Research Paper on "Facebook Versus Competitors"

Research Paper 7 pages (1954 words) Sources: 5

[EXCERPT] . . . .

Facebook vs. competitors

Arguably, Facebook is one of the most promising business ventures in the world today and represents the new generation of business models, where the advertising source of revenues is based on social networking and, as such, even more targeted than precedents such as Google. Having grown from a simple social networking website at Harvard and initially being limited to student access only, it is now widely used by both businesses and consumers, as well as other organizations and economic entities aiming to better connect with their recipients and shareholders.

With that in mind, it is clear that Facebook is already positioning itself as a serious competitor not only within its own market segments, with companies such as My Space, but also outside, mainly in its competition with Google. With numerous similarities and differences between the two business models, Google and Facebook will shape the way that online advertising and Internet behavior will evolve in the next decades.

This paper aims to analyze, on different perspectives, the Facebook business model and to draw the appropriate conclusions as to the viability of this model, along with where the company can place itself in the competition with My Space or Google. The paper proposes to start by analyzing the Facebook business model, on its own and through the competition with other companies, and then refer to some of the challenges the model has faced in the past, the means and instruments with which these were overcome and what challenges the company is likely to face in the future, including in terms of the privacy issues. Ultimately, the paper will aim to conclude the role Facebook has played and continues to play in changing the approach of virtual organizations worldwide towards the business process.

Facebook Business Model

In many ways, Facebook's business strategy is not too different from that of many of its competitors, notably Google. In very short terms and in simple coordinates, Facebook's business strategy "is to build a huge user base, attract big brands and provide the platform for buying meaningful engagement with that user base" (Lee, 2010). As one can notice from this description of the business strategy, there are several components to Facebook's business model, but basically, it provides the relationship between supply and demand with the appropriate instruments and products.

In terms of demand, this is represented by potential clients. For companies, users on Facebook are all potential clients, meaning that a simple message that a distributor of products and services delivers within Facebook can potentially reach all users, significantly increasing the number of individual who will potentially purchase that product.

The supply side is represented by businesses, in general, but notably by big brands and important companies who recognize the efficiency of the Facebook communication channel, not only strictly to marketing, but also as a public relation reach-out instrument and a way of better understanding the preferences of potential consumers. This is probably where the bonus coordinate of Facebook's business model enters: the fact that, even compared to Google (this will be further discussed in the subchapter referring strictly to the comparison between the two), Facebook allows companies and economic entities to follow consumer preference to a much more minute degree, understanding in detail how the message should be customized to reach the potential target.

Everything needs to be considered at an enormously aggregated level, so as to better understand the impact that such a marketing approach can have and the benefits that third parties (both consumers and other businesses) can enjoy from such a business model. According to the official Facebook statistics, there are more than 500 million active users on Facebook, and 50% of those active users log on to Facebook at least once a day, in any given day (Facebook Press Room, 2010). At the same time, the Facebook model offers not only a large number of potential clients, but also a large base of active users, users who login to exchange content and information with other active users.

Connecting these two parties are the instruments that Facebook provides. These have become more and more complex, aimed at both making the user experience more beneficial (including with new applications such as Download Your Information, recently launched) and at enabling companies who offer products and services to better reach out to their potential clients (Gaudin, 2010). At the same time, the newer tools that Facebook offers are also targeting the privacy issue that the company had to tackle in the last period of time, as will be discussed later in this paper.

As a final conclusion on the Facebook business model, one can note that it represents "groundwork for reorganizing the Internet according to the relationships between people instead of pages" (Hempel, 2010). Based on the new paradigm for social networks as the new way virtual organizations will connect with the shareholders, the competition with Google resides in the fact that the latter proposed a different model for the Internet, one in which the connection and relations between the web pages was the fundamental criterion for the organization of the Internet.

Facebook vs. Google and My Space

Although the idea according to which, as things appear now, with the existing business models and instruments, Google has lost the battle with Facebook, appears too radical, it is clear that the new world, including both the social and economic environments, favor communication and collaboration as the two essential coordinates of Internet evolution.

If one starts the comparison between Facebook and Google strictly with the basis of revenue for both companies, advertising, the business model that Facebook promotes does seem more successful nowadays. As previously mentioned, the social networking model that Facebook works on is more successful in providing applied information that is more useful for the selling business entity that the information it can receive via Google.

Even more than that, the communication tools and environment that Facebook facilitates is more efficient from that perspective. On that, one should consider the fact that Google's usefulness for business resides in the information on page visits and Internet behavior of users. However, Facebook elevates this type of information and provides direct feedback from the user itself in terms of his preference, via the Facebook page that he continuously updates and through the communication the user has with fellow users and friends. At the same time, Facebook is also a communication tool, which means that direct marketing, besides advertising, is a reality in the process of targeting a potential consumer.

On the other hand, it would be interesting to note the things that the two business models have in common or, at least, the fact that both of them are trying to incorporate elements from the other model. For example, Facebook has announced that Bing is the default search engine that it uses for all its accounts. This means that, beyond the social networking business model that Facebook is using to obtain information and use it in its advertising campaigns, it can now also benefit from a search engine that has over 400 million users worldwide (Hall,2010). It can thus complement both instruments into one highly efficient one.

On the other hand, Google has also reported the conception and promotion of several social networking tools that it can integrate with its search engine, as well as its email. Buzz was launched one year back as an instrument of communication and sharing within the email. Google Wave is also reportedly in the making as a more complex cooperation and communication tool. While both Facebook and Google seem to continue to rely mostly on the core model for the success of the business, both companies continue to borrow elements from the other in order to complete and add more, as well as create more opportunities for potential revenues.

In terms of the competition with MySpace, this is certainly more of a competition within the same market rather than the competition between business models reflected in the one with Google. MySpace relies on a similar business model as Facebook, with social networking as the basis for it and revenues coming, ideally, from information from the users that business entities can benefit from and, eventually, use in their advertising campaigns.

However, from the very beginning, MySpace seems to be customized to fit a particular category of users. On one hand, the focus is on the degree of customization that users can bring to their pages. With this in mind, MySpace is much less focused on attracting potential business users than Facebook is and has continued, throughout its existence, to focus on a different category of potential consumers, namely teenagers or, as it grew, artists. From that perspective, the user demographics were different. Facebook has a great number of applications that can be used and implemented, and it has also implemented control tools that can limit spam (Vercillo, 2010).

Challenges

The most important challenge that Facebook faced throughout its evolution was the privacy issue. Initially, it was the fact that on a… READ MORE

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