CASE METHODOLOGY - Facebook

8/13/2019 CASE METHODOLOGY - Facebook

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MASTER OF BUSINESS ADMINISTRATION

MGT 6798

CASE METHODOLOGY:

An Individual Assignment

Submitted to :

Mr. Ayub bin Hj. Khalid

Submitted by:

Fakhrul Anour bin Abdullah G1136857


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CONTENTS

1- ABSTRACTS Page 02

2- INTRODUCTION Page 03

3- PROBLEM STATEMENT Page 06

4- SWOT ANALYSIS Page 08

5- CONCLUSION Page 09

6- RECOMMENDATION Page 10

7- OTHER REFERENCES Page 13


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ABSTRACT

A lot of them (a ton of random things) just werent meant

for other people to see, and they were just things that I made

for myself because I thought that they would be cool.

Mark Zuckerberg (founder of FACEBOOK )

The main objective of this case is to DEVELOP A DECISION to keep up with

the fast growing technology based business while ensuring FACEBOOK s userexperience was better than its competitors. To do that it has to use all its

internal forces to be different and unique in order to remain popular an able

to overcome c ompetitors threats and intense media scrutiny.


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INTRODUCTION

The Social Network is one industry that venture into a business that the financial strength mostly

comes from investments of advertisements, supporting funds and sponsorships. All it takes for a

social network to gain such strength is by increasing number of users to raise a community that

can easily be reached by businesses. Looking at FACEBOOK , this case analysis will foresee

how a social network established and gain profitable income to support its long run.

FACEBOOK was officially launched on 4 th February 2004 for college students by the

Harvard drop-out, Mark Zuckerberg with his college mate Eduardo Saverin, Andrew McCollum,

Dustin Moskovitz and Chris Hughes. It all started with nothing but intuition to get along with

other at ease by network technology. With his coding talent to write software, this 21 years old

man who supposed to be major in psychology quit Harvard to concentrate on his successful

creation.

FACEBOOK is an online social networking service. Its

name stems from the colloquial name for the book given to

students at the start of the academic year by some American

university administrations to help students get to know one

another consisting of individuals photographs and names. It is a

free service and accessible to an yone with .edu email account

which limits its use to college student. They can create personal

profile, interest & current course schedule your friends are your

peers & have own privacy settings.

The predecessor of FACEBOOK was called facemash which brought in 450 visitor and 22,000 photo views in its first fourhours online based at Harvard University.


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It started off without any business vision, it was just an idea and intuition to create a

college wide FACEBOOK online where students could communicate regardless of where they

lived. But within 2 years the organization had grown from a few friends programming around a

kitchen table to a full fledge technology business to over 100 employees and 7.5 million users!

Since it has grown BIGGER unexpectedly so why not explore further, expand and continue to

sustain in the market.

By June 2004, FACEBOOK was serving about 30 colleges in United States and had

about 150,000 registered users. Eleven months later it has reached into a million users! By late

May 2005, FACEBOOK had attracted 2.8 million registered users on more than 800 college

campuses.

I guess its mostly a utility for people to figure out just whats going on in their friends lives,(and those) people they careabout.

Mark Zuckerberg

It was notreally scientific;

it was justintuition and

probablywrong.

Mark Zuckerberg had been programming since he was 10 years old, and his skills had, in his words reached a point where it went into my intuition, and I wasnt really thinking that much about it consciously. He hadcreated (unlike FACEBOOK ) many computer programs which went unnoticed.


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Then by September 2005, FACEBOOK entered the market of high schools at United

States which the users increased much faster in six to seven months the users reached a million

registered! The popularity just not ends there when the management starts to figure another

group of users, the alumni those graduated from high schools and colleges still return to

FACEBOOK each day.

At the end of this school year, were going to have a group of

seniors graduate who has been on FACEBOOK for 2 years. Instead

of just saying well let you on if have an alumni e -mail address, we

might try to do something more proactive to get them on the site.

Mark Zuckerberg

As of April 2006, FACEBOOK organization had grown to over 100 employees, and

most were located in a single office in Palo Alto, CA. Its user base was growing at an impressive

rate; from ~5.0 million users in late October 2005 to over 7.5 million in mid April 2006, when

FACEBOOK was available in over 2,100 colleges and over 22,000 high schools.

Through Sean Parker, the co-founder of Napster that became the first president ofFACEBOOK , the leverage strength of the companys financial stability increased. He helped

the company to secure a number of meetings with potential investors & entrepreneurs. As the

company needs money to support its cost of servers and operational activity, the first investment

came from Peter Thiel, a venture capitalist and founder of PayPal with the value of $500,000.

From there, a vision followed by mission started to flourish in the organization to turn the social

network into a successful internet business.

