Facebook Inc - Term Paper Example

?Facebook Inc. Introduction Facebook was launched in 2004. It is a social network with millions of active users. Most of its users use it on their mobile appliances. Before using it, the users are required to register. After registering, a personal profile is then created which includes friends, photos, and other areas of interest. User can then enjoy its services including the exchanging of messages, joining groups that suit them like their schools or work places. Facebook was started by Markl Zuckerberg together with his friends and roommates from college. When it started it only gave membership to the students of Harvard. It later spread out incorporating other colleges in Boston. Eventually its number increased to students in high schools and anybody above the age of 13. This does not mean that there are no children below 13 years who have Facebook accounts. A research by Consumer Reports reported that there are about 20 million children below 13 years who have Facebook accounts thereby breaching its terms of service. In 2009, Facebook was ranked as the most famous social networking site. Most fans of facebook commend it stating that Facebook helps them remember their colleagues and friends’ birthdays, bug their friends, play games, chat with long term friends among other uses. Its critics are however complaining that is has become an obsession especially in the United States. They have complained that it is a time waster and supports narcissism. Facebook is estimated to have about 150 million new visitors from the United States in May 2011. Two years ago, it was estimated that about 42% of the population in United States had opened up Facebook accounts. In May 2011, its market growth started deteriorating; it lost 7 million users especially in Canada and the United States. This paper will discuss the market trends, market structure, business environment, pricing strategies, and government role. It will also analyze the nature of its products and services in United States as compared to other countries. 1. Nature of Product/Service Facebook Life cycle A product Life cycle is significant in marketing. These stages are Introduction, Growth, Maturity, and Decline. Sales are not as important in the introduction stage not unless the brand has already taken effect. At the introduction stage, the users are introduced to the service where they are expected to register. Users are able to request their friends to join Facebook. This stage usually has its users using it for communication and networking. At the growth stage, Facebook starts inventing new features but not many registrations come up. This is where users employ the services mainly for commercial use. The maturity stage does not have much going. Registrations greatly reduce, and some users may opt to terminate their accounts. Finally, the decline stage has more people terminating their accounts than joining. A good example of a social site at this stage is MySpace. According to a recent research carried out, investors would rethink of their decision to join Facebook before doing so. This is due to the fact that Facebook is currently at the downward slope of the life cycle, especially in its major markets like the United States of America. Even though Facebook appears to be doing perfectly well as will be discussed in this paper, it is in its third stage, which is maturity, heading to the fourth stage, which is decline particularly in most of its biggest markets in the world. The first sign of its decline was the report on its traffic drop in its largest markets: United States and Canada. The first time, it lost about six million users. It has continually fluctuated around this figure since then. At the same time, UK, Russia and Norway recorded a loss of about 100, 000. Facebook’s reports do not however, indicate these figures, but instead reflects a growth. This growth is said to be gained from countries that have embraced Facebook late. Role of technology Facebook’s online nature of operations and its substantial database merge to imply that the operations run by the company contribute value added via improved demand by its customers for appliances. Presently, over 350 million monthly users internationally, gain access to Facebook via their mobile phones, with over 475 operators of mobile appliances striving to install Facebook mobile features. Customers have access to different types of products, enabling them to access content on the internet and website, including Facebook. It has been noted that Facebook has magnificently contributed to the sale of these appliances. Some consumers confess to buying certain devices, because they can use it to access Facebook. Therefore, Facebook has improved sales of infrastructure and device. Facebook has also contributed greatly to the usage of broadband. According to a research carried out in 2010 by a mobile company, 2500 data terabytes were employed across United States’ top broadband connection whereby Facebook consumers contributed to 7 terabyte. This contributed to Facebook being the largest user of data, as compared to Google and Yahoo (Giles, 2011). Impact of Facebook on technology sales The sum amount of stock employed by various countries to reach Facebook is estimated, and the United States is the leading in these sales. When focusing on the effects of Facebook and the usage of broadband, focus should be put on the fixed line and mobile. A recent study showed that the production of Smartphone in United States is minimal as compared to other countries like UK and China. 