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Facebook Inc. is one of the largest companies in the industry of social networking and contains a variety of other subsidiaries related to the internet and technological solutions. Despite the relatively long lifespan of its primary product (the Facebook social network), it is unlikely that the company would be able to sustain itself in the long-term if it did not diversify. The various business-level strategies and corporate-level strategies that the company employs are designed to keep its main product fully featured while exploring other avenues of operation. This paper will provide an overview of the business and corporate-level strategies of Facebook Inc., as well as an analysis of the competitive environment in the market.
The primary business-level strategy of Facebook Inc. is in its focus on its social network Facebook. It is perhaps one of the longest-running social networks in the world, and its user base contains more than two billion active users who use the site on a monthly basis. It is the strongest asset of the company, and the majority of its efforts are directed on monetizing the user base and enhancing user experience to attract more new users. Some of the strategies on this level include the use of information that the users of Facebook provide to the company as a way to deliver targeted advertisements to their profile pages. Usually, Facebook allows companies to buy advertising spaces directed at very specific demographics. A client who is seeking advertising opportunities is able to market its products to a specific sex, age group, country, and even towns if the advertisement is designed to be local. Facebook also sells user information to advertisers wholesale whenever social networking advertisements are not a viable choice (Skeggs & Yuill, 2016).
These types of monetization may be highly invasive in their nature, as previously, the company experienced multiple lawsuits and complaints after unethical use of the platform to gain profit. Profiles of users who passed away were used for advertising products, advertisements themselves were not clearly marked, and in general, the user experience suffered from aggressive monetization. However, the company was able to maintain its status by focusing on improving the user experience in a continuous fashion. Every year, Facebook Inc. attempts to rejuvenate its social network with new features, improved interface, and many other aspects.
While the majority of the features only appease the existing user base, some more successful ones are extremely effective in attracting both users and businesses to the platform. In recent years, Facebook Video became a very popular feature that caused a multitude of online publications to either pivot to video content or at least included an active presence on the Facebook platform. Earlier, mobile integration through smartphones caused a similar effect, with millions of new users joining the network or becoming more active users than they were previously. When such a project is successful, the company becomes more attractive to advertisers, and the advertisement strategy is put to use once more (Skeggs & Yuill, 2016).
In 2017, the company began to be more cautious of its promotional tools due to a major conspiracy case in which the platform was used by Russian cyber agencies to destabilize the election and affect the people’s votes by creating a promoting a large number of politically-oriented user groups that used propaganda materials and negative information about various candidates and political movements to reduce their popularity. While this situation was initially only a rumor, further investigation of it led to a large court case in which the groups and their creators were publicly revealed. This forced the company to rethink its current promotion-related business-strategy and to remove the false groups. The company is more cautious of allowing political promotion on its service and monitors its groups more actively.
I believe that the current focus on expanding the user base and using it for targeted advertising is a valid and powerful business-level strategy. The continuously growing levels of yearly revenue that Facebook Inc. earns through advertising show that this strategy is effective for the company and that it should continue pursuing it further. Unfortunately, the company brand is continuously involved in controversies, and the lack of foresight among its management may lead to it becoming even less relevant in the future.
The corporate-level strategies that Facebook Inc. utilizes are very ambitious. After gathering immense levels of capital through its social network, the company began to focus on major acquisitions of promising technology companies and social networking applications. In the recent years, their major purchases included one of the first modern virtual reality companies Oculus VR, as well as one of the most popular mobile instant messaging services in the west WhatsApp Inc. and the photo-sharing social network Instagram. By focusing on such acquisitions, the company is able to expand its reach to audiences that are less likely to use Facebook on a daily basis such as the teen and young adult demographics. The purchase of Oculus VR Inc. also allowed the company to be on the ground floor of a rapidly developing industry of virtual reality in both commercial and professional applications. While the industry did not meet the numbers that were projected before the release of the modern virtual reality headsets, it is steadily growing, and new technological solutions are being developed with the help of Facebook Inc. as well as its competitors (Čirjevskis, 2017).
