What is Facebook? – Analysis of Facebook
Facebook, Inc is the world most famous social media corporation. It is the owner of Facebook, Instagram, WhatsApp, Messenger, Oculus and Giphy.
It was founded in 2004 and made its IPO in May 2012. Currently, it has almost 3 billion monthly active users and its market cap is around $800MM.
What is the business of Facebook?
When a user signs up in any of its platforms, Facebook obtains a lot of data from them. In addition to that, any interaction (“like”), visit or movement a user does within the platforms is analysed by the powerful data analytics systems of Facebook. It allows Facebook to obtain revenue by selling ad space to companies. But they don’t sell just any space. Thanks to the data collected, Facebook allows marketers to laser-focus their advertising to their potential customers like no other traditional advertising platform.
As you can see, the vast majority of Facebook’s revenue comes from advertisement.
Facebook not only has became the world largest social network, but also has bought and develop the third and fourth one (WhatsApp and Messenger). At this point, the main competitive advantage of Facebook (apart from its number of users) is that Facebook is at a level where it can just copy or buy its competitors. It has already happened with Snapchat when Instagram added its “Stories”. More recently, it has just happened again with Tik Tok when Facebook launched “Reels”
Some important metrics of Facebook
Facebook has managed to continue increasing its active daily users and its ARPU as it is shown in the picture below
Which are the main catalyst of Facebook to grow?
- Covid-19. Because of the virus, people are going to spend more time at home. They are going to use more social media to be updated about their friends’ activities
- Instagram. Thanks to stories and Reels, Instagram is growing a lot. Entering in new geographies and elder groups of people
- WhatsApp has just launched a store to buy items directly on the App
- Artificial Intelligence will allow Facebook to increase its ARPU
Conclusion about Facebook
Nobody knows how long Covid-19 is going to last, but one thing is clear. It has already changed the world forever. In this new reality, we will have more “social distance” and spend more time alone, probably connected to the internet. However, we are humans and we need to maintain our social network. In this paradigm, there are some clear winners, and without any doubt, Facebook is and it will be one of them.
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