2. Market trends Consumer behavior There has been a great shift in how people are connecting with different brands. This shift has mainly been caused by the increase in the use of social media. Social media has increased the level of recommendations between consumers, who are very good at marketing. Brands are now increasing their manifestation on social networks as social network is a just but another form of word-of-mouth advertising, which is very powerful. For word-of-mouth to be efficient, these brands need to be at the customers’ vicinity. These areas include social networks, and prime websites. The solution is to come up with opportunities that will give an opportunity for interactions. Giving customers a communication channel and a ground to communicate and share, promotes the growth of constructive stories and support that can be extended to other social network mediums. Social networks encourage consumer-to-consumer interaction thereby building brand equity. The open graph of Facebook highlights the significance of developing consumer-to-consumer sharing (Hadley and Gary, 2012). This began as a restricted map of consumer-to-consumer associations and their desired brands has grown well past the walls of Facebook and its “Like” button. With the object incorporation and third-party action, brands are able to set up contextually genuine contacts across all the important areas before getting traffic to their Facebook page that is already branded. When consumers are given the opportunity to share their views and passions about products particularly brands, these views can be compiled to form structured stories on variety of customer preferences, that can then be shared on the Facebook news feed, ticker, and wall/timeline, so that all their friends, and friends of friends, can see. These stories will act like a billboard on the timelines of these consumers. All the updates and developments on these boards will automatically be reflected in these timelines, thereby creating a consumer-brand relationship. The strategic merging of the center of interaction, which in this case is the brand website and the relationship center, which is Facebook, enables brands build word-of-mouth efforts of marketing to balance. Marketers, on the other hand, will have an inestimable insight acquired from the advocates of the customers. Mr. Zuckenberg states that Facebook’s future lies in the fact that it its products has turned out to be the consumer. Facebook’s sponsored stories give it Companies an opportunity to buy ad units of consumer-to-consumer communications through the open graph to shelf life, the potential to influence, and to increase visibility. The main point is that employing the use of personal media like your email list, will move reports into Facebook from the open graph, thereby giving insight into the kind of reports that will efficiently control the extended network of a consumer. At the end of the day, influencing the open graph by Facebook and consumers’ power, the loyal consumer bases will magnificently be made stronger by the brands. These brands will be capable of increasing insight into their customers and the friends of customers, and at the same time, strengthening and exploiting their investments on social media. 3. Production/ Supply Process and costs Analysts have observed that there has been a rapid evolution at Facebook Inc. It has grown to be one of the famous ventures in the corporate business. In March last year, it was valued to be worth 65 billion US dollars. United States has been the leading country in terms of Facebook users. It makes up to 25% of users internationally with Indonesia and the UK respectively. This has been represented in the figure below. Figure 1: Facebook users by country 4. Structure of the Industry/Market Facebook has developed a significant following in English-speaking countries. One third of the Canadian citizens joined Facebook in 2007, a growth of over than 2,000% in a year. The U.K is the third largest in terms of active users. There is lesser growth in Asia and Europe because the social media site is only available in English (Par, 2009). There are plans to translate the website and make it accessible to users from non English countries. Facebook has not had significant growth in Germany and countries to the north of Europe. The company has only recently infiltrated users in France, but the results are showing the numbers of users are increasing. Less than a month after its launch, Facebook has attracted a large number of developers and produced many applications. The progression/expansion of Facebook’s active user base has been accompanied by an expanded range of uses. Since the launch of the Facebook, over 3000 applications have been created by third-party developers. Most of Facebook's revenue comes from advertising. Facebook is still getting considerable amounts of project capital and expertise to the company, in addition to a deep market survey. All these induce via a swift influx of consumers from its 2004 initiation. With the largest member record as compared to other sites, it records the biggest profit index. 5. Governments’ Role Some governments have been putting measures to regulate Facebook.  In China, the social media website is banned and is inaccessible. The cost of regulation of social media business is quite costly. In the United States, the cost of complying with regulation is almost $1.7 trillion each year. This is according to a survey by the Competitive Enterprise Institute done recently. Compliance to government regulations posses a hidden tax on U.S companies that is passed on to consumers in the form of higher costs. Businesses could afford to hire more employees if they didn’t have to spend a lot of money in complying with government regulations. The U.S. economy would probably be in much better shape if the government didn’t impose such regulations.  