Facebook Platform and Business Model
Facebook was founded by a Harvard undergraduate student the name Mark Zuckerberg. The Facebook platform was launched in May 2007 by a California-based company. This platform allowed third-party users to develop applications for the site and this convinced many observers of social networking that Facebook was more than a ‘flash-in-the-pan’ social networking site (Eisenmann and Feinstein 3). This site has been recording a steady growth rate since its inception and it has attracted many users from all over the world. Initially, it was started as a social network for Harvard university students in the early 21st century but with the growth in demand for its services, it has expanded to include all groups of people.
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In 2006, the CEO Zuckerberg turned down an acquisition offer of one billion dollars from Yahoo! with the claim that he could see Facebook going far on its own. It was not long after it received 240 million dollars worth of investment from Microsoft, which boosted its startup capital to $15 billion (Eisenmann and Feinstein 3). Its main source of revenue is related to the advertising agreement between Microsoft and Facebook. Its growth has not been without challenges as it has faced major rivalry from other social network sites such as MySpace, which have continued to be the leader in the U.S. market.
However, the CEO and other colleagues have been innovative in coming up with new ideas to see that Facebook beats all other social networks. Facebook has a long-run competitive advantage in that it provides a variety of services to a large population including photo-sharing and messaging. It has also launched new services, such as, the introduction of Newsfeeds and Mini-feeds where people can learn more about their friends, and it also announced an open registration to all users that have led to an increase in its growth rate (Eisenmann and Feinstein 7).
Medium and Long Term Success
In the medium term, the Facebook business model is likely to face many challenges given that it is still in its early stages of development. Other internet sites, such as, Google and yahoo are also on the move to introduce social network services, which is a major threat to Facebook. Not forgetting that MySpace is still leading in the U.S. and it is estimated that 64% of Facebook users also use MySpace while only 20% of MySpace users use Facebook.
This means that if MySpace introduces another service that is superior to the services offered by Facebook, then the latter is likely to face a significant reduction in its growth rate. Currently, it has a competitive advantage over MySpace but this is not sustainable given that other social networks are also advancing. As at the end of 2007, Facebook was the largest photo-sharing site and offered other unique features such as poke, profile, inbox, the wall, events, groups, marketplace, and others.
One way of ensuring sustainable growth and winning in the long term would be the introduction of email and search engines. Google has been able to maintain its market share because of the variety of services it offers. It offers clean and user-friendly products and services that attract a large number of end-users. Most of its web pages are easy to use compared to other search engines. With a single click, a user is able to access the information he is seeking for whereas other search engines provide complicated procedures. It does also provide relevant results on specific pages making it easy for end-users. If Facebook is able to provide some of these services, then it is likely that many users would spend more time on Facebook than on other internet sites.
Facebook as a Threat to Google’s Strategic Goal with OpenSocial
Google developed OpenSocial as an alternative mechanism for social networking since it was blocked from indexing its sites by Facebook. OpenSocial is a free application programming interface (APIs) that enables third-party developers to come up with applications that can work in any social network. By using OpenSocial, third-party developers can retrieve users’ information, and perform other functions within the site.
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Google’s OpenSocial strategy is likely to face a threat from Facebook in many ways. Given that Google has been prevented from indexing user profiles by Facebook this limits Google users from conducting as many online activities as Facebook users. Facebook has a higher growth rate (estimated at 18%) than Google and Facebook users spend more time on the site as compared to other internet sites. It is estimated that Facebook users spend three and a half hours on Facebook every month.
A big percentage of these users spend most of their free time on Facebook and this is a big threat to Google’s OpenSocial. OpenSocial has been criticized as the lowest denominator due to its compatibility with many social networking sites. It was not able to provide special functions and activities but offered services that were familiar to other social sites. Unless it is able to come up with unique services, Facebook will continue to be a major threat not forgetting that it is one of the most advanced social networking sites.
Eisenmann R. Thomas and Feinstein Brian. Facebook Platform. Boston: Harvard Business School, 2008. Print.