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Shea 1
FACEBOOK AND THE INFOTECH, COMPUTERS & SOFTWARE INDUSTRY
One of the oldest and more prominent social media platforms is Facebook, Inc. The
company operates in the InfoTech, Computers & Software Industry, where it allows users to
connect, share information, advertise, play games, and communicate through multiple platforms.
They accomplish this through their various social media products, including Facebook, Messenger,
Instagram, WhatsApp, Oculus, Workplace, Portal, and Calibra.
1
Facebook, Inc. originally began
in February of 2004, when Mark Zukerberg and co-founders Dustin Moskovitz, Chris Hughes, and
Eduardo Saverin created the Facebook platform. Facebook quickly expands, and in the following
years, the platform finds new ways to expand and improve, gaining more users in the process. By
2011, the company will launch Messenger, and in 2012, Facebook will reach over a billion users,
while also acquiring Instagram. In 2014, the company continues to expand through acquisition of
both WhatsApp and Oculus. In the next few years, the different platforms will evolve and expand,
launching new ideas that will target both current and new markets, including Workplace, Portal,
and Calibra. However, despite their massive growth and success since the founding, Facebook,
Inc. has faced trouble over the years as well. Since the start of the company, there has been some
controversy about how Facebook conducts business. This began when, in its first years of
existence, the company faced several lawsuits, including one from co-founder, Eduardo Saverin.
Saverin’s lawsuit was a result of Zukerberg removing him from the company,
2
while another
lawsuit from the Winklevoss Twins arose from Zukerberg allegedly stealing their idea for the
1
Company Info: About Facebook-What We Build. (n.d.). https://about.fb.com/company-info/
2
Carlson, N. (2012). EXCLUSIVE: How Mark Zukerberg Booted his Co-Founder out of the
Company. https://www.businessinsider.com/how-mark-zuckerberg-booted-his-co-founder-out-
of-the-company-2012-5
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social media platform.
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Over the years, more scandals have arisen from the company, including
issues of user privacy, false advertising, unauthorized information sharing and selling,
questionable content policies, misinformation, and political influencing. Some of these have even
resulted in Zukerberg going before Congress to defend the company’s actions. In 2018, Facebook
dealt with backlash when it was revealed that their platform was used conspire genocide against a
Muslim minority in Myanmar.
4
So, while the company has faced rapid growth since its
development, it has not been without challenges.
INDUSTRY ANALYSIS
Part I. Internal & External Variables
These large tech companies within the industry have built a certain environment within
their companies to maintain an efficient workforce. An important part of a company’s structure is
transparency and innovation to maintain skilled and loyal employment. In addition, companies
within this industry rely heavily on word-of-mouth marketing for their products. They focus
largely on the communication of the current decade to keep up with social trends. In terms of
pricing, most products available in this industry are free for users. Revenue is generated heavily
from selling advertisements space and user data. Research and development also relies mainly on
things such as current social trends and user convenience.
3
Lonescu, D. (2011). Winklevoss Twins v. Facebook: Case Closed.
https://www.pcworld.com/article/224933/Winklevoss_Twins_v_Facebook_Case_Closed.html
4
Meisenzahl, M. (2019). The 11 Biggest Scandals Mark Zukerberg Faced Over the Last Decade
as he Became One of the World’s Most Powerful People.
https://www.businessinsider.com/mark-zuckerberg-scandals-last-decade-while-running-
facebook-2019-12
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A major external force in the industry is government and regulation. Recently, several
companies within the industry have had trouble with the government regarding things such as
cybersecurity, data privacy, and foreign business. This eventually led to five major companies,
Apple, Inc., Amazon, Inc., Facebook, Inc., Alphabet, Inc.’s Google, and Microsoft joining forces
to fight some policies and regulations in 2017.
5
In addition, technology’s development since the
rise of infotech and computers has changed how the industry operates. Originally, the platforms
were used exclusively on computers, but now, with cell phones, apps, and other devices,
companies are forced to evolve to become more accessible. These platforms must also consider
the changing demographics of those that use their networks. Teens prefer platforms such as
Instagram and Twitter over Facebook, while adults gravitate towards sites such as Facebook and
LinkedIn. Meanwhile, a company’s standpoint and actions on different current events could
change the public eye’s perspective on a business. The wellness of the economy could also affect
how a company operates.
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For example, for networks that rely on advertisements for revenue, a
bad economy could change the types of advertisements. Similar to how elections, global
pandemics, global warming, and political and social movements can.
