Porter’s Five Forces Analysis of Facebook
|Founded||February 4, 2004|
|Headquarters||Menlo Park, California, United States|
|Founders||Mark Zuckerberg, Andrew McCollum, Chris Hughes, Eduardo Saverin, Dustin Moskovitz|
|Revenues||US $ 117.929 billion for2021(audited) and US $ 116.609 billion till fourth quarter 2022 (unaudited)|
|Profit||US $ 39.37 billion for 2021(audited)and US $ 23.2 billion till fourth quarter 2022 (unaudited)|
|Competitors||Google, TikTok, Twitter, Pinterest, Snapchat, LinkedIn|
The Facebook was founded in February 4, 2004 by a Harvard sophomore named Mark Zuckerberg.In October 2021, Facebook Inc. changed its name to Meta Platforms, for which founder Mark Zuckerberg remains the CEO.Facebook, Instagram, Facebook Messenger, and WhatsApp are subsidiaries of Meta Platforms, and are now known as Meta’s Family of Apps. As of the fourth quarter of 2021, Facebook had a total of 2.91 billion monthly active users globally. India is the country with the largest Facebook audience size, with over 329 million Facebook users, followed by the United States and Indonesia. Facebook made an annual revenue of US $ 117.929 billion and net profit of US $ 39.37 billion for 2021.In 2022, brand value of Facebook amounted to 101.2 billion U.S. dollars. A year earlier, the value stood at 81.48 million dollars. Facebook is the second most valuable media brand worldwide
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Michael E. Porter in 1979, at Harvard Business School.
Facebook Rivalry among Existing Competitor
- Facebook Business Segments:In 2022, Meta Platforms (formerly Facebook Inc.) generated approximately US $ 116.609 billion U.S. dollars in revenues through its Family of Apps segment. The social media company’s FoA includes Facebook, Instagram, Messenger, WhatsApp, and other services and revenue from the segment is largely derived from advertising. As of January 2022, Facebook’s leading audience base was in India, with almost 330 million users whilst the United States ranked second with an approximate total of 179 million users. The company’s average revenue per user (ARPU) in 2021 was 40.96 U.S. dollars, up from 32.03 U.S. dollars in 2020.
- Facebook Global Operations Year 2021 and 2022:The company had a great financial year and overall there was an increase in the users.
Family daily active people (DAP) was 2.82 billion on average for December 2021, an increase of 8% year-over-year and 2.96 billion on average for December 2022, an increase of 5% year-over year.
Family monthly active people (MAP) was 3.59 billion as of December 31, 2021, an increase of 9% year-over-year and 3.74 billion as of December 31, 2022, an increase of 4% year-over year.
Facebook daily active users (DAUs) were 1.93 billion on average for December 2021, an increase of 5% year-over year and 2.00 billion on average for December 2022, an increase of 4% year over-year.
Facebook monthly active users (MAUs) were 2.91 billion as of December 31, 2021, an increase of 4% year-over-year and 2.96 billion as of December 31, 2022, an increase of 2% year over-year.
Ad impressions delivered across our Family of Apps increased by 10% year-over-year in 2021, and the average price per ad increased by 24% year-over-year in 2021.
- Google is also proved to be one of key players by giving a record sale of US $ 257.637 billion, with a net profit of US $ 76 billion for 2021 and revenue of US $ 788 billion and net profit of US $ 46.348 billion for third quarter ended September 2022. In 2021, Google accounted for the majority of parent company Alphabet’s revenues with 177.7 billion U.S. dollars in Google website ad revenues alone. The majority of Google’s revenue comes from advertising through Google owned and operated properties such as Google Search, Google Maps and more. Advertising remained the main revenue-generating segment for Google in 2021. During the examined year, 81.3 % of Google’s revenue came from advertising on Google properties and YouTube. The Google Cloud revenue segment generated 7.5 % of the company’s revenues, up from 4.3 % in 2018. As of January 2022, Google sites were ranked first amongst the most visited multi-platform web properties in the United States with just over 270 million U.S. unique visitors and a market share of 61.4 % among the leading U.S. search engine providers. Parent company Alphabet’s market capitalization in February 2021 was valued at 1.79 trillion U.S. dollars.
- Snapchat is also one of the competitors of Facebook, it generated sales of US$ 4.601 billion in 2022. In 2021, Snapchat had approximately 428 million users worldwide. The number of users is expected to exceed 500 million by 2025. As of April 2022, India had the biggest Snapchat user base in the world, with an audience of 144.35 million users. The United States ranked in second place with a Snapchat audience base of over 107 million users. The photo-sharing platform is projected to reach nearly 400 million global users by 2024. In 2021, Snapchat generated 3.1 billion U.S. dollars in advertising revenue. This figure is expected to further grow to reach 5.9 billion U.S. dollars by 2026. The instant messaging app is responsible for roughly 0.6 % of the global ad revenue. Moreover, Snapchat’s Daily Active Users, or DAUs, increased 17% year-over-year to 375 million in fourth quarter of 2022. Average revenue per user, or ARPU, was $3.47 in Q4 2022 and Revenue increased 12% year-over-year to $4.6 billion in 2022.