The social media services that the company acquired in recent years has shown to be a valuable investment, as the revenues generated by Instagram and WhatsApp have outmatched even the revenue produced by its advertising and promotional services. The company does not absorb the features of the purchased services and instead allows them to perform almost completely independently, while only forcing basic Facebook integration into the services themselves. This allows Facebook to avoid negative publicity by closing active and popular services that have unique user bases. This careful approach allowed for all of its brands to remain separate and independently powerful (Čirjevskis, 2017).
I believe that these corporate-level strategies are the most important to Facebook Inc. They diversify the services and products that the company creates and allow it to sustain and expand itself through new types of business. The brand of the company also grew in its legitimacy. While it was a major social network before these acquisitions, its services only concerned people who used the platform or advertised on it. After the acquisitions, the company became a legitimate high tech hardware manufacturer with state of the art products. Oculus VR Inc. began a new industry that is quickly finding a foothold in entertainment and professional markets.
In the previous paper on this subject, Porter’s model of five forces of competition was used to examine the competition that the company faces. There are two main fields in which it experiences competition at the moment. The first is social networking. While Facebook Inc. holds steady as the most powerful traditional social network, its competitors are domineering in other types of networks. The primary competitor for Facebook Inc. is Google Inc. Google owns the most popular and lucrative video social network on the internet YouTube. YouTube’s success relies on similar business-level strategies as Facebook’s. Google makes sure to provide the best user experience possible while using its network of content creators to show online advertisements, sponsored video content, and using targeted advertising.
Unlike Facebook, Google is capable of using more private information to target its ads, such as the search history of its users, history of videos watched by them, as well as the public information that users post on their profiles. This gives Google a major advantage in terms of advertising. Its promotional platforms are also separate from YouTube, as the AdSense service that Google operates is present in the majority of websites while still using the same information as YouTube. YouTube is also benefiting from the accessibility of its service. The only action that a user needs to perform to watch a video, as well as see an advertisement, is to click on it. There is no need to register or fill out a complex profile. This attracted a much younger audience to YouTube, while retaining older demographics (Kalyanam, McAteer, Marek, Hodges, & Lin, 2017).
On the corporate-level, their strategies are also similar. Google was involved in major acquisitions of both social networking sites and technological firms. While the company is interested in a VR solution, the major development on the technological side from Google is designed to be in the realm of augmented reality. Google differs in its approach to acquisitions, however. Whenever Google Inc. purchases a company, it attempts to make it a part of its services or at least integrate heavily into it. This caused a number of controversies when the company shut down popular services to integrate them into its own.
I believe that in the long term, Google might be more successful due to its domination of the search engine space, Internet browser industry, and video sharing services. This choice would not differ in a different cycle market because the differences in achievements between the companies, as well as the number of negative publicity situations that Facebook Inc. experienced, put it at a major disadvantage. However, it is possible that by following its current strategies, Facebook Inc. would continue to grow and in time would diversify enough to dominate in more markets.
Facebook Inc. is a powerful company with ambitions to expand outside of its comfort zone. In the years since its first acquisitions, the company proved that it is capable of managing multiple organizations successfully. So far the company was able to expand into the field of virtual reality by purchasing Oculus VR Inc. as well as other types of social media such as Instagram and WhatsApp. However, with competitors on the level of Google, it might be difficult to become the market leader in the adjacent categories. The company is likely to remain a major force in the industry, but its current issues with negative publicity and insufficient success of virtual reality are making it difficult to consider it a market leader.
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Čirjevskis, A. (2017). Acquisition based dynamic capabilities and reinvention of business models: bridging two perspectives together. Entrepreneurship and Sustainability Issues, 4(4), 516–525.
Kalyanam, K., McAteer, J., Marek, J., Hodges, J., & Lin, L. (2017). Cross channel effects of search engine advertising on brick & mortar retail sales: Meta analysis of large scale field experiments on Google.com. Quantitative Marketing and Economics.
Skeggs, B., & Yuill, S. (2016). Capital experimentation with person/a formation: how Facebook’s monetization refigures the relationship between property, personhood and protest. Information, Communication & Society, 19(3), 380–396.