The Hacker Way: Inside Facebook Business Strategy

To understand Facebook’s business strategy, it is essential to go back to Mark Zuckerberg’s Founder’s Letter of 2012 to look at the key elements of Facebook’s vision, mission, and critical pillars.

It is important to note that while Mark Zuckerberg emphasized this letter back in 2012, Facebook isn’t anymore one of the fastest-growing tech startups. But one of the largest tech companies.

facebook-statistics

This is an attempt to analyze the key elements of Facebook’s business strategy. It is not an attempt to judge whether or not the Facebook business model is good or bad.

By default, I don’t think there is an intrinsically lousy business model. What might make it go awry is the scale of that model and the fact that it might rely too much on a single monetization strategy, even when it reaches a massive scale.

Let’s dive into the key elements of Facebook’s business strategy.

facebook-business-model
Facebook, the main product of Meta is an attention merchant. As such, its algorithms condense the attention of over 2.91 billion monthly active users as of June 2021. Meta generated $117.9 billion in revenues, in 2021, of which $114.9 billion from advertising (97.4% of the total revenues) and over $2.2 billion from Reality Labs (the augmented and virtual reality products arm).

Facebook’s vision and mission

facebook-arpu-breakdown
ARPU, or average revenue per user, is a key metric for attention merchants like Facebook. It assesses the ability of the platform to monetize its users. For instance, by the end of 2022, Meta’s ARPU worldwide was $10.86. While in US & Canada, it was $58.77; in Europe, it was $17.29; in Asia, $4.61 and in the rest of the world, it was $3.52.

As Mark Zuckerberg pointed out in their Founder’s Letter:

Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.

It’s hard to believe, yet, back in the days when Mark Zuckerberg launched what would become Facebook, even after being widely successful, he wasn’t convinced at all that was a business to pursue.

What did inspire Marck Zuckerberg to launch Facebook?

At Facebook, we’re inspired by technologies that have revolutionized how people spread and consume information. We often talk about inventions like the printing press and the television — by simply making communication more efficient, they led to a complete transformation of many important parts of society. They gave more people a voice. They encouraged progress. They changed the way society was organized. They brought us closer together…

While this statement is inspirational, it does tell us that for a business strategy to be successful, being inspired by great and seemingly unachievable things can be a great enhancer. At the same time, you have to break down this mission at a small scale so that you also make it actionable.

As March Zuckerberg continued in the letter:

…Even if our mission sounds big, it starts small — with the relationship between two people.

Thus moving from “changing society” to improving relationships between people allows Facebook to design its tools using a simple metric.

Facebook’s growth framework

In another part of the letter Mark Zuckerberg highlights another critical aspect and also one thing that I try to stress over and over:

Most great people care primarily about building and being a part of great things, but they also want to make money.

In the business world, people often seem to fear admitting they are in for the money.

While making money isn’t the primary element, people still see it as an essential aspect of doing business.

That’s because, as a company, making money is a signal that helps you understand whether you’re building things people love.

Through the process of building a team — and also building a developer community, advertising market and investor base — I’ve developed a deep appreciation for how building a strong company with a strong economic engine and strong growth can be the best way to align many people to solve important problems.

Building up a successful business isn’t a simple task. And it requires the combination of several key elements.

Without a strong developer community behind in the software world, it becomes very hard to be sustainable.

At the same time, you need to build a robust economic engine, which in Facebook’s case, turned out to be its advertising business.

That of course, attracted a solid investor base, since the start.

Understanding the hacker’s way

The Hacker Way is an approach to building that involves continuous improvement and iteration. Hackers believe that something can always be better, and that nothing is ever complete. They just have to go fix it — often in the face of people who say it’s impossible or are content with the status quo.

One of the elements that most identified Facebook’s culture since the beginning was its “hacker way.” This is explained above, and it also carries a few other ingredients.

The hacker way requires quick releases but also making sure to learn from fast iterations so that the software released can get better and better and improve exponentially.

As Mark Zuckerberg pointed out at the time, “done is better than perfect.”

And according to him, a hacker doesn’t spend days discussing ideas. Rather it prototypes and tests to see if it works. Back in the days (not sure if that is still used) at Facebook, the say “code wins arguments” got used over and over.

