Facebook's Inc.'s Effective Business Strategy

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Facebook’s Inc.’s Effective Business Strategy

The world’s largest social networking site, Facebook, was created in a college dorm room at Harvard in 2004 by 19 year old Mark Zuckerberg and three of his other pals. A site which was initially created for college students to socialize online became the world’s largest social networking site having billions of users and revenues. A website which is more popular than Google is seen to be the ‘most transformative social change’ in the recent history by Zuckerberg, which made him the world’s youngest billionaire because of it. Overcoming the first-mover advantage of Myspace, who was an early leader in social media, was the first thing Facebook did before it became the global phenomenon. Myspace’s success attracted the attention of News Corporation, which later got acquired by them in 2005. After Myspace became a publicly owned company, its revenues and profitability became more pressing issues and their business model started shifted on generating more revenues by focusing on ad-heavy markets. Later in 2008, Myspace declined in its business which laid off 45% of its staff. Facebook remained a private company until Microsoft purchased $240 million equity stake and a Russian investment group added $200 million, which gave Facebook less pressure to produce bottom-line results than Myspace that allowed them to pursue a different business strategy to make more users first and profits later. Facebook pursued a global strategy due to which it has more than 70% of its users outside the Unites States. Facebook displaced Myspace from being the most popular social networking site in 2008 but faces new challengers in social media space like Google, LinkedIn, Pinterest and Twitter.

Facebook and Myspace are the social networking sites that allows users to create public profile on the website and to connect with other users which were introduced in 2004 and 2003 respectively. The users find it interesting because they offer a lot of benefits and services like connecting them with their friends, new people and they can even share their thoughts, opinions and interests on them. Before Facebook became a worldwide sensation, it had to overcome the first-mover advantage held by Myspace. Before the Facebook was introduced, Myspace was popular in the social networking business as many people were new to having access to a site like that which had new contents and could connect with friends and find new friends through it too and even its success attracted the attention of News Corporation in which they acquired Myspace for $580 million in 2005. After being publicly owned company, Myspace focused more on a few ad-heavy markets to grow revenues and profits rather than increasing more users. They also kept on redesigning their website which made them to lose its user data base and they also started getting off because there were too many bugs and issues. On the other hand, Facebook pursued a different business strategy: more users first, profits later, which was a global strategy. As Facebook’s strategy was to gain more users first, it made its website simple, better and easy to use and they didn’t keep on changing its designs so people got used to it and started to use it.

As the main motive pursued by the Facebook was more users first and profits later, it focuses on lowering the cost and affordability of its product which leads towards increment of the users of Facebook. Facebook also focused on the differentiation strategy by providing its users with better features in its product like ‘news feed’ which is at the heart of user’s homepage and provides regular updates of friends’ posts, photos, events, etc., ‘timeline’ which allows users to paint a complete life story on his or her profile and ‘graph search’ allows users to query in that portion which is connected and filled with other users. For the focus strategy, Facebook serves its customers with the taste, size and design of the product that could best match with the customer’s need and requirements.

Facebook also follows the intensive growth strategy to sustain in the market. It uses the market penetration strategy to maximize its current market share by making alliances with telecommunication companies to increase the number of users using the company’s social media service through the Facebook mobile app. For the market development strategy, Facebook coordinates with the governments of different countries to allow their citizens to have access to online social network which emphasizes in the growth of Facebook in the global market.

The competitive challenge should be pointed out properly to formulate strategies. Facebook’s main competitive challenger was the first-mover advantage of Myspace as they were already in this online social networking business with many of its users when Facebook was just starting. But Facebook slowly increased its customer as at that time their main focus was to increase customers first and earn profits later, so, they were able to overcome that challenge. This challenge turned into its competitive advantage in the long run. Right now, Facebook’s main competitive challenge is to maintain its competitive advantage for having a huge customer base. If only Facebook had no edge over its competitors, it would have been hard for Facebook to sustain in the market as it earns money from its large number of users. So maintaining this challenge, Facebook staying in this online social networking business is its biggest competitive challenge. Therefore, this is how Facebook became the number-one social media company, and not Myspace which enjoyed a first mover advantage.

After analysing the case along with the strategies used by Facebook I think the strategy followed by Facebook seems very fine to me because of the strategy that they used they have gained a lots of users around the globe. More than 70% of Facebook’s users are outside of the Unites States and its bringing billions in revenue and gaining popularity in the world. So, I think Facebook has a good strategy. Only three recommendations that I would like to give to Mr. Zuckerberg are:

Be aware of the rapid increment in the growth, development and obsolescence of current technology because the Facebook platform can get outdated any time, so it needs to act accordingly and adapt to the new updates in the distribution of the services they provide, exclusively since what they offer are highly technology amplified.
To start focusing more on sustaining large number of users they have and less on increasing the number to grow because focusing on sustaining their large number of users will help them to gain more loyal customers who stay active on their site around the globe and those loyal users will benefit the company more by influencing other users to be in it together which will be a win-win situation for both Facebook and its users.
Acquire what they have invested in for so long. Their enormous customer base has yet to explore a lot of opportunities. As social networking has highly influenced many people’s loves, Facebook needs to capture as many opportunities as possible that is present in the absolute number of users they have online.

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