Facebook is a social networking service and website launched in February 2004, operated and privately owned by Facebook, Inc. As of October 2012, Facebook has more than 1 billion active users. Users may create a personal profile, add other users as friends, and exchange messages, including automatic notifications when they update their profile. Additionally, users may join common-interest user groups, organized by workplace, school or college, or other characteristics, and categorize their friends into lists, e.g. “ITB friends”, or “Really Good Friends”. Facebook users must register before using the site Facebook allows any users who declare themselves to be at least 13 years old to become registered users of the website.

Here are some important innovations of Facebook’s technologies, process, and products in timeline:

2003

  • October 28, 2003: Mark Zuckerberg releases Facemash, the predecessor to Facebook.

2004

  • February 4, 2004: Zuckerberg launches Facebook.
  • March 2004: Facebook expands to MIT, Boston University, Boston College, Northeastern University, Stanford University, Darmouth CollegeColumbia University, and Yale University
  • June 2004: Facebook incorporates into a new company
  • December 30, 2004: Facebook achieves its one millionth registered user

2005

  • September 2005: Added high school networks
  • October 2005: Added international school networks and added photos

2006

  • September 2006: Facebook discusses with yahoo! about the latter possibly acquiring the former, for $1 billion
  • September 2006: Facebook launches a high school version of the website
  • September 26, 2006: Facebook is open to everyone aged 13 and over, and with a valid e-mail address

2008

  • August 2008: Employees reportedly privately sell their shares to venture capital firms, at a company
  • October 2008: Facebook sets up its international headquarters in Dublin, Ireland

2009

  • August 2009: Facebook acquires FriendFeed

2010

  • April 2, 2010: Facebook announces the acquisition of photo-sharing service called Divvy-shot for an undisclosed amount
  • April 19, 2010: Facebook introduces Community Pages, which are Pages that are populated with articles from Wikipedia
  • April 21, 2010: Facebook introduces Instant Personalization, starting with Microsoft Docs, Yelp, and Pandora
  • October 1, 2010: The Social Network, a film about the beginnings of Facebook is released

2011

  • February 2011: Facebook adds new “civil union” option for gay partenrship
  • June 2011: Facebook partners with Skype to add video chat
  • September 2011: Facebook partners with Heroku for Facebook application development using the Facebook Platform
  • October 10, 2011: Facebook launches iPad app
  • December 21, 2011: Facebook log in page changes due to Facebook Timeline addition
  • December 22, 2011: Facebook launches its new profile user interface, Facebook Timeline

2012

  • April 2012: Facebook acquires picture sharing and social network, Instagram, for $1 billion, the largest acquisition to date
  • July 2012: Facebook adds same-sex couples as icons for marriage
  • August 2012: Facebook forces all remaining users of the old profile style to the new “Timeline” style
  • October 2012: Total number of Facebook users reaches 1 billion

Facebook’s Business Models

Based on the Facebook’s business model above, we can infer that the revenue stream for the Facebook is get from the display advertisement. Talking about the innovations, Facebook did a differentiation on how they do the advertisements if we compare it to Google. Google uses keyword advertising that is adopted from the invention of Overture.

Display ads somehow distract the users, and are also not that efficient at producing revenues. Facebook only make about 1/10th of Google’s revenues even though they have 2x the page views.

However, Facebook has a lot of room to target ads more effectively and put ads in more places. Google makes the vast majority of their revenues when people search for something to buy or hire. They don’t have to stoke demand – they simply harvest it. When people use Facebook, they are generally socializing with friends. You can put billboards all over a park, and maybe sometimes you’ll happen to convert people from non-purchasing to purchasing intents. But you end up with a cluttered park, and not very effective advertising.

Facebook ads feel more like batteries, Happydent bubble gums, KitKat chocolate bars when we are queuing to cashier in the supermarket. We may not need those stuffs but when we are bored waiting on line we may purchase one.

Recommendation

Since Facebook is more likely display the ads on a more specific target market (not display it randomly), to generate more revenues from display ads, I simply recommend Facebook to sell the users profiles to the marketers. Facebook can save the users’ history when they are surfing on Facebook. For example, if someone has a preference on seeing H&M, Top Shop, New Look, and Forever 21, Facebook can conclude that she has an interest in young, fresh, and up-to-date fashion. The user contacts like e-mail are exactly things that Facebook can sell to the marketers. Thus, the marketers can more focus to display the ads ONLY to the users that are listed by Facebook.

Prediction

After acquiring Instagram in last April 2012, I think Facebook will acquire another brand that is popular in Apple and Android users, like Path maybe? Or another access for Facebook users to chat to Line users. Yeah..who knows.

Reference:

http://en.wikipedia.org/wiki/Facebook

http://cdixon.org/2012/05/15/facebooks-business-model/

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