There exist arguments that regulation is needed to protect clients/consumers. In actual fact it hurts them more than it helps. It is a form of protectionism, and it tends to benefit regulated industries at the expense of clients/consumers. Big and connected companies often use the government to kick out the smaller companies through regulations (Kirkpatrick, 2010). While Facebook’s process of social networking is unchallenged, their record on consumer privacy is rather poor, at best. After going public, Facebook and its employees have been making millions for the U.S. government in form of taxes. At the moment the estimates indicate that the average tax gain from each employee will be roughly $1.1 million. That breaks down to about $4 billion in taxes the government will collect. There is a high possibility that this $4 billion figure will rise, if Facebook's shares price is in the mid-$30 range or higher. Facebook's social graph is a natural monopoly in the same way that the Bell telephone or utility companies are natural monopolies.  It won’t be surprising if Facebook was not subject to heavy regulatory requirements over the next thirty years.  There is certainly going to be regulations which reduce the ease with which governments can obtain access to your private information. Creditors and advertisers will also begin to use machine learning and relational machine learning on these public datasets.  Your Facebook profile and pictures will likely be a factor in your credit score, health insurance rates and credit worthiness in the future, even if explicitly forbidden by law.  Even if the use of these is explicitly banned, corporations will still find ways to use it explicitly. 6. Business Environment The business environment has immensely changed due to networking sites. There are various networking sites, including Facebook that have given a voice everybody with internet connections. With just a few characters, you let thousands of people aware of what you are up to, and what you intend to do in the course of the day. Regardless of how big businesses are, they have embraced social media. The fact that it is also free to join, is also encouraging. Joining Facebook is not all it takes but online presence and acquiring of more people, which needs a lot of strategy and tactic. Apart from the E-mails and phone calls made to customers, companies use social media to give more to their customers. Social media enables companies to gives product updates to their customers, investors, and followers, which is a very important aspect of business. In United States, Facebook is used by almost all the companies. It has been embraced in business more than in other countries, which have companies that are still in denial. Measuring the economic impact of Facebook in Europe The economic impact of Facebook is developed via narrow and broad effects. Its narrow effects are brought about by its daily activities in Europe, while the broad effects are accumulated by third parties by their Facebook network. These narrow economic impacts by Facebook are as a result of direct, indirect, and induced economic effect. Direct effect is the amount of money that Facebook invests in employee salaries, tax payments, and the output received from its activities. Indirect effect is the amount accrued in related supply chain companies stemmed from the contribution of inputs to Facebook. Induced effect on the other hand, is the amount accrued from expenses in the general economy due to the direct and indirect impacts from the economic occupations created from Facebook and its related companies. Businesses that rely on the internet like Facebook have the capacity to influence wider economic interests over a sequence of economic agents regardless of their modest physical footprint. Facebook has great effects on Business participation, platforms, and technology sales. Business participation gives businesses an opportunity to create awareness of their products and thus creating new sales via business stories on Facebook, which initiate referrals to sites and the value of brands, and via paid publicity (Shih, 2009). Facebook also influences platforms as it creates focused particular App community and allowing bigger more common and bigger social activities among consumers. Technology sales are influenced by Facebook, in that, they increase the technology demand via improved sales of appliances and broadband connections. Facebook economic impacts The most important impacts of Facebook are developed by Facebook contributing to business participation. This comprises of advertising pursuits on Facebook and pursuits that create brand equity and value. Jointly, this is approximated to contribute to a lot in the added value developed by those companies, their suppliers and via the costs of those profiting from related jobs. Facebook’s economic impact in Europe In 2011, the estimated gross income generated by Facebook in its network in the EU27* across the above effects was 32 billion Euros. This revenue is thereafter changed into a financial impact of 15.3 billion Euros which is equivalent to sustaining 232,000 occupations. Its narrows effects amount to 14million Euros, sustaining 3,200 occupations while the broad effects amount to 15.1 billion Euros, sustaining 229,000 occupations. The impact of the broad effects on business endeavors where Facebook gives other companies a platform to advertise, promote their brand, and make new sales by creating awareness, is so far, the biggest, and is immensely accountable for about a half of Facebook’s economic impact. Most of these effects are brought about by the brand value generated for organizations via the social links dominant on Facebook. 7. Firm/Industry Location Facebook has declared changes to its programming interface with the intention of enabling the intermediary applications control their reach by their location or age. This upgrade was created to be of assistance to developers, who may be caught up in legal issues when they present their applications accessible to all the users of Facebook, in spite of their age or their countries. The recent restrictions on age in the API employ Facebook profile information to ascertain the area and age, and profile information is not completely correct. Therefore, developers are advised by the social network to enquire forthright regarding this information. 