Facebook Case

Facebook The “social media” revolution

History

In February 2004, Facebook was created by Mark Zuckerberg (with DustinMoskovitz, Chris Hughes and 2 other Harvard students)

Initially, the membership was restricted to students of Harvard University,and subsequently expanded to other US and Canadian colleges then toEuropean and Asian colleges (email addresses with .edu)

Since September 11, 2006, it has been available for any email addressglobally, but the interface is in English only

On May 24, 2007, Facebook launched the Facebook Platform (f8) whichprovides a framework for developers (anyone) to create applications thatinteract with core Facebook features

As of Sept. 25th 2007, with 42 million active users, FaceBook is the secondlargest social networking site globally after MySpace

5Source: Facebook

Things you can do on Facebook

Keep in touch with your old friends and meet new ones

••••

Private and public messaging optionsKeep tabs on what your friends do via their News feedFind former schoolmates using the search featureUser groups let you discuss with others who share your interests

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

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,…)

Retain your privacy• Control what strangers and friends may see and read about you

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Explosive growth that accelerated in 2006

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More than 42 million active users as of Sept. 25th 2007: the second largestnetworking site

Growth: 270% between June 2006 and June 2007

The number of active users has doubled since Facebook expandedregistration to include users outside US campuses in Sept. 2006

Facebook is the sixth-most trafficked site in the US

Worldwide Growth of SelectedSocial Networking Sites

Age : 15+

The evolution of the user base has beensynonymous with an expanded range of uses

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May2007 35+

A favorite among students (85% market share of 4-year US universities), but halfof Facebook users are now outside of college

Fastest growing demographic: 25-34 years old (+181% between May 2006 andMay 2007)

Since the launch of the Facebook platform in May, almost 4000 applications havebeen created by third-party developers

Age slice

12-17

18-24

25-34

A feature of its users’ daily life

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• More than half of active users return daily

• People spend an average of 20 minutes on thesite daily

• More than 6 million active user groups on the site• Over 55,000 regional, work-related, collegiate and

high school networks

Activity and loyalty are twokey characteristics of the

Facebook community

A winning strategy : opening the platformto third-party developers

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Less than a month after its launch, the Facebook Platform had alreadyattracted more than 40,000 developers, and produced more than 1,500 newapplications

On Sept. 25th 2007, the top 44 applications represented almost 200 millioninstallations and had a total of more than 16 million daily active users

3,900 applications exist as of Sept. 11, 2007, while Facebook itself only offers13

A ‘long tail effect applies toapplications: the top ones attractmillions of users but the numbersquickly drop for others down thelist

A strategy which competitors willhave a hard time imitating

because of structuraldifferences: after the f8 launch,LinkedIn announced it would openitself to outside developers but the

Privacy Issues :

Privacy is an issue:

The concentration of information freely available through the platform and the free-for-all

mentality that enabled the creation of so many applications can be a threat to FaceBook’s

success

FaceBook provides the best privacy management tools available in the social media universe

But it has yet to be properly understood and used by new users, especially as business and

personal lives “collide” on FaceBook more than on other social networking sites

Brands and companies should learn how FaceBook:

Enables a new communication with their consumers:

Via sponsored groups for a real conversation ‘a la’ web2.0

Via clever advertising (feed, flyers ‘a la’ AdWords …)

Offers new collaboration and knowledge sharing opportunities:

Quickly spread successful ideas and recruit for projects or causes

Let users manage what they do not want to share instead of asking them to make an effort to

share

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Competitors

Twitter

• Allowed users to interact with almost any other user on its service.

• Learning information in real time• 90% make their info open to everyone• Real time update• Facebook also updated to real time later

Google’s OpenSocial Platform• The rapid growth of Facebook, coupled with its release of an application platform, put it into direct

competition with Google, an internet giant that offered numerous internet services, including search, e-mail, calendar, instant messaging as well as on-line document sharing and editing to tens of millions of users.

• some media analysts believed that Facebook Platform could become “the platform that unites the applications and services you believe are the best on the Internet and that allows you to instantly overlay your social networking fabric on top of it.

