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Nowadays, almost all channels of international communication include Facebook. Developed initially for college students, this social network has transformed into an important part of peoples daily life. During 13 years of its existence, Facebook has spread to each continent of the planet. The business model of the company is a core concept that is focused on value creation for customers and the effective promotion of businesses of the companys clients. Due to a successfully developed business framework, Facebook has become a powerful network with high revenue. Therefore, it is important to analyze Facebooks model of business, determining the value it brings to customers, distribution channels, CRM techniques, sources of revenue, its key assets and activities where they are applied as well as partnership network and cost structure. The paper will present the basic segments of Facebooks business model and discuss them in terms of effectiveness and beneficial use the company.
Customer Segments
The companys main focuses is two groups of customers – private and business users. Initially, the network was developed for university students. That is why in the first group of customers, the students from universities and colleges constitute the largest part, with nearly 30% of share (Kashif 17). In recent times, the application of Facebook in business has risen as well because of the diversified products, offered to the networks users.
Value Proposition
Each group of customers has different value in the usage of Facebook. Thus, private users have a free space for communication that is easily accessible from any place and comparatively safe to use. The company offers to its customers an opportunity to design their profile and differentiate themselves. Another function is to read and share the news that is generated by users activity and personalized exactly according to the interests of each person (Facebook Products). With Messenger, Facebooks mobile application, users can exchange messages and call each other for free with Internet connection. This app is designed for Android, iOS, and Windows platforms and, therefore, is accessible on the majority of mobile phones (Facebook Products). Private users can also create groups and inside communities that limit access to other people. The function is appreciated by groups founders for the ability to accustom privacy settings based on their preferences. Group members can exchange private information without having to worry about its confidentiality (Facebook Products). Customers also have a comfortable search instrument that helps finding content by words or searching for other people by their name, place of study, type of relationship, and so on. Celebrities and public organizations can promote their popularity by creating a page and encouraging other users to like it (Facebook Products). Moreover, a subscriber as well as the owner can track other peoples activity on the page and share it to expose the pages reach.
Business entities may benefit from the network by using its options for business promotion. Thus, Facebook offers different types of effective advertising, targeted at particular groups of customers. For example, business owners can choose the age, gender, and the location of customers to show promotion only to their customer segment. There is also an opportunity for event managers to invite people to their venues by creating a page in Facebook (Facebook Products). Page owners can also access statistical information on their community that includes the frequency of attendance, the number of likes for a certain period, the geographical location of users, and so on. Thus, Facebook offers a set of different values in accordance with customers interests. Private users can maintain contact with their friends and find new ones, obtain updated information, and track the activity of other users as well as create closed communities and share personal information there. Businessmen take an advantage from Facebook by promoting their business among target customers, managing events, and receiving statistical information on the performance of their page.
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Distribution Channels
The main channels of Facebooks reach rely on the Internet. The company delivers its products to customers through the website, its official mobile application, and its communication app Messenger (Facebook Products). To obtain access to offered products, both private and business users need to the have Internet access and a personal webpage. With the fast spread of the Internet, the network has nearly 2 billion active users per month (FacebookCompany Info). Thus, simple distribution channels help the network bring its value across the borders.
Customer Relations
The company has introduced a strong system of Customer Relationship Management (CRM) that helps it remain popular and reach more customers. According to Malthouse et al., an effective CRM strategy encompasses the understanding of customers needs, engaging with the company, quick responding to requests, and a high level of organization (272). In order to perceive customers needs properly, Facebook has statistical tools that analyze the latest trends in followers preferences through the number of likes, reviews, and shares. There are two levels of engagement, lower and higher, at which page users behave differently. At the first one, people consume content passively by clicking and sharing it, but they do not generate any new material. Furthermore, at the higher level, Facebook users actively participate in the networks developments. They may encourage they friends to join Facebook, post their articles or reviews, and promote their profile (Malthouse et al.). The companys employees, responsible for customer relations, are obliged to answer any requests of their users. The button Quick help on the website is designed to assist users with any concerns about Home Page, Timeline, Chat and Messages, Security and Privacy (Malthouse et al.). There is also a link to Information Center, where a user may find a detailed explanation on Facebooks usage and replies to frequently asked questions. The efficient organizational structure of the company helps it allocate human resources among all fields of activity. The area of strategic development is headed by the companys owner Mark Zuckerberg (FacebookCompany Info). Sheryl Sandberg controls business operations, while David Wehner is responsible for the financial performance of the company and manages information technology teams. The technological development of Facebook is led by Mike Schroepfer, and Chris Cox oversees the core products, offered by the company (FacebookCompany Info). Overall, with a careful approach to customers needs, the measured levels of engagement, high-speed support services, and a well-built organization structure, the CRM system of the company helps it maintain popularity and grow in size.
