Growth of Revenue Sources and Strategic Alliances of Facebook

Submitted To

Fernando Alex Seminario

California University of Management and Sciences

By

Student Id: 516123

Santhosh Kumar Chada

Date: April 20, 2017

1) RESEARCH TOPIC

The research topic study deals with Revenue Sources and Strategic Alliances at Facebook.

Facebook is an American for-profit corporation and an online social media and social

networking service based in Menlo Park, California.

2) COMPANY OVERVIEW – Facebook Inc

Facebook, Inc., incorporated on July 29, 2004, is focused on building products that enable people

to connect and share through mobile devices, personal computers and other surfaces. The

Company also enables people to discover and learn about what is going on in the world around

them, enables people to share their opinions, ideas, photos and videos, and other activities with

audiences ranging from their friends to the public, and stay connected by accessing its products.

Facebook enables people to connect, share, discover and communicate with each other on mobile

devices and personal computers. There are various ways to engage with people on Facebook,

including News Feed, which displays an algorithmically-ranked series of stories and

advertisements individualized for each person. Instagram enables people to take photos or

videos, customize them with filter effects, and share them with friends and followers in a photo

feed or send them directly to friends. Messenger allows communicating with people and

businesses alike across a range of platforms and devices. WhatsApp Messenger is a messaging

application that is used by people around the world and is available on a range of mobile

platforms. Its Oculus virtual reality technology and content platform offers products that allow

people to enter an interactive environment to play games, consume content and connect with

others.
3) PROBLEM STATEMENT

Marketing stays to become nearly Facebook revenues' only real source. Particularly, For 2014

2015 advertising accounted for 92% 95% and 89% of the profits. This kind of intensive reliance

on marketing makes the company susceptible to modifications in developments and marketing

methods, reduced amount of advertising budget of businesses among others. The lack of

electronic like a supply of profits, bodily or its items is among Facebook’s main flaws. The

following three problems identified for this case study:

a. Lack of Revenue Sources

b. Absence of Strategic Alliances

c. Dependence on a few key personnel

The proposal will focus on the enhancements in the firm about Revenue Sources and Strategic

Alliances.

4) RECOMMENDATIONS

1) Diversification of revenue sources

Facebook senior management is recommended to diversify the sources of revenue. Currently,

more than 90 per cent of Facebook revenues are generated via advertising making the business

vulnerable to changes in advertising practices and trends, reduction of marketing budget of

companies and other risks. It is important to Facebook to ensure that its current competitive

advantages are extended towards new services and products that company is going to introduce

as additional sources of revenues.

Implementation
 i. Development of the premium features that can be utilized to manage the huge following

profiles

ii. Premium account marketing to the exisiting influencers and celebrities.

iii. Feedback analysis for continuous improvent of the features.

2) Strategic Cooperation with Industries

Facebook senior management is recommended to enter into strategic cooperation with other

businesses operating in e-commerce industries. An appropriate implementation of this

recommendation in practice can have a positive impact on further increasing the numbers of

Facebook users, saving on advertising costs and ultimately increasing profit for Facebook.

Implementation

i. The organization must research on allying with companies that need largest social

networking community.

ii. Brick and Motor companies like Walmart requires Social networking help to regain

the growth and the way of communication.

iii. Building a product that can be reusable to small companies by analyzing their data.

3) Invest on Human Resources

The company is recommended to increase the level of its investments on human resources. In e-

commerce industry, the ability to innovative in general and creativity of employees in particular

is one of the most important competitive advantages. Therefore, in order to remain competitive,

Facebook is recommended to invest in the most competent employees via the application of

tangible and intangible employee motivation tools in an integrated manner.

Implementation

i. Identifying dependence of the business on a few key personnel.

 ii. Smart sourcing involving automated job board processes and plug into social networks.

iii. Changes to the existing boot camp that trains the new employees in the company.

5) IMPORTANCE OF THE PROJECT –WHY IS THIS IMPORTANT??

The Project is important as it shows more revenue sources and strategic allainces for the

company to improve its profits. The social media company employs more than 12600 people

globally and in 2015 the company generated revenues of USD17.93 billion, which is an increase

of 44% year-over-year and ad revenue was of USD17.08 billion, which is an increase of 49%

compared to the previous year. The social media company is not free of weaknesses and its

major weaknesses include the dependence of revenues only on advertising, challenges in

sustaining the growth rate of revenues and the dependence of the business on a few key

personnel such as Mark Zuckerberg and Sheryl Sandberg. The leadership team has to implement

the recommendation given this proposal to see the fruitful future. The recommendations are

based on Revenue sources, Strategic alliances and, good HR management that Facebook can

adopt and improve immensely to catch up the trend where google and lot of other platforms are

leading the curve. The below section provides insight on Projections and Benefits to the

Facebook.

6) PROJECTIONS AND BENEFITS

Facebook will be benefited from the recommendations discussed:

 By the end of 2018, Facebook stock is expected to boost its earnings per share by more

than four times

 Facebook’s revenues are projected to jump 141% between now and the end of 2018.
 Number of Facebook employees by 2020 would be around 50,000

 Number of Facebook users in the U.S. by 2020 would be close to 500million.

7) REFERENCES

Rusli, E.M. (2012) “Facebook Buys Instagram for USD1 Billion” New York Times, Retrieved

from http://dealbook.nytimes.com/2012/04/09/facebook-buys-instagram-for-1-

billion/?_r=0

Sachin, S.R. (2016) “Only 3 Percent Of Facebook’s Senior Leadership Is Black” Huffington

Post, Retrieved from http://www.huffingtonpost.com/entry/facebook-makes-little-

progress-diversity_us_5787c9d6e4b03fc3ee4fcfdb.

Titcomb, J. (2016) “Mark Zuckerberg tightens control over Facebook’s future by restructuring

shares” The Telegraph, Retrieved from

http://www.telegraph.co.uk/technology/2016/04/27/mark-zuckerberg-tightens-control-

over-facebooks-future/

Rader, D. (2016) “How Facebook Turned a Big Risk into a Very Big Success” Catalant,

Retrieved from http://blog.gocatalant.com/how-facebook-turned-a-big-risk-into-a-very-

big-success/