Facebook, with its products, with its strong appeal, and consumer brand has a solid businessmodel, threatened in the last years by privacy concerns, which open up the way to potential regulation to break up the company. If that will not happen, Facebook will have the chance to expand to define other markets like VR.
Facebook strengths
Facebook is an attention-based businessmodel. As such, its algorithms condense the attention of over 2.4 billion users as of June 2019. Facebook advertising revenues accounted for $31.9 billion or 98.66% of its total revenues. Facebook Inc. has a product portfolio made of Instagram, Messenger, WhatsApp, and Oculus.
Strong brand
Facebook Inc. has been able to build a strong consumer digital brand for its core products (Facebook) and the set of product parts of the holding group (Instagram, WhatsApp, Messenger, and Oculus going forward).
Strong products
Over the years, Facebook has undertaken an effective acquisition strategy, where it managed to buy products that would eventually become strong consumer brands (Instagram and WhatsApp). Those products today are still trendy and tied to the daily habits of hundreds of millions of people across the world.
High integration
Those same products are well integrated to form a whole Facebook ecosystem. For instance, Instagram advertising can be run directly from the Facebook Ads main platform, and WhatsApp might, in the future, also connect with that. Also, those products already share strategic parts that make the whole Facebook ecosystem highly integrated, even though the user is let free to experience each of those platforms separately.
Extremely viable business model
Facebook is among the most profitable companies on earth. With its mostly digital services, the company has built the strongest digital advertising machine (together with Google).
Direct distribution
Facebook also enjoys mostly a direct distribution, which is tied to the strength of its brands, as its apps are on top of mind for hundreds of millions of people they also traveled with a quick word of mouth mechanism, where people would download them as soon as bought a new mobile device. That made it easier for Facebook products to scale up.
Facebook weaknesses
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.
Growth stalled in wealthier countries
As the mobile market (smartphones) saturates so does the ability of the growth of the Facebook products also slows down, especially in wealthier counties, where Facebook has reached a mature level. of penetration.
Most revenue growth is driven by a single product (Instagram)
Facebook successfully completed the transition to mobile a few years back, and that paid off. Indeed, today most of the advertising revenues come from mobile traffic, and from Instagram. This, however, also skewed Facebook revenues toward a single product and a single format, which opens up the way for competitors to compete.
Facebook threats
GAFA is an acronym for Google, Apple, Facebook, and Amazon. Those companies emerged in the 2010s as the most powerful American tech companies.
Regulation and privacy
Facebook has been growingly under the radar of regulators as more privacy scandals have risen concerns about how the company handles the data and whether, after all, a business model that scaled to billions of users, can be based on advertising alone, and whether this would be in conflict of interests with the users’ data, which is among the most valuable asset on Facebook. Facebook has already been fined for $5 billion dollars by the F.T.C. back in 2019, which while is the largest fine probably issued for users’ data breach, which represented just a bad quarter for Facebook, nothing more. Thus, the potential threat of regulation is on the potential breaking of the company and fines that can also pass the $5 billion mark.
Global competition and new formats (TikTok)
In the past decade when new formats came along Facebook was successful in acquiring them (Instagram) or replicating them (Snapchat). However, the rise of new formats, and companies like TikTok, raise the question on whether Facebook would be able at this time to contrast the growth of it, and if that might turn in a valid competitor eroding part of Facebook’s market share. True though, that TikTok itself is opening up a new category, which might result in a market with a scale, even larger than what social media offered.
TikTok is the Chinese creative social media platform driven by short-form video content enabling users to interact and generate content at scale. TikTok primarily makes money through advertising, and it generated $4.6 billion in advertising revenues in 2021, thus making it among the most popular attention-based business models or attention merchants.
Facebook opportunities
The digital advertising industry has become a multi-billion industry dominated by a few key tech players. The industry’s advertising dollars are also fragmented across several small players and publishers across the web. Most of it is consolidated within brands like Google, YouTube, Facebook, Instagram, Amazon, Bing, Twitter, TikTok, which is growing very quickly, and Pinterest.
Further global expansion in other verticals
Facebook and its products have still the ability to expand in other verticals to make their products more and more engaging. For instance, during the pandemic, Facebook released on its products important updates about video chat, to enable more and more people to do all within the Facebook products. This makes it possible to improve further the engagement of those products.
New business models (payments platform)
Facebook is also integrating with its product payment frameworks that might enable the company to start collecting commission within its platform, thus enabling it to diversify its businessmodel.
