As a social media network, the astronomical growth of Facebook has been nothing less of a fantastic journey. The company has witnessed its user base growth enormously over the past eight years. Several factors have contributed to the stellar growth of Facebook to become the leading social media network mainly because of its highly differentiated and engaging features. Despite this tremendous success, the company has also gone through its fair share of controversies and challenges within a short period. Having more than 2.5 billion monthly active participants, Facebook has built a strong user base and a healthy cash flow. The company's growth from an increased user base, also means it is incurring more expenses and costs.
The primary source of revenue for this company is advertising. Google and Facebook together share a leading role in digital advertising. However, the share of Google all around the world is twice that of Facebook. There has been a significant growth of mobile users who can access Facebook over the last few years. The company's primary goal is to improve the overall user experience via mobile devices. It aims to engage mobile phone users and grow its conversion rates. This paper presents an application of strategic concepts that define what Facebook has to do in the next three years and an in-depth discussion of revenue sources. The document shows a credible plan demonstrating the solutions from challenges the company faces, the cost of solving these issues and highlight who the company competitors are.
Delegate your assignment to our experts and they will do the rest.
Strategic Analysis
Year 1: International per User Monetization
In year one, Facebook will implement a new way of generating revenue by monetizing its WhatsApp and Messenger. This revenue source will help the company combat the high costs and expenditure of an extensive customer base. The new source of revenue will help the company expand its endeavors through research and development activities. Additionally, monetization of per-user internationally will help the company overcome some of its challenges related to data security and privacy from the company's higher customer engagement.
The company's ability to penetrate international markets has placed the company in stiff competition with other social media networks like YouTube, Tik-Tok and WeChat, Amazon, Linked-In, and Pinterest. Still, it has enabled it to be securitized much deeply on its ability to handle a large amount of customer data. The Cambridge Analytical scandal is one of those challenges that the company has had to endure. This scandal's unearthing depicts that the company operates in a challenging environment and faces intense pressure to control all the falls reports circulating about its platform. Therefore, by finding new ways of monetizing its user base significantly in Instagram and WhatsApp, we will pave the way for the company to boost its financial performance. The added revenue will be used in increasing security capacity in protecting the user's private data.
The efforts further support improving data security pledged in countries like Malaysia, Indonesia, India and Pakistan. They have started to invest billions of dollars in improving their IT infrastructure. According to Tip Ranks (February 2021), these efforts will also mean a higher internet penetration to these countries in the future. Facebook will, therefore, experience a healthy growth opportunity in these regions. Seetharaman et al., (2021) point out that Facebook will fulfil its goal of positioning itself as a digital privacy protector by upholding greater good in ensuring data privacy, having high tech app-tracking equipment and working on its visions concerning the upcoming internet usage. To ensure in–house data security, we can acquire a cyber-security company such as FireEye. According to Conger and Frenkel, (2008), the company's market is worth $3.4 billion plus an excellent historical background in detecting any online misinformation. Thus FireEye Inc. will offer its wealth of experience in ensuring first-hand protection of Facebook users’ database. Doing so will enable Facebook to work towards protecting user’s data that have tarnished the company’s reputation.
Year 2: Acquisition and Mergers in Adjacent Areas
With the financial health and past success through, mergers and acquisitions, Facebook can remain in this course during the second year. Though the use of Facbook.com is slow, other social media apps acquired by Facebook are proliferating and generating a significant stream of revenue. These apps are WhatsApp and Instagram. Facebook can proceed seeking other promising organizations to merge with them such as Tik Tok. Facebook can use its comparative core competencies and advantage to jumpstart the growth of such mergers quickly. Though this strategy may cause certain strategy risks such as poor choices on the right companies to acquire, Facebook can still maintain a well-balanced and growing user-base through consistent returns. Through Facebook acquisition strategy, there will be market user growth to level out the stiff competition from players like Googles, Orkut, Windows Live Space and Myspace. It is because such acquisition deals involve the transfer of expertise and critical technologies to the company. Thus there will be a boost to our app development platform, photo sharing, instant messaging, user surveillance and information, location services, analytics and advertising.
Facebook can continue to maintain its market dominance by harnessing the effects of networks. It will reinforce the value in advertiser benefits and consumer market in online advertisement markets. The upcoming innovative companies offer competitive tension in such markets irrespective of achieving a large firm's success. They tend to siphon off customers to more innovative and attractive platforms or access data from Facebook. Therefore, to deal with the competition problem that Facebook is facing, we will continue with our acquisition program. The startup companies will benefit the dominant company, Facebook, by reducing such intense competition pressure from the new companies or the entire periphery of the market. Additionally, such mergers will also help prevent future expansion or entry among such firms that may undermine Facebook's incumbent dominance.