A few other people have invested a fewthousand dollars here and there, but Im sort

of the main investor, pre -venture, Peter Thiel (founder of PayPal)

Note: PayPal was acquired byeBa in 2002.


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PROBLEM STATEMENT

Security and privacy

Since the existence of FACEBOOK until the end of 2005, the target users are only

students with the age ranged between 15 until 35 years and above. Therefore the limitation that

this social network had to face was on the security and privacy factors. For example in 2005,

various media outlets offered condemning reports on social networking sites upon many topics

of security and privacy. Even the users (in this case the students) complained about how the

websites were being abused.

Business Model

In the beginning, FACEBOOK was never made for financial profit but more on social platform to extend communication ability among users. But as the number of users started to

grow rapidly, it has provided a certain value of credibility to attract businesses in utilizing

increasing network. Thus FACEBOOK needed to re-evaluate its strategy from a free platform

into a profitable social network.

Legal Issues

Entering into business means that FACEBOOK need to increase its shield by investinginto legal protection and at the same time preparing verdicts for any legal attacks from

competitors or users. For example in 2 nd September 2004, ConnectU.com (an online meeting

place for student) filed a lawsuit against Facebook for stealing idea & source code. Apart from

that the security and privacy need the legal protection from being breached.

Our mission is to increase information flowbetween people and to help people learn whats

going on in their world and express themselves.

Mark Zuckerberg


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Competition

Since late 1990s, the creation and discovery of social networks has become an explicit website

designed to connect people online. The attention received through registered users with average

not less than 500,000 has attracted businesses to utilize the accumulative community potential

for marketing and sales purposes through advertising and spread awareness. The social network

has become another alternative to easily spread information with less cost. Before FACEBOOK ,

there already existed a few successful social network especially MySpace. The incoming of

FACEBOOK either was a sign of threat, or juggernaut from extreme competitors.

2003, founded by Chris DeWolfe & Tom Anderson, its an onlinecommunity website that lets you meet friends Friend. Other featuresinclude group invitations, events, classified & forums.

1997, created by Andrew Weinreich from New York City. Meant tocreate friends and post bulletins board items in first, second andthird degrees. It failed after year 2000.

1997 (Jan.), Scot Hassan started the e -mail comm. svc which later became eGroups to share calendar, file space, group chat & simpledatabase. Bought by Yahoo! Groups in year 2000.

1998, AOL acquired for $287 million the ICQ, an instant messagesetu ro ram b Israeli - based svc created in 1996.

2003, an online business & professional services was created. Thesesite help in hiring managers &talents referral that allow managementto communicate and interviews them.

2000s (early), a recreational social networks service formed in byJonathan Abrams. A prominent dating website & was use as a

powerful human relationships to connect each other.

2004 (Jan.), another network was found by Turkish born Googlesoftware engineer. This web restrict to membership by invitation only.


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SWOT ANALYSIS

STRENGTHS 1) Long term commitment2) Wide range of users

regardless of their agegroup or status

3) Daily retention4) One of the fastest, evolving

and adaptable websites

5) Translated in more than 70languages

6) User -friendly

WEAKNESSES 1) Facebook privacy settings.

(Leak of millions of privatephotos over the internet).

2) Dependence on DisplayAdds. Up to 80% of

revenues come from ads.3) Uneasy Customization

W -O Through surveys and pollscan expect informationregarding different servicesfor different businesses

before making anyinvestment decision. Its tocreate fair situation of freeusage with benefit.

S-O Its a social network for theusers that involves one at a

personal level. It possessesa clean layout that makessharing is very easythrough the website. Turn

the introduction pages to a place of communication toexpand awareness.

OPPORTUNITES 1) Facebook has an

extensiveopportunity tomake use of thedata collected

2) The currentpopularity

3) Expand their B2BNetwork.

THREATS 1) Competitive threats.

The major Social-Networking sites areactively trying to geta hold of Facebook.(Twitter, Tumblr,LinkedIn, Google +).

2) Highly competitivead market

3) Low switching cost

W -T Invest on developing

privacy policy to increasesecurity over the users

photo and privacy. Improvethe service regard on their

communication capability by improving the pageinterface and increasefunctional attribution.

S-T Spend on R&D in order tocreate advanced value totheir website to exceed thecompetitors. And by havingthe collectivity of the usersregardless of their agegroup or status, it will give

FACEBOOK acompetitive advantageagainst its competitors.


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CONCLUSION

Legal issues on business lawsuits are a common attack on patent infringement especially uponnew creation of a product once compared. But with the growth of a business upon capital

ventured and acquisitions, any competition brought to legal either about issues of patents or

lawsuits against security breach can be settled overtime. As FACEBOOK creation derived from

the honest nature of a man in trying to build a platform that can easily build a social bridge, any

faulty evidence can be repelled by the witness of community users or through business

partnerships. For example (based on extended research), the lawsuit made by ConnectU.com in

2004 was settled five years later through acquisition with FACEBOOK .

