

Social factors and cross-cultural communication play a critical role in international and global markets, and your success will depend on the depth of your research in this

area. Getting this wrong is costly and may not come to light until considerable investment has been made by your

organization.

PESTLE


The pace of change in technology is becoming more rapid, and often changes that impact your market come from

unexpected sources.

Technological factors can be broadly divided into two areas: manufacture and infrastructure.

Organizations that fail to keep up with technological advances leave opportunities for a smaller producer or new

entrant to enter their market.

PESTLE


Legal

Recent years have seen a significant rise in the number of regulatory bodies that have been set up to monitor

organizations’ observance of legislation relating to all areas of operations, including consumer protection, employee

welfare, waste disposal, and how their earnings and investments will be taxed.

PESTLE


Environmental

These ecological and environmental aspects can have consequences that are felt both on an economic and a

social level.

- Use social media to improve environmental performance

- Each media should be used in a different way

- Keep it fun, keep it engaging

Use Of Social Media Marketing

We began by simply asking marketers if they use social media to market their businesses?


Measuring social media ROI



Facebook Key Resources - Tangible

Finacial Resources

Strong cash position especially after the IPO

Huge data centers with very high capacity servers & storages

Accurate profilephotos & videoshobbies, interests, places, history,..

1.11bn web MAU &

Physical Resources

End-user data Installed base


Facebook Key Resources - Intangible

Network Effect Switching Cost

User Lock-in

Most of friends & relatives are pushing for facebookGaming

Loss of historical dataLoss of friends & connectionsLoss of registration in some web sites

Strong brand with well known favorable signs “like” buttonBrand


Facebook Capabilities

Analysis of Data


Developement of new products and features

Acquiring talents & startups

End user Messages Photos & video pagesvideo calling gifts Places

Marketers & AdvertisersTargeted ads with high hit ratios

Developers APIs Social Plugins Payments FB credits Login

Strong financial position

FB easily attracts best talents from competition

Acquiring early competitors such as Instagram

connections User data

Facebook Competitive Advantage


Largest installed base

for social media

High Switching Cost

User lock-inNetwork Effect

Unique access to the largest database of accurate and detailed users’ contents

Valuable

Rare

Costly to imitate

Organized to be captured

SWOTStrengths

Large installed Base 1.11B monthly active users

Biggest and the strongest brand in social networking.

Global phenomenon with presence of over 70 languages,

Integration with websites and applications.

Excellent users experience and understanding of user’s needs and behavior.

Strong financial position in 2012 with 9.6B Cash Position


Weaknesses

Only two sources of revenues. low investments in “mobile ads”.

Weak business model. Lack of website customization.

Weak CTR (click-through rate) of advertisements

SWOTOpportunities

Increasing number of people using smart phones and using Facebook through mobile devices.

Continuous increase of world populations and demand for communications across the globe

Continuous increase of internet reach around the globe

Growing demand for advertising services and gaming entertainments

Diversify sources of revenue to maximize profits and need to increase investments in “mobile ads”

Open Facebook marketplace and expansion to China


Threats

Increasing number of mobile internet users. Attitude towards users’ privacy invasion.

Decreasing annual growth rate of social networks. Slow growth rate of online advertising.

Advertising revenue growth forecast by in U.S. , CAGR 2013-2018

Industry rivalry

Google+, Twitter ,LinkedIn , Renren ,

Mixi , vKontakte. Direct Network

effect

New Entrants

Medium barriers to entry

High for Other social

networking sites

Bargaining Power Of Customers

Moderate for End Users Low for Marketers & advertisers

Complementary

Moderate bargaining

power for Game makers

Threat Of Substitute

High due advance in technology and

mobile internet

Bargaining Power Of Suppliers

Moderate For Hardware and

software supplies


Porter’s Six Forces

Current Business Model Canvas


Problem DefinitionIPO Crisis

◦ One of the biggest IPOs in technology and Internet history (104B market cap and 38$ initial stock price)

◦ Technical issues with NASDAQ’s electronic trading platform due to high volume of trades◦ Stock opening was delayed 30 minutes

◦ Mass investor confusion

◦ Traders were unable to sell stock when it started to fall

◦ Even after months, the stock was still declining (more than 50%)◦ Criticism and questions from investors and Wall Street stakeholders about the initial offering (overvalued)


Problem Definition (cont’d)Low “Average Revenue Per User – ARPU”

◦ Massive gap between Google and Facebook◦ Although the number of Google users vs. Facebook users is comparable (1.3B vs. 1.11B), and advertising is the core business for

both companies (> 80%)

◦ Facebook real crisis of the continuous stock decline

◦ Plenty of room to grow… but where?


Average Revenue Per User in 2012. source: seekingalpha.com US Digital Ad Revenue Share, source: emarketer.com

Problem Definition (cont’d)Low “Average Revenue Per User – ARPU”

◦ Upon IPO, digital ads revenue of Facebook was almost completely tied to desktop ads

◦ Looking at different digital ads segments for e.g., mobile ads is in significant growth


Digital Ads Market growth by market segment, source: emarketer

Alternative StrategiesIncreasing revenue, even with the same user base, is the main strategy to mitigate the losses and improve ARPU and stock price.


• Encourage all accounts to watch ads by giving points that can be redeem from Facebook store (gifts, apps, etc)

• Keep the same core products for free, and create premium accounts for advanced/complementary features

• Expand Gaming Applications (by introducing proprietary apps or by investing in new advanced apps with Web developers)

• Increase advertising on mobiles

• Big data analysis… FB has tons of personal and public information for all users, they can provide better customized information for marketers and sales enterprises

• Partnership with mobile OS vendors, to force all mobile users to HAVE a Facebook account

• Make commercial pages with fees, when reached a certain number of likes

Capitalize on existing core products and services

• Facebook can invest in emerging technologies – long term investment

Technology

• Apple Partnership to integrate Facetime with Facebook video/audio caller. This will be a head-head competition with Google’s Hangouts, and it will provide Facebook access to more users (Apple users)

• Amazon Partnership to enable the “one-click-to-buy”. This will give Facebook user the luxury to buy any product/item found on the ads (whether desktop or mobile ads) without leaving their Facebook page.

Alliances and Aqcuisition

Selected Strategy


Select Strategy

Capitalize on existing core products and services.

TechnologyAlliances and Aqcusition

Capitalize on existing core products


Capitalize on existing core products. data

analysis

Expand in Gaming Apps

advertising on mobiles

U.Tmodel

Easy adds

Diff platforms

Fbexperience Invests

Technology


Invest in new

markets

invest in emerging

technologies

Pushing to expand in

marketing in other

countries

User Lock-in

Benefit from competition


• Apple Partnership to integrate Face time with Facebook video/audio caller.

• Amazon Partnership to enable the “one-click-to-buy”.

• Possible Acquisition for new cutting-edge technologies

Suggested Business Model Canvas


Thank You
