Group 6

Evolution of Networking sites

• In February 2004, Facebook was created by Mark Zuckerberg (with Dustin Moskovitz, Chris Hughes and 2 other Harvard students)

• Initially, the membership was restricted to students of Harvard University, and subsequently expanded to other US and Canadian colleges then to European and Asian colleges (email addresses with .edu)

• Since September 11, 2006, it has been available for any email address globally.

• On May 24, 2007, Facebook launched the Facebook Platform which provides a framework for developers (anyone) to create applications that interact with core Facebook features

• As of Oct. 2011, FaceBook is the largest social networking site globally.

• 800 million active users

• Largest photo sharing site – 100 billion photos and growing by 200 million everyday

• More than 75% of its users hail from outside US

• Revenue - $4.27 billion in 2011

Introduction

• 90% of Facebook’s revenue was expected to come from advertising

• But it offered limited growth opportunities as it already accounted for more than 30% of US online display ads

• Facebook users clicked on only 5 ads for every 10000 displayed

• Increased competition from Google+ which emphasized on extensive user privacy controls

• Google+ also offered its platform free of charge making its platform more appealing

Challenges

• Solving the challenges was very critical to Facebook as it was soon to go public

• Hence they needed to develop new revenue growth opportunities to increase the strength of its initial IPO

• Possible options:Increase its investments in developing new advertising products

Invest further in the Platform and help large establishes companies develop their own platform applications

Approaches

Advertising solutions tailored for all kinds of

situations

FB websit

es

FB platfor

m

FB ads

Revenue Model

• Display ads required advertisers to upload a 110 by 80 pisel graphic and asked for a headline of upto 25 characters followed by a description of upto 135 characters

• Facebook Pages allowed businesses, brands, products, artists and public figures to create free custom Facebook pages

• Facebook Beacon allowed sponsors to boradcast news about Facebook users’ actions on the sponsors external website to that users’ friends

• But users felt it violated their privacy.

Facebook Ads

Ads for Pages and Ads for events

Social Ads – allowed companies that had a Facebook page to target friends of fans of that page

Sponsored Stories and Ads for Applications which continued to turn user interactions into advertisements

Ad Products Evolution

Facebook Platform• Ads for Pages and Ads for events• Social Ads – allowed companies that had a Facebook

page to target friends of fans of that page• Sponsored Stories and Ads for Applications which

continued to turn user interactions into advertisements

• But only a small number of applications accounted for most usage

• Most of these had been developed under exclusive development agreements before the Platform was released.

• Majority of the applications developed are silly, useless and time wasting

• Some developers failed to adhere to Platform rules

• Revenues generated were low and many applications barely covered their costs

Criticism in Facebook Platform

• Founded in 2007 by Mark Pincus

• Texas Hold’em, FarmVille, CityVille, Empires and Allies

• Leveraged Facebook’s platform to integrate social elements into the game

• Zynga games attracted over 250 million monthly user with over 45 billion users on any given day

• They were charged real money to purchase virtual goods

• Zynga booked $90 million in profit on $850 million revenue in 2011

Zynga

• Virtual currency that could be exchanged for virtual goods in applications across Facebook.

• They were purchased through credit cards or PayPal.

• Initially rolled out to major application makers such as Zynga and collected a 30% commission on all Facebook Credit purchases.

• By Jan 2011, 150 developers were using it over 350 applications

• Accounted for over 70% of all virtual transactions

• It was eventually sold to various brick and mortar retail stores

Facebook Credits

• 2nd generation platform with similar set of capabilities as FB platform

• Migration to 3rd party websites is possible without creating log in ID there

• Can interact with same FB friends on 3rd party websites

• 3rd party websites can then send information on users’ activities on the websites to FB for his/her friends to see

• Launched like button for websites thereafter

Facebook websites

:

• Fall2004: $500,000 from Peter Thiel(a co-founder of Paypal)

• May 2005: $12.7 million from Accel Partners

• April 2006: $27.5 million from Greylock Partners, Accel Partners, Meritech Capital Partnersand Peter Thiel

Facebook Funding

• Allows users to interact with almost any other users

• Short status updates sent via the web or SMS text messaging immediately giving real time feeling

• Integrated into programming for TV news networks such as CNN

• 6 millions users till march 2009

Twitter

• First launched Orkut similar to Friendster platform, became popular in Brazil and India

• Opensocial was designed to compete with FB platform

• Friend connect in May 2008 to compete with FB websites

• Google buzz launched taking insight from twitter in Feb 10’, tied with Gmail

• In June 11’ Google+ was launched

Google

• Constantly innovate

• Help companies to develop platform applications for different segments such as music, travel, sports, financial markets etc.

• Give complete authority to users to control their privacy

• Create new advertising strategy

Recommendations

Thanks