Part II. The Five Forces
Despite the large revenues the InfoTech, Computers and Software Industry generates, the
industry is dominated by only a few companies. The industry’s largest competitors consist of
companies such as Google, Facebook, LinkedIn, and Twitter, producing relatively similar
5
Bass, D., & Ingold, D. (2017). The Top Five Tech Rivals Join Forces to Shape Policy and Fight
the Government. Bloomberg.com, N.PAG.
6
Lamberton, C., & Stephen, A. T. (2016). A Thematic Exploration of Digital, Social Media, and
Mobile Marketing: Research Evolution from 2000 to 2005 and an Agenda for Future Inquiry.
Journal of Marketing, 80(6), 146-172.
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products, which causes high competition within the industry.
7
Some companies manage to
differentiate, such as LinkedIn, by focusing specifically on networking within the business and
professional field, but still face fierce competition.
These dominating companies make it difficult for new entrants in the industry. However,
the constant change in social media trends could be used to the advantage of new platforms. It is
relatively easy to create new websites and apps, but more difficult for the platforms to gain
attention and momentum within the industry. This means there is a low entrance barrier in the
industry, but there is still difficulty in growing the business.
In terms of suppliers within the industry, the servers, general software, and basic supplies
are standard within the industry. This means there is low differentiation and considering the size
of the dominating firms within the industry, the infotech companies most likely hold significant
bargaining power when dealing with majority of their suppliers. However, for the large scale and
probably high-quality computer hardware and software, suppliers may enforce their own
bargaining power within the industry.
8
With buyers, they will gravitate towards these large, dominating companies easily,
however, the companies may have to restrict the amount of content to avoid overwhelming the
users with advertisements. In terms of data, a buyer may be more restrictive, depending on the
7
Plunkett Research, Ltd. InfoTech, Computers & Software Industry: Industry Analytics.
http://www.plunkettresearchonline.com.proxy1.library.eiu.edu/researchcenter/IndustrySummary.
aspx?Industry=6&NAICS_CODE=51913
8
Trefis Team. (2014). Facebook Through the Lens of Porter’s Five Forces.
https://www.forbes.com/sites/greatspeculations/2014/11/28/facebook-through-the-lens-of-
porters-five-forces/#1173533c7dd3
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demographic they want to target. However, the popularity of the companies in the infotech industry
also helps to restrict the buyer’s options.
The high competition between the top companies in the industry makes it relatively easy
for consumers and users to switch platforms. If a user dislikes the formatting, privacy, or other
aspects of a network, they can easily switch to another. Similarly, if a buyer dislikes the prices or
quality of data, there are other platforms that they can buy from. In addition, the products have
relatively low differentiation, making it easy to switch.
Essentially, in terms of current competition, companies within the InfoTech, Computers
and Software Industry face strong pressure due to large, dominating competitors. With new
entrants, there is a moderate threat, because, while it is easy to enter the industry and create a
platform, it can be difficult to grow and gain recognition by the public. Suppliers also provide a
moderate level threat. Basics such as general software and supplies may be easy to bargain with,
but for large scale computer hardware and software, a company has limited choices. With buyers,
the popularity of the top companies restricts them to fewer options, but they are still able to switch,
leaving the buyers with medium bargaining power. Lastly, there is a high threat from substitutes.
Users easily switch from one platform to another, and generally, hold accounts on several. This
makes it easy for users to stop using one platform, and consumers would likely follow the trend of
users. Overall, this is probably an attractive industry. These tech giants are some of the most
profitable companies in the U.S.,
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and create a tight industry with low competition from new
competitors. The size of these companies helps restrict buyers and users from switching and
intimidates suppliers and limits their bargaining power.
9
Bass, D., & Ingold, D. (2017). The Top Five Tech Rivals Join Forces to Shape Policy and Fight
the Government. Bloomberg.com, N.PAG.
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Part III. Financial Analysis
Major Competitors:
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• Facebook, Inc. (Stock Symbol: FB)
Market Share: 26.64%
Core Competencies:
o Reputation
o Global
o Largest social network
o Rapid growth and networking
o Innovation
o Digital Advertisements
• Alphabet, Inc. (Google) (Stock Symbol: GOOGL)
Market Share: 62.85%
Core Competencies:
o Innovation
o Reputation
o Global
o Biggest search engine
o Quality service
o Digital advertisements
o Most used web browser
• Twitter, Inc. (Stock Symbol: TWTR)
Market Share: 1.26%
Core Competencies:
o Short and easy communication
o Reputation
o Global
o Innovative
o Appeals to all demographics
10
Plunkett Research, Ltd. InfoTech, Computers & Software Industry: Industry Analytics.
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Financial Analysis:
-5
0
5
10
15
20
25
2017 2018 2019
Return on Assets
Facebook, Inc. Alphabet, Inc. (Google) Twitter, Inc.