Year 3: Creating "App-For-Everything "
In year three the company can implement an app containing all forms on online services in one place. Given the triumphant story of WeChat's of China, especially it rich set of features, Facebook can venture for "app-for-everything". The strategy involves combining photo/ video sharing, micro-messaging, payment options, payment score tracking and city/ map services. Though this strategy has worked for WeChat's it is undesirable for Facebook because of several reasons. First, WhatsApp's Chinese success was basically because of China's market. According to Chao (2017), the success happened because China had blocked Twitter, Google, and Facebook among other social media apps, which enabled its market to be open only for WeChat to fill all the niches. Therefore, such a strategy will not be functional in Europe or the United States because Facebook serves most of those niches and the competitors have the same services.
Facebook faces competition from Twitter, YouTube, Google, Snap Chat and Tik-Tok, providing the same services. The American market has a high saturation level, and having a singular congested app will not experience a similar appeal as China's case.
On the same note, diversification of Facebook services, will also not be an ideal strategy. Though diversification may look like a desirable strategy, such a step is very misleading. Already, Facebook has various products within the entire social networking platform, and it is leveraging them well. Therefore, we can diversify our services by venturing to other adjacent markets in this platform, such as payment systems or sharing focused videos. We should not try to join an unrelated market blindly such as the production of phones. Such diversification with no specific purposes will have no meaningful value to Facebook but rather a timid gamble.
Having a well-focused app will help Facebook attract new users despite their small number. Welch (2019) indicates that the CEO of Facebook Zuckerberg in his letter has noted that short stories, private messaging and tiny groups are among the fastest increasing sectors of internet communication. As the Facebook team, we have to re-affirm our commitment to security and privacy to win back the public's support. However, though such a goal based on a privacy-focused approach, it will directly conflict with our advertising revenue by limiting access to the users' data.
Conclusion
By looking at the three strategies for the next three years, there is need to utilize an unprofitable Messenger and WhatsApp apps to shift into the direction of monetization. At the same time the company needs to retain the focus on advertising on both Instagram and Faceebook.com. The issue of security on the free apps can lead to cash challenges, especially with the current lack of monetization on messaging apps from Facebook. Therefore, there is need to only focus on the payment system as a primary monetization strategy. Such a system capitalizes on our declared dedication to security and privacy so that we start competing with Skrill and PayPal payment systems. Already WhatsApp and Facebook Messenger do deal with cash transfer. Therefore, we should dwell on the expanding the features of the third-party and their sites for adoption. Our core power currently resides in our size and extensive courage. The current customer base has enabled our perpetual growth. Matters on privacy are top on our priority list and to continue being consistent in penetrating revenue from an advertisement for the next decades. Our tremendous growth and user-monetization can continue to be our strength by acquiring young startups. Finally, we need to look into the acquisition or merger with a cybersecurity company that will ensure a constant end to end encryption and customer data protection.
References
Chao, Eveline. (2017, January 2). How WeChat Became China's App for Everything. Retrieved from https://www.fastcompany.com/3065255/china-wechat-tencent-red-envelopes-and-social-money
Jason Furman et al., Unlocking Digital Competition: Report of the Digital Competition Expert Panel, HM Treasury Digital Competition Expert Panel, March 2019, page 21, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785547/unlocking _digital_competition_furman_review_web.pdf .
Seetharaman D., Glazer, E., and Higgins, T., (February 13. 2021). Facebook Meets Apple in Clash of the Tech Titans— 'We Need to Inflict Pain. Retrieved from https://www.wsj.com/articles/facebook-meets-apple-in-clash-of-the-tech-titanswe-need-to-inflict-pain-11613192406?mod=business_lead_pos5
Tip Ranks (February 10, 2021). Facebook: International Markets Could be a Game Changer. Retrieved from https://finance.yahoo.com/news/facebook-international-markets-could-game-082906405.htm
Welch, Chris. (2019, March 6). Read Mark Zuckerberg's letter on Facebook's privacy-focused future. Retrieved from https://www.theverge.com/2019/3/6/18253472/mark-zuckerberg-facebook-letter-privacy-encrypted-messaging
