Facebook Inc the fastest growing e-commerce organisation, with a strong innovative value on it starts up that created by the founder Mark Zuckerberg as a young entrepreneur with managing the organisation with continually growth and trying to sustain the business that has a strong potential for improvement and expending to go big.
Facebook founded in 2004 is one of the fastest growing social networking website. “Facebook.com” operated and privately owned by Facebook, Inc. since September 2006. Facebook was founded by Mark Zuckerberg as currently one of the youngest billionaires in the world with personal wealth of US$4 billion in 2010 together with his college roommates and fellow computer science students Eduardo Saverin, Dustin Moskovitz and Chris Hughes, at Cambridge, Massachusetts, USA (Business insider Inc. 2010). Initially the website’s membership was initially limited by the founders to Harvard students, but was expanded to other colleges in the Boston area, the Ivy League, and Stanford University. It later expanded further to include (potentially) any university student, then high school students, and, finally, to anyone aged 13 and over. The website currently has more than 400 million active users worldwide.
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Based on Joseph Schumpeter entrepreneurship innovation theory – Mark I descript as entrepreneur is the one who is innovative, creative and has foresight. The characteristic best fit the founder of Facebook Mark Zuckerberg that innovate of a website that initially try to connect students and share information on the web and he has the foresight of the website is going to expend worldwide.
E-commerce businesses require only limited startup capital. Developing the idea and a website is not prohibitively expensiveâ€¦ key issue is making sure web user visit the site of the business, a problem which intensifies all the time as more and more sites are put up. However venture capitalist have at time been investing in these businesses, often accepting risks and uncertainty not normally associated with venture capitalistsâ€¦ Bolton, W. and Thompson, B.K. (2000)
According Bolton, W. 2000, there are 3 factors which determine the extent and value of the opportunity: 1. the concept or idea, 2. Innovation, 3. Engagement and implementation. The concept and idea of Facebook created the value for this business and act as the strongest social network and gaining popularity in speed. The strong traffic determinant and lead to the potential for profit and revenues to attract the potential investors and the advertising revenues opportunities. Because of the innovation and distinction advantages compare with its competitors it builds new values and thus sustain any early advantage. In the early stage engagement and implementation to set up the infrastructure and management was well managed.
Farther on there are 3 further factors which reflect the project or business outcomes:
1. Traffic 2. Finance. 3. Visibility.
Figure 3, source Hitwise us 2010
Figure 4, Facebook mobile, source: Facebook.com 2010
The booming of Facebook popularity among the globe generated More than 400 million active users, 50% of our active users log on to Facebook in any given day, People spend over 500 billion minutes per month on Facebook, More than 70 translations available on the site, about 70% of Facebook users are outside the US, over 300,000 users helped translate the site through the translations application. There are more than 100 million active users currently accessing Facebook through their mobile devices. Facebook mobile user are twice more active on Facebook than non-mobile users. There are more than 200 mobile operators in 60 countries working to deploy and promote Facebook mobile products. (Facebook.com,2010).
Financial history of Facebook likes any other entrepreneurs it started up with a funding of unofficial number USD15, 000. According to the official website of Facebook the round one official funding was $500,000 from PayPal co-founder Peter Thiel, in june 2004. Followed a year later $12.7 million in venture capital from Accel Partners, April 2005; Round three: $27.5 million from Greylock Partners leading the round, Meritech Capital Partners participating, and Accel Partners and Peter Thiel increasing their investment in the company, (Facebook 2010). A leaked cash flow statement showed that during the 2005 fiscal year, Facebook had a net loss of $3.63 million.