It is important to remark that this hacker way was born in the software world, and it thrived in the digital economy.

That’s because in the bits world, by definition, releasing something might carry a lower cost when done at a smaller scale.

However, as a company grows and it acquires scale, it is vital that it moves away from a minimum viable product to an exceptionally viable product.

Indeed, the hacker mindset might be critical to challenging the status quo. But when you’ve become the status quo, the cost that a failed product might have on your brand might be greater than the benefits of iterating that product with its users.

That is also why in one way, Facebook moved from “move fast and break things” to “move fast with stable infrastructure.” The cost of making mistakes increases exponentially with scale. And cleaning up after the mess created by a failure might be too large to deal with.

Conclusions and the pillars of Facebook’s business strategy

To conclude, Facebook’s business strategy pillars move around five key elements:

  • Focus on impact
  • Move fast
  • Be bold
  • Be open
  • Build social value

While these pillars remain important to Facebook’s overall strategy, they might have also changed along with Facebook’s massive scale and growth.

Related Visual Stories

Who Owns Facebook

who-owns-meta
Facebook, rebranded as Meta in 2021, is primarily owned by Mark Zuckerberg, founder and CEO. Zuckerberg keeps tight control over the ownership and decision-making of the company. Other large individual shareholders comprise former COO Sheryl Sandberg and co-founder Eduardo Saverin. Large institutional investors include BlackRock, Vanguard, and Fidelity.

Facebook Business Model

facebook-business-model
Facebook, the main product of Meta is an attention merchant. As such, its algorithms condense the attention of over 2.91 billion monthly active users as of June 2021. Meta generated $117.9 billion in revenues, in 2021, of which $114.9 billion from advertising (97.4% of the total revenues) and over $2.2 billion from Reality Labs (the augmented and virtual reality products arm). 

Facebook Revenue Breakdown

facebook-revenue-breakdown

Facebook Revenues

facebook-revenues

Facebook Employees

facebook-employees-number

Facebook Revenue Per Employee

facebook-revenue-per-employee
In 2022, post layoffs, Facebook generated $1,535,056 per employee, compared to $1,638,586 in 2021.

Facebook MAU

facebook-users

Facebook ARPU

facebook-arpu-breakdown
ARPU, or average revenue per user, is a key metric for attention merchants like Facebook. It assesses the ability of the platform to monetize its users. For instance, by the end of 2022, Meta’s ARPU worldwide was $10.86. While in US & Canada, it was $58.77; in Europe, it was $17.29; in Asia, $4.61 and in the rest of the world, it was $3.52.

Facebook ARPU 2010-2022

facebook-arpu
The ARPU, or average revenue per user, is a key metric to track the success of Facebook – now Meta – family of products. For instance, by the end of 2022, Meta’s ARPU worldwide was $10.86. While in US & Canada, it was $58.77; in Europe, it was $17.29; in Asia, $4.61 and in the rest of the world, it was $3.52.

Facebook Profitability

facebook-profitability

Reality Labs

facebook-losses
As of September 2022, Facebook, rebranded as Meta, is a profitable company, generating $18.54B in net profits. Yet, if we look at its Reality Labs segment, which is in charge of building the Metaverse, it recorded a net loss of $9.44 billion in the first nine months of 2022.

Instagram Business Model

instagram-business-model
Instagram makes money via visual advertising. Acquired by Facebook for a billion-dollar in 2012, today, Instagram is integrated into the overall Facebook (now rebranded as Meta) business strategy. In 2018, Instagram founders Kevin Systrom and Mike Krieger left the company as Facebook pushed toward tighter integration of the two platforms. In 2022, Instagram is the most successful product still, in Meta’s portfolio.

WhatsApp Business Model

how-does-whatsapp-make-money
Founded in 2009 by Brian Acton, Jan Koum WhatsApp is a messaging app acquired by Facebook in 2014 for $19B. In 2018 WhatsApp rolled out customers’ interaction services, starting to make money on slow responses from companies. And Facebook also announced conversations on WhatsApp prompted by Facebook Ads.

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