Few companies have been able to shake up the world like Facebook has. In just more than a decade, the company has gone from being a small thing and the apple of the eye of a Harvard student to being one of the most powerful companies in the world. It has more than one billion users, and it has been trying desperately to find ways to monetize those users. This has not been easy for the company, but it has seen some financial success. At the core of the struggle has been the need for Facebook to both respect its founding purpose and find new ways to be viable as a business entity. With this in mind, the company has many strengths, a series of weaknesses, some opportunities, and a number of existential threats. This SWOT analysis lays out the case for why Facebook is in a good position, but has some challenges it must navigate deftly if it wants to maintain its success moving forward.
The meteoric rise of Facebook from a simple social media site launched in a college dorm room to one of the world’s foremost corporate powers is both interesting and extraordinary. The company has gone from being a vague concept to being a machine, allowing for political influence and the ability of companies to market their goods. It has a series of strengths that have allowed to have a power IPO and to continue to command a strong position within the tech world. There are also some weaknesses and a number of threats that may knock the company off course. The company’s situation can be understood by conducting a SWOT analysis to better frame the issues facing Facebook both in its internal and external environment.
Perhaps the biggest strength of Facebook, which allows it to have significant leverage, is the monthly user base of the company (Chen, 2014). While it is difficult to pin down exact numbers at any given time, reports indicate that Facebook has north of one billion active monthly users. This strength allows the company to cash in on a number of opportunities, including marketing dollars and data collection dollars.
The company also has a strong understanding of what its users do on the site, as well as how the users expect the site to operate. As a company that has grown from such small beginnings, Facebook has always been customer-centered (Chen, 2014). It conducts serious analytics and spends significant resources just trying to get to the bottom of the question of what users are wanting from the platform. According to the numbers, Facebook seems to have a good handle on this, as users on its site spend more time there daily than on any other site on the entire Internet right now. Whatever Facebook is doing to enhance the user experience and meet user needs, it appears to be working.
The company also has a strong point in its integration with various web applications and websites (Baym, 2015). One needs to look only at power sites like ESPN to see how Facebook has grown and enhanced its standing. Many major news sites today do not have their own comments sections, but instead, they have basically farmed out this service to Facebook, as users make comments based upon their Facebook profiles. This helps to loop more people back into Facebook.
Lastly, the company has cultivated a strong brand during a time when doing so is not exactly easy. Tech companies have been on the chopping block. Companies like Uber and Jetsmarter have run into PR problems because of a lack of understanding of business ethics and the progressive consumer expectations of today (Navalgund & Sharma, 2015). Facebook has remained relatively dynamic and responsive to these changes, navigating its situation deftly because its users span so many different demographic groups. Facebook has managed, somehow, to build a progressive brand without offending the conservative people who use the site each day.
One of the chief weaknesses of the company is the weak click through rate on some of its advertisements (Baym, 2015). Though Facebook is very early in its quest to monetize what it does, the company has to figure out ways to get people to click through ads. Right now, people seem content to use Facebook in their old ways, and though Facebook is throwing more advertisements at them, many people simply have no desire to click.
Another weakness is that the company does not enough diversity in terms of its revenue streams (Chen, 2014). While the company is working on new ways to monetize, it currently depends heavily on advertising fees paid when people click through things. Major attempts at changes—such as the Facebook money feature or selling game credits—have not yielded results of yet, leaving Facebook dependent on a revenue stream that is sometimes unpredictable.
Another weakness is the privacy focus of the company. When it came out that massive government spying had been taking place, Facebook was one of the sites that allowed the government to have access. While companies like Google and Apple have taken somewhat stronger stances on user privacy, Facebook has been lacking in this regard. This can be a concern given how concerned consumers are today about these issues (Isaac, 2016).
Another weakness for the company is in its positioning within the world of political discourse. Facebook, it seems, has become more of a political platform than anything else (Baym, 2015). While the opportunity to share and build connections over core issues is a major part of what makes Facebook work, it also presents a challenge and weakness during a time when people can get burned out with politics. That Facebook’s focus has shifted in this way could lead to less user loyalty than in the past.
There is no question that Facebook has opportunities to capitalize on the added user focus on mobile devices (Chen, 2014). More and more people are using smart phones today. This provides a unique opportunity for Facebook to be even more engaged with customers and even more a part of the lives of those people. Given the almost addictive quality of Facebook, this presents a real opportunity to sustain the levels of engagement the company has seen in its browser based client.
Almost every company covets opportunities in China, and Facebook seems better poised to make this move than most (Barnett & Benefield, 2015). Given its strong brand recognition and given the fact that Chinese consumers tend to love American brands, Facebook has the opportunity to be very popular there as well as take advantage of the new and growing consumer class in China (Isaac, 2016). That Facebook’s expansion has been without a huge surge in China to this point suggests that serious growth possibilities may exist in this market.
The company has a chance to continue growing its Facebook marketplace. Some economists and other experts believe that the online consumer goods industry is just taking off. Companies like Amazon have taken over and have capture much of the market share, but the share of goods purchased online will continue to increase in the future. Facebook is positioned well for this because the company’s platform offers a solution to a major problem in online retailing—trust. This can be just as important in the US culture as it is in others, where the company may expand (Barnett & Benefield, 2015). Facebook offers people the chance to buy from folks they know and folks they can identify, which could make it a more attractive option than sites where people have to trust that they are not being worked over.
If the company does not revamp its approach in order to be more friendly toward mobile users, it risks losing much of its engagement (Chen, 2014). The Facebook experience has been built around the browser model, but people are changing their habits. Facebook must adjust and respond or it could become a relic.
Better technology has popped up to allow users to control their Internet experience more concretely (Baym, 2015). The online revenue model demands that companies are able to throw ads in front of consumers in a targeted way. If technology comes up with solutions—such as extensions and plug-ins—that allow users to block advertisements on sites like Facebook, then the site is in the difficult position of having to either ban the use of these add-ons or find other revenue sources.
There is weakness in the Facebook business model. The problem for Facebook is that it was never meant to be a big money maker (Chen, 2014). It was meant to connect people, which it has done with more success than any site in the world. The problem now is that the company’s leadership has to retrofit the site’s goals into a corporate structure in trying to find places to profit. It is simply not easy given that the model was not built for this. A lack of discernable revenue stream diversification is the primary issue for the company. This is the ultimate threat to Facebook, that its business model in the new corporate era does not align necessarily to the reasons the site became popular in the first place.
- Barnett, G. A., & Benefield, G. A. (2015). Predicting international Facebook ties through cultural homophily and other factors. new media & society, 1461444815604421.
- Baym, N. K. (2015). Social media and the struggle for society. Social Media+ Society, 1(1), 2056305115580477.
- Chen, T. F. (2014). Developing a New Revenue Business Model in Social Network: A Case Study of Facebook. In Handbook of Research on Demand-Driven Web Services: Theory, Technologies, and Applications (pp. 197-221). IGI Global.
- Isaac, M. (2016). Facebook Said to Create Censorship Tool to Get Back into China. New York Times.
- Navalgund, D. I., & Sharma, A. K. (2015). Branding Missteps Dog UBER. International Journal of Management, IT and Engineering, 5(8), 38-53.