• This could threaten Google’s growing line of in-house applications, including Gmail, Docs, and Calendar, as well as Google’s platform for thousands of third-party “gadgets” that could be embedded in iGoogle, its user-customizable home page.

Towards a Facebook economy:Facebook applications development

With the launch of the Facebook platform, Facebook has been touted as an online SocialOperating System

Facebook’s first acquisition in July 2007, Parakey, was a web OS company

Facebook allows developers to build their own applications, and lets them keep all the revenuesgenerated from its exploitation

The success of an application is highly dependent on the application’s virality and its user base

Different ways of making money with an application:

Promoting third-party applications

Selling advertising space

Attracting sponsors

Selling online services

Selling products

Development of a real Facebook eco-system

Facebook app factories: Rockyou (superstar with the apps Horoscopes, X-Me and SuperWall),Slide, AppFactory programme launched by VC Bay Partners, Social Media, 30boxes, AF83, …

Internal (in third party applications) ad networks have sprouted: Lookery, FBExchange,RockYou, EggNetwork, Cubics, Appsaholic, …

In Sept. 2007, the $10 million fbFund was created by Facebook, offering grants ranging from$50,000 to $250,000 to aspiring applications developers

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Google’s Response• Instead of seeking to unseat Facebook by building its own social networking site, in November 2007

Google built an on-line social network platform, called OpenSocial, designed to compete directly with Facebook Platform.

• Critics charged that OpenSocial could not match key advantages of Facebook and its Platform. OpenSocial did not allow data sharing across social networks, so a given application was only as valuable as the social network into which it was incorporated.

• Without data sharing, some believed, OpenSocial would never be able to match Facebook’s scale.

• In addition, OpenSocial lacked viral distribution mechanisms, which limited its ability to rapidly distribute applications through News Feed, Mini-Feed, Notifications, and Invitations.

• Friend Connect (2008)– Easily add code from Google

• Dubbed Google Buzz (2011)– Real time updating service like twitter tied to Gmail server

• Google+ (2011)– Sharing status update

Facebook applications are quicklyreplacing specialized websites

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Facebook is the no 1 photo sharing application on the Web (more than 2.7billion photos on the site and more than 14 million uploaded daily). The Photoapplication draws more than twice as much traffic as the next three sitescombined (Photobucket, Yahoo! Photos, Webshots Community…)

There are three times more people invited through the Events applicationthan through a leading focused website such as Evite.com

The video application allows users to upload and record their own videos,display them on their profile and send video messages

Facebook effectively provides a one-stop shop solution to its users

FACEBOOK Ads.

• Facebook Ads consisted of Facebook Pages and Social Ads. Facebook Pages allowed businesses, brands, products, artists, and public figures to create free custom Facebook pages that mimicked Facebook user profiles

• Advertisers could then advertise these pages through Social Ads, targeting their advertising

• Facebook Ads also featured the Facebook Beacon, which allowed sponsors to broadcast news about Facebook users’ actions on the sponsor’s external website to that user’s friends on Facebook campaigns on the basis of gender, age, geographic location, and profile keywords.– For example, when a Facebook user bought a product on eBay or rented a

move on Blockbuster Online, his or her friends would be alerted through their News Feeds.

• As before, Facebook adjusted the privacy settings on Beacon to make the program opt-in rather than opt-out

• The Beacon uproar subsided quite quickly, however. New users continued to sign up at a rate of 5 million per month, while existing users continued to engage with the website. However, the revenue numbers remained largely flat.

The evolution of social networking sitesshow they develop new functionalities

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First generationsites only let users

manage friends’lists

There are mainly flat,single entry lists byschools or classes youattended

Examples: Copainsdavant(FR), Classmates.com

(US)

Second generationsites can be seen as

the first socialnetworks

They are centered aroundan individual and hisfriends, and friends offriends : they follow the 6

degrees rule

Examples: LinkedIn (US),Viadeo (FR), Xing (G)

Third generationsites could represent

the first socialmedia sites

They allow multi-dimensional connections,real conversationsbetween users, in

compliance with the socialgraph theory*

Examples: Myspace (US),Facebook (US), Bebo(UK)

*as exposed by Mark Zuckerberg

Advertising deal with Microsoft offersFacebook guaranteed revenues

The deal was signed in Aug. 2006 for a duration of threeyears (just before Facebook became available to allusers)