Form the year 2005 to 2006 there are lots of companies trying to buy off the latest social network, company such as Yahoo! with price reaching as high as USD1 billion. Board member of Facebook, indicated that Facebook’s internal valuation was around $8 billion based on their projected revenues of $1 billion by 2015. On July 17, 2007, Zuckerberg said that selling Facebook was unlikely because he wanted to keep it independent, saying “We’re not really looking to sell the company; we’re not looking to IPO anytime soon. It’s just not the core focus of the company.”On October 24, 2007, Microsoft announced that it had purchased a 1.6% share of Facebook for $240 million, giving Facebook a total implied value of around $15 billion. However, Microsoft bought preferred stock that carried special rights, such as “liquidation preferences” that meant Microsoft would get paid before common stockholders if the company is sold. Microsoft’s purchase also included rights to place international ads on Facebook. The investment follows by more tycoons in November 2007, for example Hong Kong billionaire Li Ka-shing invested $60 million and BusinessWeek stated that the private sales by employees, as well as purchases by venture capital firms had and were being. Factures of the website are free for end users; main revenue generates through advertising such as banner ads, referral marketing and casual games and act as a data bank. According to an interview with the CEO of Facebook, there is undisclosed information about the specific revenues generated through this website. (Michael Arrington, 2008). In September 2009, Facebook claimed that it had turned cash flow positive for the first time.
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Because of the nature of the business as a social networking website, the immediate brand popularity is growing strong. Instant coverage from internet blogs, main stream news around the world about the organisation had been published. However brand identity and brand image should be maintain on positive relationship with the investors and build a balance between the money making relationship with the advertisers and user-friendly with keep the key factor of usability for the end users.
Figure 5, source: Ichak Adizes 1988
Figure 6, source: boyd, d. m., &Ellison, N. B. (2007
Generally social network companies have a short cooperate life cycle, because of the nature of the business, it will easily replace by other innovative and more advanced site. For example Myspace buyout by News Corporation and Friendster eventually conjunction with its new financial acquisition MOL Global Pte. To keep a social network company in a long run it will need to keep the best interests of the users and invertors. Innovation is the key elements for maintain the business, article from the CNN website review that the signals of success are numerous from investors to market positioning to their founding teams. Key among those seems to be the need for continued innovation and consistent service. Bebo, meanwhile, was a MySpace clone which was able to gain an early foothold in U.K. schools — it too lacked a long-term vision beyond getting big fast. Fittingly, MySpace’s failings were similar to Friendster’s. A lack of technical innovation led to crowded, slow-loading profile pages, spam messages and a slew of hacking attempts. MySpace also failed to keep up with the rapidly evolving demands of Web users: While Facebook introduced its continually-updated “news feed” in 2006, MySpace took more than a year to respond with a similar feature. MySpace stagnated; Facebook blossomed. A similar fate awaited Bebo: Post-acquisition, innovation ground to halt and U.K. users embarked on an exodus to Facebook’s more fertile shores.
Facebook CEO Mark Zuckerberg still maintain as the head of top management that control and lead the organisation. Following will be discussing few of the business strategy directions by the CEO. First of all based on the information by FT.com November 2009 Facebook is showing clear signs that it is preparing for an eventual public offering, It has followed Google’s lead and introduced a dual-class stock structure and the controversial structures give certain shareholders, usually founders much stronger voting rights.
Yearly event held by Facebook- f8 conference. Its mission is to bring together the developers and entrepreneurs who are building the social web. Beside f8 is a Facebook developer conference where developers and entrepreneurs collaborate on the future of personalized and social technologies. In the Facebook f8 conference 2010 Mark Zuckerberg announced few of the new features of Facebook such as Social Plugins (Like Button), Open Graph Protocol, Graph API and, OAuth 2.0. The new features will allow developers to store information about their users if they connect to a site. The company has also released a set of plug-in, such as a “like” button for any site that will tap into its social clearinghouse without much effort. Facebook is depending entirely on their own development technical ability to keep things fresh. For the company, survival is about the innovative services that developers build on their platforms.
Most recent news, Facebook will host developer conferences which aim to foster innovative new ideas and developments around their respective services. One of the success factors for Facebook is that others social networking websites were unable to cultivate such healthy ecosystems around their products, eventually reaching the aging and dies off stage.
As a dot.com organisation, Facebook Inc is a successful organisation with fast growing and expending progress and it has strong connection and relationship with the advertising industrial. The organisation depends heavily on advertising as the main source of income. The organisation needs a strong research and development team to make sure it keep the innovation idea fresh, and building a platform that attract with the most linkage with other brands and companies. Based on the performance and development of Facebook, the organisation is heading toward a more advertising oriented platform that searching for a method to create Facebook as the central of the internet portal that link advertiser and end user in to a new dimension.
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