New markets (VR/AR)
Mark Zuckerberg is among the firmest believer in VR and the fact that the VR will be the next comprehensive tech platform. If that will be the case, this will open up much bigger market opportunities, as in the VR, the experience would be so comprehensive that Facebook would become much more than just an entertaining app, but it would convert into a Super Platform.
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.
Samsung was founded in South Korea in 1938 by Lee Byung-Chul. Originally a trading company, it took Samsung 22 years to become the fully-fledged electronics company that most people recognize today. Indeed, the company is a leader in technological innovation through telecommunications, electronics, and home appliances.
Costco is a large American multinational corporation with a focus on low-cost, membership-only retail warehouse clubs. Costco is the 4th largest retail operator in the world, operating 785 warehouses in 10 different countries. Indeed, it has enjoyed rapid success growing from zero to $3 billion in sales within six years.
From humble beginnings just over 50 years ago, Walmart has grown to become the world’s largest retail company. A single small discount store in Arkansas has now expanded to over 11,000 stores in 28 countries. Some reports suggest that the company now makes $1.8 million of profit every hour.
Headquartered in San Francisco, California, Uber started as a peer-to-peer ridesharing platform. In more recent times, the company has moved into food delivery, rental cars, and bike-sharing. In one form or another, Uber now has a presence in over 900 cities worldwide.
It would be hard to argue the case for a more recognizable entertainment brand than Disney. Disney is of course synonymous with Walt Disney, but it was Walt and his brother Roy who started the company in 1923 in Burbank, California. Disney content is now broadcast on over 100 channels in 34 different languages across the globe.
Coca-Cola is the market leader of the soft drink industry. It is also the most widely recognized brand, with a Business Insider study revealing that a staggering 94% of the world population recognizes the red and white logo. However, Coca-Cola faces significant challenges with increasingly health-conscious consumers and less access to water resources.
Founded in 1903 by Henry Ford and is the fifth-largest family-owned company in the world. Ford is a globally recognized brand in the automotive industry for a couple of reasons. First, Henry Ford is well-known as the inventor of the production line and thus the modern automobile industry. Today, Ford has also maintained relevance as the seventh-largest car manufacturer worldwide, selling a range of passenger cars, trucks, and vans.
Tesco was founded in 1919 by Jack Cohen, as a small group of market stalls. After rapid expansion in the following years, the company became the largest retailer in the UK and is now the second-largest in the world. To put their dominance into perspective, consider that Tesco serves around 66 shoppers per second across 7000 retails stores, delivering approximately $180,000 worth of sales every minute.
Amazon is among the most diversified business model in the tech industry. The company is well-positioned to dominate e-commerce further. And while its online stores have tight profit margins, Amazon still unlocks cash for growth, while consolidating its dominance in the cloud and grabbing new opportunities like voice.
Facebook, with its products, with its strong appeal, and consumer brand has a solid businessmodel, threatened in the last years by privacy concerns, which open up the way to potential regulation to break up the company. If that will not happen, Facebook will have the chance to expand to define other markets like VR.
Starbucks is a global consumer brand with direct distribution, recognized brands, and products that make it a viable business. Its reliance on the Americas as a primary operating segment makes it a weakness. At the same time, Starbucks faces risks related to coffee beans price volatility. Yet the company still has global expansion opportunities.
Among the most recognized car manufacturers, Tesla is valued more than the combined market capitalization of GM and Ford. While the company’s direct distribution is a strength, its lack of financial viability is a weakness. Competition is a future threat. However, if Tesla defines a new market for car manufacturing its potential growth will be massive.
Netflix is among the most popular streaming platforms, with a subscription-based businessmodel. The brand, platform, and content are strengths. The volatility of content licensing and production are weaknesses. The streaming market is a potential blue ocean. Inability to attract and retain premium members, and its fixed long-term costs are threats to its businessmodel.
Apple can leverage a strong consumer brand and set of successful products as a strength. Yet the company is still too reliant on the iPhone as a primary revenue stream. Though Apple is working to open up new markets as an opportunity, it has to make sure to sustain its stores’ sales.
Google’s strength is its strong consumer brand. The company is grabbing new opportunities by opening up industries like voice search and consolidating in industries like the cloud. As a weakness, its revenues primarily come from advertising. A primary threat is the quick change of search and potential intervention by regulators.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
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