It aims at creating an attractive combination foradvertisers

Facebook lets Microsoft provide search and advertisinglistings to its users

Microsoft is able to post advertising banners and

sponsored links that appear on the left or the bottom

of Facebook pages

Facebook can benefit from the Microsoft adCenter

system, which allows advertisers to filter their targets

so that their ads are relevant

Clickthrough rates are low: 0.04% on average (whileMyspace rates are 0.10%)

A potential problem is the lack of relevance: conflicts ofimage arose when ads from prominent British companiesappeared on the pages of the British National Party

A localized sales house would make it far easier forFrench and European brands to tune in to Facebookadvertising

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Facebook is offering new advertisingproducts

HomepageSponsored

Stories

SponsoredGroups

Advertising solutions tailored for allkinds of situations

FacebookFlyers

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A low-cost and direct advertising solutionfor users: Facebook flyers

Flyers let users make their own ads on Facebook at low prices

The price is based on how many times the Flyer is viewed

Flyers are displayed on the left side of Facebook pages, with thepossibility to:

Choose targets by both gender and age

Target specific colleges, and go further by specifying the education status desired

(undergrad, grad student, alumni)

Select regional networks you want your ad to be displayed on

Flyers Pro, launched in Sept. 2007, offer more more options:Selection more precise (by location, sex, age, keywords, poltical views,

relationship status and workplace)

Specify how much you are willing to spend to advertise, by setting a maximum

price per click : the higher the price, the higher the chances your ad will be shown

Pricing is now CPC as opposed to CPM

Facebook’s lack of control has given rise to deceptive Flyers, launchingfake security warnings and prompting users to download varioussoftwares

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Facebook provides the means for a realconversation

The conversation is multi-media, with the use of words, drawings, pictures,videos,…

The conversation is both verbal and non-verbal, through dedications (songs),gestures (pokes), and emotions (gifts, feelings)

It can be either instantaneous (with chat applications and presenceindicators) or asynchronous (with wall posts, messages)

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The conversation takes placebetween real personas (fewhidden identities with avatarsor nicknames) and without

(nooutside interventionmoderation or censorship)

It respects the users’ privacy ifthey so desire: only 1 in 10users changes his/her privacy

Facebook letsusers have

multi-dimensional

conversations

Exchangemessages

usingcommonweb tools

Sharephotos andvideos with

friends

settings

Interactusing

applications

Manageand

promoteupcoming

events

FaceBook users can be segmented bythe usage they do

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#1 : iLike

#2 : Graffiti

#3 : Where I’ve

been

#4 : Zoho Online

#6 : Flickr Photos

#7 : Honesty Box

#8 : Box.net Files

#9 : SuperPoke!

Office

#5 : Fantasy Stock

Exchange

#10 : The Friend

Match

#1 : Google Reader

Shared Items

#2 : Twitter

#3 : Video

#4 : Kyte.tv

#6 : Upcoming

Calendar

#7 : Blog Friends

#8 : Wordpress

#9 : Ustream.tv

#5 : BlogTips #10 : Skypeme

Core users have apersonal use

Socialization and entertainmentapplications

More recently professionaluses appeared

Multi-media publication andfeedback applications

Conclusion• By Sep 2011 – Undisputed Internet Powerhouse (800 mn users)• MySpace – turned to a flop• Twitter- some legitimate chance of withstanding competitive pressure

• Sep 2011 – Sought to replicate best features of Twitter and G+• Turn User Pages to Timelines

• Privacy is an issue:

• The concentration of information freely available through the platform and the free-for-all

• mentality that enabled the creation of so many applications can be a threat to FaceBook’s

• success

• FaceBook provides the best privacy management tools available in the social media universe

• But it has yet to be properly understood and used by new users, especially as business and

• personal lives “collide” on FaceBook more than on other social networking sites

Suggestions

• Should refrain from generating revenues by Extensive Ads.– Should stick to the present ad. architecture– Should refrain from mixing ad with ads.

• Should concentrate on helping other companies develop Facebook along with them– Applications– Flyers– Company Pages

THANK YOU