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Revenue Streams
With the growing access to the Internet and the popularity of social networks, the company has created several revenue streams. These include advertising sales, selling credits to the gaming industry, and the recently implemented Facebook Live Broadcasting for pay (Sharma). The future revenue sources of the company also lie in technology investment. Setting the Internet networks in the regions without connectivity and designing a virtual reality both for entertainment and research are expected to generate high profits for Facebook in the future. Specifically, digital advertisements form the largest part of the companys income (Sharma). To differentiate itself form the rivals, Facebook offers to its clients targeted advertising with a huge base of users data. The network has developed a variety of advertising products for different stages of business and it has an individual approach for each customer. Profit is also generated by games that are available for Facebook users (Sharma). Game owners need to pay credits to the site owners in order to introduce their applications. The service of Live Broadcasting brings profit from the broadcasters who want to promote their content and pay for the videos advancement. As it can be seen, the company has diversified its sources of income and secured itself from the risks of profit loss from one of the streams.
Key Resources
The effective management of this social network needs a wide range of resources. Therefore, it is based on software equipment, application servers, and the employees who run them. Mainly, all functioning of Facebook is grounded on servers. They run all operations on the website as well as the mobile application and process large volumes of traffic. Servers are in charge of automatic answering for users requests and writing the information into the system. To improve the productiveness of software, the technical team of the company has introduced or developed by itself the BigPipe web page system, PHP compiler Hip-Hop, coding program MySQL, logging framework Scribe, cross-language soft Thrift, storage system Memcached, information processor Hadoop and HIVE, and photo storage system Haystack (Barrigas et al) These software components are the main resources of the companys performance that support its stable functioning and help it process large volumes of traffic. As for its Human Resources management, Facebook is recognized as one of the best employers with excellent working conditions for its employees. With 23,165 hired people as of June 30, 2017, the company put a dollar value on each staff member and heavily invested in recruitment system (FacebookCompany Info). Furthermore, the company has a well-developed corporate culture with the intense focus on technical engineers whose work and inventiveness are fundamental for its success. Generally, Facebook has an effective system of key resources management. Its fast-working servers, specially developed software, and highly-qualified employees form a base for the sustainable growth and expanding reach of the network.
Key Activities
The main task of the company is to provide its users with an online platform for the communication and exchange of information. According to the prime idea of Mark Zuckerberg, the network should allow its users to interact with each other via classes, closed communities, common interests, and shares. Therefore, the mission of the company is To give people the power to build community and bring the world closer together (FacebookCompany Info). Another key point in generating the companys profit deals with designing targeted advertising and promoting the public pages of its clients. Facebook developers create tools for the effective personalization of advertisements to users preferences, which allows serving the interests of business clients. The companys focus on the needs of its customers assists it in both creating value and earning revenue.
Partner Network
Facebook has a wide range of categorized partners that provide data from different parts of the world. Thus, Quantium, Experian, and Acxiom supply the information from Australia (Facebook About Partner Categories). At the same time, Acxiom is also responsible for the delivery of data from France, Germany, the United Kingdom, and the United States, while Experian also provides data from Brazil, the UK, and the USA (Facebook About Partner Categories). Acxiom Japan and CCC Marketing can supply the information to Facebook from Japan, while Epsilon is responsible only for data delivery from the United States. Finally, Oracle Data Cloud provides the company with data from the UK and the USA (Facebook About Partner Categories). One can see that Facebook has secured itself from the loss of a partner in a particular region by setting a partnership with several data providers in each country of its activity.
Cost Structure
The fixed costs of the company cover operating performance and contribute to its permanent functioning. The cost structure of the social network involves property expenses on rent and mortgage, server equipment that record and process the data, monthly salaries to employees, marketing, and insurance expenditures. There are also other types of expenses such as tax payment of dividends that are not fixed. Overall, the stable level of capital expenditures allows the executive officers to increase the revenue of Facebook and spend it on investment or charity purposes.
The business model of Facebook has contributed to its growing popularity and helped transform it from a start-up to the worlds leading IT company. Due to the precise definition of customer segments, the delivery of personalized value to each of its users, and a wide variety of products, Facebook encourages new customers and supports loyal relations with current ones. As the distribution channels are based on the Internet, its CRM model is responsible for the behavioral patterns of users and a quick reaction to their requests. The major source of revenue is digital advertising, but the network also profits from broadcasting content, selling credits, and choosing successful projects for investment. Among resource base, servers and programming tools as well as the staff are mostly appreciated since they aim to provide both connectivity and advert promotion for their users. Partner network includes data providers from numerous regions of the world. The structure of the companys costs accounts the main aspects of its performance and covers financial expenditures. Considering all features mentioned above, I approve of the business model of the company and consider it to be one of the most efficient in terms of bringing profit.