- Investment in Research & Development-Marketing Cost and Brand Image:The existing competition between different social media platformsis the constant technological development.It is necessary to invest in a range of emerging technology trends and breakthroughs that can offer significant opportunities such as Radio Frequency Identification, Augmented Reality, Artificial Intelligence, Blockchainto deliver value to customers and growth for the company. Facebook also needs to focus the marketing cost to increase the brand image and better customer loyalty.
Facebook Threat of New Entrants
- Social Media Industry Social media usage is one of the most popular online activities. In 2021, over 4.26 billion people were using social media worldwide, it is projected to increase to almost six billion in 2027.
- High Capital Investment: The new entrant will be requiring high capital investment, for brand recognition and marketing in order to attract customers from other websites with innovative and unique features on your website. Any new player entering the market will have to make high investment and therefore; will have difficulty to establish itself and grab a market share.
- High Research & Development Cost: High research and development cost is required for launching any new product in the current social media industry.
- Technological Advancement:In this age of high tech advancement, where social media platforms provide services like voiceover communications, video conferencing, interactive messages board and a lot more, only high technological advance companies or groups can enter such a market.
Facebook Bargaining Power of Suppliers
- Large Number of Suppliers:The Facebook’s supply needs include servers and related computing and network technology/equipment, as well as office supplies. There large number of suppliers in the industry and the overall high supply reduces the supplier influence in the industry.
- Suppliers Collaboration: In 2021 Meta spent approximately US $ 1.4 billion with global diverse suppliers for services including network infrastructure, facilities management and more. The company has close ties and collaboration with the suppliers.Meta also achieved its goal of spending US $100 million with Black-Owned businesses in 2021, by spending a total of US $306 million.
Facebook Bargaining Power of Buyers
- Product Awareness and Availability:By using search engines customers can easily obtain information about rival products and can switch to any other product without any difficulty.
- Customer Satisfaction – After Sales ServicesFacebook provides excellent customer services through its help center to resolve all problems and providing step by step procedure for all its services. As of the Statista survey of 2017, 45 % of responding Facebook users in the United States were rather satisfied with the customer service of the online company.
Facebook Threat of Substitute Products or Services
- Television, Radio and Print Advertising:Facebook provides social media services to its members or users. However, advertisers are the company’s main source of income. These advertisers have the option to use substitutes, which are highly available. For example, instead of advertising on Facebook, customers could advertise on television, radio and print media, all of which are widely available and effective in reaching target audiences.
- Similar Social Media Platforms:Other similar social media platforms such as Google, Twitter etc. pose a threat to Facebook as a substitute. Also many new social media apps are continuously being introduced in the market that can also be a threat as a substitute.
- Facebook – Statistics & Facts(Jan 3, 2023)| Available at Statista
- Meta Reports Fourth Quarter and Full Year 2022 Result| Available at Meta
- Meta Annual Report2021| Available at Meta
- Brand value of Facebook worldwide from 2020 to 2022(2020-2022)| Available at Statista
- How satisfied are you with the customer service of Facebook?(Sep 3, 2019))| Available at Statista
- Facebook usage in the United States – Statistics & Facts(Nov 22, 2022)| Available at Statista
- Number of monthly active Facebook users worldwide as of 3rd quarter 2022(Oct 27, 2022)| Available at Statista
- Leading countries based on Facebook audience size as of January 2022(Jul 26, 2022)| Available at Statista
- Number of daily active Facebook users worldwide as of 3rd quarter 2022(Oct 27, 2022)| Available at Statista
- Annual revenue generated by Meta Platforms from 2009 to 2022, by segment(Feb 2, 2023)| Available at Statista
- Transforming supplier diversity| Available at Meta
- Number of social media users worldwide from 2017 to 2027(Jan 24, 2023)| Available at Statista
- Snapchat – Statistics & Facts(Jan 9, 2023) |Available at Statista
- Leading countries based on Snapchat audience size as of April 2022(Nov 25, 2022)| Available at Statista
- Advertising revenue generated by Snapchat worldwide from 2017 to 2026(Jan 6, 2023)| Available at Statista
- Snapchat 2022 Annual Report| Available at Snapchat
- Revenue of Google from 1st quarter 2008 to 2nd quarter 2022(Dec 2, 2022)| Available at Statista
- Google – Statistics & Facts(Jan 3, 2023)| Available at Statista
- Annual revenue of Google from 2002 to 2021(Dec 2, 2022)| Available at Statista
- Distribution of Google segment revenues from 2017 to 2021(Dec 2, 2022) | Available at Statista