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Facebook Case Solution

Solution Id Length Case Author Case Publisher
687 1042 Words (3 Pages) Frank T. Rothaermel McGraw Hill Education : MH0054
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A large chunk of Facebook users utilizes the social networking website for that very purpose- social networking. The users of Facebook belong to all age groups, from young teens to grown-up adults and ultimately to the senior citizens and those well beyond their retirement age. While Facebook was initially launched as a communicator between campus students, its massive growth encompassed geographical boundaries. The reasons for its massive growth were the ease of communicating and the large range of functionalities provided in the social network by Facebook Inc. 

Following questions are answered in this case study solution:

  1.  Why do people use Facebook?

  2.  What do they do when they are there?

  3. Evaluate the success of advertising on Facebook.

  4. Which of the three options should Facebook emphasize in order to monetize?

Facebook Case Analysis

With the passage of time, Facebook kept coming up with newer applications and features to their comprehensive website. This kept the users engaged even after they openly criticized some of the new features. For example, the launch of the Timeline was seen as more privacy intrusion by a large number of Facebook users. However, due to the involvement of Mark Zuckerberg and his regular contact with the customer base, the users kept coming back to Facebook. Hence, Facebook eventually had an edge over other social media platforms due to its elaborate privacy settings. A large number of users were starting to trust Facebook with their pictures, videos, and contact details.  

However, besides leisure, Facebook is also utilized by business organizations to communicate with their customers and potential customers. Hence, business organizations monitor the electronic word of mouth (E-WOM) through Facebook and save up considerable costs associated with market research. Facebook provides convenient two-way communication to such business organizations to monitor their relationship with the customers.    

2. What do they do when they are there?

A major part of the time spent on Facebook is for going through a person's Newsfeed. The Newsfeed contains all updates, including statuses and pictures of those in your friends' list. A large part of the time spent on Facebook is to monitor what is happening in your close and extended circles. A lot of the Facebook users are silent spectators while others regularly comment and Like their friends' posts as well as expect comments and Likes on their posts.  

Besides such regular and daily use, the Facebook users engage in massive fan-following through Facebook. The celebrities and other well-known personalities make their official ‘fan pages' on Facebook to gain more publicity. Hence, a large number of Facebook users spend time on reading about their favorite personalities, receiving daily updates through statuses and pictures. In addition, job seekers also use the Facebook platform to locate suitable jobs. This is because business organizations are using Facebook as a cheap source of job advertisements' placements. Instead of posting an expensive ad in the newspaper, companies are resorting to such cheaper means and also getting the right pool of candidates.

In addition, Facebook is utilized by its customers for information purposes away from leisure. For example, information about companies, countries, and tourist destinations are comprehensively explored through Facebook website. Facebook helps to serve as a convenient mode of comparison due to its search engine feature that helps to explore a large variety of options to make better decisions.

3. Evaluate the success of advertising on Facebook.

On the whole, Facebook advertising has not been successful as conversion rate has been less than 1 percent. This means that a user has to see a large number of advertisement messages from the same company on Facebook to eventually decide to use its products or services. Hence, in terms of conversion, the success rate has been very low and is getting lower with each passing year, as discussed in the case. However, the success of advertising on Facebook, or on any other social media platform, has been the convenience of placing advertisement.

Secondly, the minimal cost of advertising through Facebook has been a success factor. There are a large number of companies who no longer opt for expensive television advertising, but utilize the services of Facebook. Due to tremendous cost reductions, a large number of companies started using Facebook to advertize their products and services. Seeing such massive growth, Facebook began to develop improved applications and features for advertising needs of its corporate users.

As the rate of conversion kept declining, Facebook kept pace with developing new applications. For example, Facebook Platform was launched to provide increased customization to the customer base. Facebook Platform encouraged companies to develop platform applications that were primarily provided for cell phone users. Facebook customized its advertising further and charged the advertisers heavily in terms of placements of advertisements. For example, if the advertisement was now shown to a user as part of his/her Newsfeed, this had improved chances of conversion. For such customized advertising, Facebook certainly charged much higher advertising rates.    

4. Which of the three options should Facebook emphasize in order to monetize?

Among the available options to monetize, it is recommended that Facebook encourage the companies to develop platform applications. Another major option available to Facebook is to further develop mobile advertising products. However, mobile advertising products are still a new market and would take some time to grow. In the company's immediate financial interest, platform applications are recommended.  

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