They were three Harvard students with a bright idea but not a lot of computer expertise, so Cameron and Tyler

Winklevoss with Divya Narendra (center) enlisted a sophomore named Mark Zuckerberg to help them build a social-

networking site for college students named ConnectU. On September 2004, they filed a lawsuit against FACEBOOK

for stealing ideas and source code. Then on June 2008, FACEBOOK settled by acquiring ConnectU for $20 million

in cash and over $1.2 million in shares, valued at $45 million based on $15 billion company valuation. 1 1 http://www.boston.com/business/technology/articles/2008/06/27/facebook_connectu_settle_dispute/


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FACEBOOK Announcements:

text -only school per day

Fees: $5 - $20 (basedon impressions)

BannerAnnouncements:

graphical ad national advertisers

across websites pages

SponsoredGroups:

sponsor groups orpromotional areas on the

website

Sponsored groupshelp us keep theservice free & fast.

M. Zuckerberg

Operationalcosts

Server

costs

Venture Capital: Accel Partners

invested $12.7 millionwith reported valuation

(expected return) of$100 million.

I think we had 30VCs who hadexpressed an

interest in thedeal.

Sean Parker

The most important thing in this business model is how FACEBOOK maintained itsdaily retention of its users by sustaining value and supporting the incoming of new users.

Usually when it comes to high alert of security and privacy of social networks, most

responsible companies will be on action to ensure they are always in the improvement site to

reduce the matters. As FACEBOOK was very much aware that its core target of users was

students; therefore a variety of proactive measures to protect its members has been taken into

action, such as using technology to crawl the site for fake profiles. On the other side,

FACEBOOK had built a directory utility that became more useful to its members the more they

revealed themselves. Consequently, FACEBOOK was architected to enable a freer flow of

information.

Then when it comes to business model, FACEBOOK had built a systematic financial

flow to attract profit through advertisements, funding and sponsors so those ventures could

support the costs on operational activity and servers needed to ensure the long-run of its free-

based social network.

The business model of FACEBOOK :


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5th

most popular website!

Music destination: 350,000 (bands + artists)

Intermix Media, Inc. (sold): $580 million (cash)!

Oct. 2004 Oct. 2005: 614.7% (24.3 million users!)

Oct, 2003 - Oct. 2005: 2% (1.4 million unique visitors!)

Technical scalability issues

Paid for slow res onse times

Expanded features: File -sharing capabilities for allmedia types

In order for businesses to buy advertisements is by looking at its potential rate to reach

public. The more circulation provided in order to spread the information, then more value it can

sells product through the widespread of advertisements. By looking at the daily retention rates of

FACEBOOK users when compared to other social networks, even MySpace was not

performing at how FACEBOOK could perform.

Oct. 2005 Apr. 2006: ~5 million users to >7.5 million users!

2,100 colleges 22,000 high schools

The BUYOUT Valuation value: $100 million

Offer value: $750 million Sale value: $2 billion

Usage patterns: 25% (MONTHLY RETENTION!)

During the period when FACEBOOK was in its growing process in the United States, two of itsmain competitors that went global, MySpace and Friendster were in comparison based on the level of

performance in financial and users stability. When each of the social networks was trying to improve byadding new functions to its services, FACEBOOK was moving ahead on simple outlook with highcirculation of active users online.

Vs.MySpace Friendster

FACEBOOK


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The community The business

Theorganization

bridge

RECOMMENDATION

At this time of period when FACEBOOK was still in the United States, the decision of MarkZuckerberg not taking any exit was considered a smart move, especially when he quoted much

higher value of FACEBOOK ($2 billion) against the buyout value offered ($750 million). It

was a signed that Mark Zuckerberg had a confident level based on his intuition towards the

success of FACEBOOK in the future.

With the rapid success of FACEBOOK in United States within that three years (2004-

2006) since its existence, it is recommended that the company keeps its core value to growth

organically. The strength of its operational value had been proven effective while the performance of its website had been certified affective by many users registered (with daily

retention).

Through times ahead, as FACEBOOK going strong for global market, it should increases itsvalue with expansion through merger and acquisitions or taking over other companies that can strengthenthe performance of its financial without effecting its core business as a freer flow of information.


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I think that it might be prettyrelevant, but it requires some thoughtabout what those specific cultures are

& maybe the density of students inthose cultures I think that, as time

goes on, well definitely invest the time& resources into (growing

internationally).

Mark Zuckerberg

CASE METHODOLOGY - Facebook

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