Facebook Case Analysis
1
Case Analysis
Prepared for Professor John R Rumpz
BA 4910 – Business Policy and Strategy
Indiana Institute of Technology
Abstract
Facebook Case Analysis
2
This case project is a comprehensive analysis of Facebook Inc. and its continuing
developments to its worldwide platform. From what started as a small website built by a young
university student ultimately in 2003 would eventually evolve into one of the highest used and
most profitable social media platforms on the market today. Strengths, weaknesses,
opportunities, and threats will be analyzed by evaluating the ever-growing Social media market
and examining its unique features as well as Facebook’s individual position within the social
media market. Then a Financial analysis of Facebook Inc. and its determined competitors—
Facebook-owned WhatsApp, Twitter, Facebook-owned Instagram, and Snapchat will be
examined for additional measurements to evaluate the company’s position. Conclusively,
recommendations are proposed based on analysis of the collected investigation and status of the
present strategy to develop procedures for continuous and improved rates of future progression.
Facebook Case Analysis
3
Company History and Current Operations
Facebook got its start in 2003 when Harvard sophomore, Mark Zuckerberg, created a website he
coined “Facemash” (Weinberger, 2017). Using photos of classmates, hacked from Harvard
administration’s dormitory ID files, users could rate the appeal of each individual (Weinberger,
2017). Although the site was a hit from the start, receiving 22,000 page views within the first
four hours, Harvard was displeased and ordered the site to be shut down (Weinberger, 2017).
Rather quickly after that, on February 4, 2004, Zuckerberg unleashed “Thefacebook”
(Weinberger, 2017). Originally designed specifically for students at Harvard University,
Thefacebook could be used to search for people, discover classmates, and observe a visualization
of the user’s social network (Weinberger, 2017). Half of the student population at Harvard was
utilizing this site within a month of the launch (Weinberger, 2017). The facebook began
expanding in March of 2004, being operated at Yale, Columbia, and Stanford (Weinberger,
2017). In order to manage the site’s growth and built it into a business, Zuckerberg employed
four fellow Harvard students as cofounders (Weinberger, 2017). Although the site was on a steep
rise, Zuckerberg continued managing Thefacebook out of his dorm room (Weinberger, 2017). At
the conclusion of his sophomore year, Zuckerberg dropped out of Harvard to focus on
Thefacebook full time (Weinberger, 2017).
By mid-2004, the name was altered to Facebook, and Sean Parker became the first
president (Weinberger, 2017). Soon after, Facebook managing was being performed in an office
located in Palo Alto, California (Weinberger, 2017). The same month that Facebook moved into
its new office, it got its first outside funding (Weinberger, 2017). PayPal cofounders, Peter Thiel
and Elon Musk, invested $500,000 in Facebook (Weinberger, 2017). By May of 2005, Facebook
had raised $13.7 million from various funding sources (Weinberger, 2017).
Facebook Case Analysis
4
In 2006, Facebook created the “News Feed,” which provides a real-time stream to users
of what their friends are doing, beginning the expeditious climb toward cultural fame
(Weinberger, 2017). Because of this growth spurt, Zuckerberg determined that Facebook needed
a chief operating officer, and, in early 2008, he appointed Google executive Sheryl Sandberg to
the position (Weinberger, 2017).
By 2011, the site was becoming intertwined with global politics; in February of that year,
an Egyptian uprising took place, after being organized via Facebook (Weinberger, 2017). In fact,
Zuckerberg himself was vastly evolving within the political scene, conversing with world
leaders, such as Barack Obama, to express his support of Internet access worldwide (Weinberger,
2017).
Facebook’s continued success resulted in its $5 billion initial public offering in May of
2012 (Weinberger, 2017). That same year, Facebook began providing their employees with their
“Little Red Book,” which establishes that as the company continues to prosper, they would all
remain on the same page (Weinberger, 2017).
To remain unthreatened by up-and-coming social media sites, Facebook purchased
numerous startups (Weinberger, 2017). For example, in 2012, Facebook bought Instagram,
which now has over 400 million users (Weinberger, 2017). Additionally, two years later,
Facebook acquired Oculus, a virtual-reality headset producer, and WhatsApp, a mobile-
messaging service that now has daily active users totaling to more than 1 billion (Weinberger,
2017).
