Facebook Business Analysis
In terms of Facebook’s Executive Team Mark Zuckerberg remains President and CEO, according to the 2018 Investor Report, he is responsible for the broad and global direction of the company’s mission, along with setting goals and strategy that lead product development. The COO of the company, Sherly Sandberg is responsible to direct the business operations and all strategies and recommendations related to operations. In addition, to her role at Facebook, Sherly Sandberg is also a well-known U.S. female business leader who has at times been a notable face for women in technology and women in executive management with one of her most notable accomplishments, her book “Lean-in” which describes her own career philosophy (Bort). A look at the rest of the Executive team and it is easy to see that Sandberg appears to represent the only diversity that can be found at the top levels of the company’s management.
According to the 2018 Investor Report, the remainder of the Executive team includes the CFO, David Wehnr whose role is the leadership of strategy, decisions, recommendations and the department related to finances. In addition, he has the broader responsibility to oversee facilities/real estate and information departments. Facebook’s Chief Technology Officer, Mike Schroepfer, is responsible for creating and directing critical technology strategies for the company worldwide and Chris Cox is the Chief Product Officer whose role is to lead Facebook, Instagram, What’s App and Facebook Messenger (Source). The Executive team, with the exception of Chris Cox, joined Facebook from other companies and they each have different experiences in technology, finance and operations.
In addition to the Executive team, Facebook’s 2018 Investor Report details a Board of Directors which includes Zuckerberg and Samberg along with CEO’s Chairman and Presidents from other technology and financial companies, as well as academics. It is also interesting that there is a section under Company management called Founders Bios that includes bios for the other three original Harvard co-founders.
Leading into the financial statements presented in this report is a statement from Mark Zuckerberg that talks about the speed of the company’s growth. In his statement he talks about the power of 2 billion people around the world who use one of Facebook’s products every day (Source). In this statement to investors, he also discussed the company’s strengths and advantage over its competition in building the best solution (Source). The 2018 Investor Report details financial data for Third Quarter 2018. It reports its overall revenue at 13,539,000 which is 33% greater than the same time in 2017. According to this statement, the main source of revenue (and the greatest percentage) is from advertising with a smaller percentage of overall income coming from operations. In a statement that explains the Financial table, mobile advertising is said to be the major source of advertising revenue and is responsible for 92% of all advertising revenue. The overall net income for this time period is $5,137,000. This same report cites the current stock price per share at $147.87 (for a November 8 closing price). The 2017 Annual Report Form 10-K SEC Filing [included in this Investor Relations site] cites the company’s total revenue for 2017 at 40,653,000 with net income at 15,934,000 and consistent with the Third Quarter information, the majority of revenue coming from advertising (39,942,000).
It is interesting that a lot of time is spent talking to investors in the NAME OF REPORT HERE report about Company News and Press. These sections of the report include product news and business development information, but most interesting is that the amount of attention Facebook gives to numerous articles and statements about topics that are in the public attention. Facebook makes an effort to address, handle, solve and provide information about the big issues they face and those that are most controversial. Specific examples include a regular section called Hard Questions and some of the topics include how Facebook can play a role in terrorist concerns, how Facebook can play a positive role in elections and news as well as addressing privacy fears and data breaches (Source). The information sometimes includes articles of pieces written by outsiders to the company, too. Through this section, it is also apparent to the investors that Facebook takes these concerns seriously and seems to be taking steps to make these issues better. One example is a published study that Facebook conducted on the human rights impact that the company had in recent events in Myanmar.
A SWOT report is an outside independent report with the goal of analyzing a company’s business model and all of its components to identify the assets, weaknesses, opportunities and pressure that will affect a company’s business. A SWOT analysis for Facebook conducted and published by MarketLine (August 21, 2018) details Facebook’s primary opportunities into three categories: maximizing their acquisitions, best using an expansion strategy and making best use of partnerships. Specifically, MarketLine’s August 2018 SWOT analysis, cites that with a strong strategy to use acquisitions to improve their main brands Facebook, Instagram, Facebook Messenger and What’s App, the company will see better innovation, provide better products to consumers and maximize profits through their main revenue which is advertising. The SWOT analysis [conducted by MarketLine 2018] also sees the expansion that the company has been doing as a potential opportunity for them to meet consumer needs which will result in better services and positive customer feedback. Last, the MarketLine SWOT [August 2018] report analysis talks about the benefits of partnerships that the company has entered into, such as data centers, cable systems and technology platforms such as video. According to the SWOT report all of these represent ways for the company to provide better, enhanced and smarter services to consumers which can “improve its market position further” (MarketLine SWOT Analysis: Facebook)
In addition, the MarketLine SWOT analysis [August 2018] describes several strengths that can likely present opportunities for Facebook as it grows its business. First, the analysis cites the trend the company has gone through where they have been able to increase their overall profits. MarketLine sees this as a positive for two reasons. One reason is that greater profits means healthier stock prices, better return for investors which means that the market and investors will have greater confidence in the company. A second reason is that this could also result in better press and better reputation, so that in the end this could open more opportunities for partnerships, advertisers and other goals. Second, the MarketLine SWOT (August 2018) analysis discusses the strength of Facebook’s data information and the benefit and value this is to advertisers. The better Facebook’s database is the more it is set ahead of other competitors who are also looking to attract advertising revenue. Advertiser are interested in making sure their investments reach the right consumers and their dollars work hard and generate sales for their products or services. Facebook’s ability to provide information about consumers that helps advertisers accomplish this goal is an important strength. Third, the MarketLine SWOT (August 2018) analysis discusses the liquidity of the company as an important strength so that it will be able to meet its debts, free up monies for improvements, expansion and partnerships.
The MarketLine August 2018 SWOT analysis discusses only one major weakness which they identified as Facebook’s revenue stream and its single source which is advertising. The fact that almost all revenue comes from this one source makes the company susceptible to losses more easily than companies with multiple revenue streams. The report points out that if Facebook cannot deliver to what advertisers want or other changes happen in the advertising marketplace not necessarily in their control, they are leaving themselves open to significant risk.
The MarketLine August 2018 SWOT analysis discusses several key threats to Facebook. The first threat is competition. The SWOT analysis points out that changing technology which can happen fast and everyday means that other companies can offer products in the same market as Facebook. The second factor, detailed in the MarketLine SWOT analysis about competition is that it can come from a number of areas online, mobile or other platforms. According to the MarketLine SWOT analysis the third factor related to competition is the ability for other companies to attract customers by creating something that offers better service and is even perceived as new, which is appealing to the typical Facebook customer.
According to the MarketLine August 2018 SWOT analysis the second threat to Facebook’s business is concerns the public has about privacy and potential data breaches. Exposure to having their information stolen, sold or made public in some way other than they intended is a huge concern for the Facebook customer. This MarketLine SWOT analysis points out that if Facebook cannot make changes to ensure the customer concerns are not valid and if they cannot guarantee the safety of customer’s information from data breaches, the loss of confidence and damage to the company’s reputation could be disastrous. Facebook would not only lose customers, but competitors could come in and do it better and attract these customers.
This MarketLine SWOT analysis [August 2018] identifies the third threat which is government regulation which the report identifies as primarily related to privacy and data collection and storage concerns. The report points out that regulation can be both U.S. and internationally based and changes to laws can effect many areas of the company’s business and holding and could weaken its key strength which is data and therefore negatively effect the overall business model and profitability.