8. Business & Pricing strategies The most profitable of increasing sales by any company is better pricing. Prices offered should be equivalent to the service and product value in question. Better pricing helps in guiding companies to avoid predatory pricing, which is the offering of prices cheaper than their production costs. Facebook does not have recorded cases of predatory pricing. Companies, which have prices not put in place, have concealed profits that have not been exploited. Another strategy in pricing is the raising of prices by a small margin. When Facebook raised its prices earlier in 2011 by 1%, it realized an 11% profit increase (Giles, 2012). Facebook employs the 4Cs pricing strategy to ensure maximum profits as discussed below: Confidence-Facebook ensures that what their products and services offer is worth their stated price. This infuses confidence in their products assuring their users that what they offer is the best in the market. Compensation- Facebook employs compensation to support its forces of sales with its expected profit. It compares what other companies offer, and compensates its sales according to the revenue it brings. Choice- Facebook improves its profits by giving choices to its users. It has various versions of the same product or service. It has various advertising options, like creating a story and sharing it, creating groups or joining various groups like BranchOut. C-Level- Facebook has achieved great results by engaging the C-Level. It is not easy to implement change in an institution thus reinforcing the company’s C-Level, makes it a lot easier. Facebook uses its C-Level to regularly advertize the need for a pricing designed growth and profit that concentrates on culture. Network externalities are significant in the analysis of investments in technology. They are important in forecasting on specific market structures particularly those with outstanding network effects. Facebook’ network effects are powerful. Its network value intensifies for its users with the development of its network. 9. Entrepreneurial ability for managers Facebook is a good working environment due to its open and understanding internal culture, according some of its employees. Its culture is solid and unique, stressing on freedom and independence in the organization. Some industry viewers discoursed that Facebook gave vast opportunities to workers and people who had the urge to create new developments. Facebook’s culture relies on small groups working jointly and creating original things. Various analysts have observed that Facebook’s culture of empowerment to its employees has made it stand out from other institutions (Hillstrom, 2010). At Facebook Company, workers are excused from interfering management, differences in departments, and organization politics. The employees worked on shared desks as compartments were not allowed. Sharing of desks is common at Facebook company as even the management did the same, including, Zuckerberg. Most employees confess that Facebook has a working environment that provides potential for growth for its people. It has an open management that is approachable and focuses the contentment of its employees. Due to the networking nature of Facebook, its main focus was improving the experience of its customers rather than generating income. Challenges Facebook has faced a lot of challenges especially in terms of privacy. Other users are not pleased with changes it made lately on its new data sharing element. These complains were brought about by new features of instant personalization, which gives particular associate sites a chance to utilize data from the profile of a Facebook user to personalize their online experience, and social plugin, which gives developers an opportunity to put a Facebook widget on sites to enable new users post comments, share, or “like” a story. These features are seen on the timelines of Facebook users, and their friends. Conclusion Most of the above challenges and complains from the Facebook users comes from the constant upgrade and changing of its features. Its users feel that there is no privacy, and thus they need to keep checking their settings on privacy (Par, 2009). Other users however, complain that Facebook has a number of controls that confuses them, making them lack full control of their personal information; whereas others are not pleased with the changes that enable other users have access to stories on personal information that has been shared by their friends. To overcome such problems, Facebook should make sure that they inform the public in advance of their upcoming changes, and teach them how to upgrade their settings on privacy. These challenges have raised debates about whether to quit Facebook. My conclusion is that it is not easy for people to quit Facebook because of social norms, technical proficiency and network externalities. References Giles, J. (2011). Facebook’s Al enforcer. (Facebook Inc.). New Scientist. Vol. 212 (2836), pp. 21. Hadley, M. and Gary, S. (2012). Facebook ad impact in spotlight. (MONEY). USA Today. May 2012). Hillstrom, L. (2010). Online social networks. Detroit: Lucent Books. Kirkpatrick, D. (2010).The Facebook Effect: The Inside Story of the Company That Is Connecting the World .Google eBook. Par, B. (2009). Facebook’s Valuation Skyrockets to $9.5 Billion. Mashable: The Social Media Guide. http://mashable.com/2009/11/19/facebook-9-5-billion/. September 19, 2012. Shih, C. (2009). The Facebook era: tapping online social networks to build better products, reach new audiences, and sell more stuff. Boston: Prentice Hall. Read More