Transcript facebook: building a business in social graph

Chapter 8 Facebook: Building a Business from the
Social Graph
Objectives
 What is Facebook?
 Timeline
 Technology
 Social Graph
 Facebook as a platform
 Advertising
 Privacy
 Facebook takes over the Web
What is Facebook
 Facebook is the world’s largest social network, with
over 500 million users
 Firm valued at $15 billion
 Mark Zuckerberg
 Founded in February 2004
 Initially started with College networks
 Eventually opened up to anyone with an email account
How many people have a Facebook account?
What’s the Big Deal?
 Large growth of users
 Between 2008 and 2009- 600,000 to 1 million users
added per day
 Half of the users are on everyday for approximately 55
minutes or more
 35 years+ make up more then 50% of users
 Photo and Video sharing
 Docs.com
 Email system, music service and payment system
 Advantage of dark Web
Timeline
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2004 •
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2005 •
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2006 •
Founded in February 2004
1 million active users
$12.7 million raised in venture capital from Accel Partners
5.5 million active users
Expands to anyone with an email account
Forms strategic relationship with Microsoft for banner ad syndication
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2007 •
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2008 •
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2009 •
65 developers with over 85 applications
Microsoft buys 1.6% of firm for $240 million
Co-Sponsors Presidential Debate with ABC News
100 million active users
‘Like’ feature added
350 million active users
2010
• > 500 million active users
Technology
 Cloud computing
 Open source software (OSS)
 Content Delivery Networks (CDN)
 Telecommunications bandwidth
Social Graph
 Facebook’s ability to collect, express and leverage the
connection between the site’s users.
 “The global mapping of everyone and how they are
related”
 News feeds
 Competitive Advantage
 Network effects
 Switching Costs

Invested in Facebook less
likely to leave
Who has checked in their location?
Facebook as a Platform
 Application programming interfaces (APIs)
 Guideline for programs to be written to run within and
interact with Facebook
 Challenges for Facebook
 Copyright
 Security
 Appropriateness
 Free speech tensions
 Privacy
 Potential competition
What are some of your favorite applications?
Advertising
 Hunt versus the Hike
 Searching on Google is a hunt
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Ads are clicked at 2% or more
 Browsing on Facebook is a hike
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Ads are clicked 0.04%
 Banner ads are charged per thousand impressions
 Removed in 2010
 Promotions
 Engagement ads
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Ben & Jerry’s
Revenue per User
Privacy (or lack of)
 Beacon (2007)
 Consumer activity posted on news feeds
 Opt-out versus Opt-in
 “Facebook Ruins Christmas for Everyone”
 Video Privacy Protection Act
 Terms of Service Changes
 Public reaction
 Empowered users to determine the next step
 Protection of users
How might have Facebook and its partners avoided the problems with Beacon?
Facebook takes over the Web
 Facebook launched a series of initiatives (2010) that
placed the company at the center of identity, sharing,
and personalization- across the Web.
 “Like/Recommend” button added to any website
 Viral distribution
 Facebook credentials for logging in
 Facebook membership more valuable by enhancing
network effects, strengthening switching costs, and
creating larger sets of highly personalized data to
leverage
Is Facebook too open? In what ways might this benefit the firm? Is it a risk?
Summary
 Facebook was founded by a 19 year old college sophomore
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(dropout)
Over 500 million active users
Photo and Video sharing
Social graph expresses connections between individuals
and organizations
Competitive advantage- network effects and switching
costs
Facebook engagement ads
Beacon
Privacy
Facebook takes over the Web
Multiple Choice Question
How many active users are on Facebook?
A)10 million
B) Over 500 million
C)1 trillion
D) Less than 500,000
References
 Chapter 8: Facebook: Building a Business from the Social Graph. In J.
Gallaugher, Information Systems: A Manager's Guide to Harnessing
Technology (pp. 137-161). Flat World Knowledge, Inc.
 http://www.facebook.com/press/info.php?statistics#!/press.php
 http://internetbusinessmodels.org/facebookbusinessmodel/
 http://www.crunchbase.com/company/facebook