A decade from the start of the Facebook journey, over 1.23 billion users were visiting the
site every month, with many using their mobile devices as access routes (Weinberger, 2017). In
Facebook Case Analysis
5
light of Facebook’s tremendous growth, Zuckerberg formed the Chan Zuckerberg Initiative, in
late 2015, with his wife, contributing 99% of his earnings to reinvest it in various philanthropies
(Weinberger, 2017). Although Zuckerberg is now fully immersed in world-altering causes, he
remains tied to Facebook in a steep way; Facebook’s stock is structured in a way that provides
Zuckerberg with disproportionate voting power, meaning he will remain in control of the
company (Weinberger, 2017).
Today, Facebook’s mission has been unaltered, stating, “to give people the power to
build community and bring the world closer together” (Company Info, 2018). Posted on the
walls of the Facebook offices is the phrase “this journey is 1% finished,” meaning that their
mission has not yet been fulfilled (Company Info, 2018). As of September 30, 2017, Facebook
employs 23,165 individuals and has 42 international offices, in locations such as New Delhi, Sao
Paulo, Brussels, and Taipei (Company Info, 2018). Employees are rewarded for innovative
problem solving and swift decision making while functioning in small units to cultivate new
products (Company Info, 2018). Examples of these products include Free Basics, Facebook Lite,
and 360 Photos (Company Info, 2018). Free Basics, introduced in 2014, grants users the option
to browse certain health, employment, and local information websites, free of data charges, in
markets where Internet access is not affordable, such as parts of Africa, Asia, and Latin America
(Products, 2018). Facebook Lite was created in response to the expanding number of users that
access Facebook through mobile devices (Products, 2018). It uses fewer data and works properly
in all network conditions, even with slow networks that are not able to support the functionality
found in Facebook (Products, 2018). From the start of Facebook, photos rapidly became a
primary way of sharing experiences (Huang, 2016). Utilizing that information, employees
Facebook Case Analysis
6
created the 360 photo, providing a way to upload a panorama and letting friends get a real-world
experience (Huang, 2016).
The Social Media Industry
Social media has been defined as user-created audio, text, and other multimedia that is
distributed online (Social Media, n.d.). These sites allow individuals to remain informed,
compare and purchase products, and stay connected to family and friends (Social Media, n.d.). In
addition, a vast array of companies utilize social media sites in order to reach and relate to
consumers (Social Media, n.d.). Companies have either expanded to develop in-house social
media departments or hired outside consulting firms, in order to assist in the development of a
social media strategy, marketing of their products, and managing their social media accounts on
sites such as Facebook, Twitter, and Instagram (Social Media, n.d.).
This industry can be broken down into roughly six types, including collaborative projects,
blogs and microblogs, content communities, social networking sites, virtual social worlds, and
virtual game worlds (Social Media, n.d.). These developed following the launch of the first-ever
social-networking site, Six Degrees, in 1997 (Social Media, n.d.).
In 2015, social media accounted for 19% of all online minutes and has continued
increasing (Social Media, n.d.). Despite the abundance and commonality of social networks, the
market potential is still growing, as user engagement amplifies (Social Media Statistics & Facts,
n.d.). In late 2015, users in Brazil and Philippines, on average, spent more than 3 hours on social
networks daily, compared to those in the United States who expended approximately 1.7 hours
per day (Social Media Statistics & Facts, n.d.). On average, users from around the world spend
109 minutes per day on social networking sites (Social Media Statistics & Facts, n.d.). As a
result of the climbing amount of time users invest in surfing social media, brands have begun
Facebook Case Analysis
7
promoting their products and services via social advertising (Social Media Statistics & Facts,
n.d.).
As smartphones, such as the iPhone and Android, have gained popularity, social
networking has taken to mobile platforms (Social Media Statistics & Facts, n.d.). Smartphone
and tablet apps have allowed for the seemingly constant presence of social media, regardless of
the users’ location (Social Media Statistics & Facts, n.d.). Mobile-first or mobile-only platforms,
like Snapchat, Instagram, and Twitter, are readily available to users at any time (Social Media
Statistics & Facts, n.d.). Additionally, location-based services, such as Foursquare, and visual
blogging sites, like Tumblr and Pinterest, are increasingly sought after via tablet (Social Media
Statistics & Facts, n.d.). In the last quarter of 2016, more than one billion Facebook users logged
in via a mobile device (Social Media Statistics & Facts, n.d.).
