Facebook - SWOT analysis

The article is based on Facebook SWOT analysis which can be found in the Library, in CayenneApps SWOT application.

“People aren’t using Facebook less” — we have read this in the latest TechCrunch article describing current earnings report of the American company. The Q2 2015 ended for them with $4.04 billion in revenue, and the number of people using the website monthly reached an astonishing level of almost 1.5 billion!

This was very impressive, so the minute we saw this news, we thought that it would be a really interesting opportunity to conduct a comprehensive SWOT analysis for Mark Zuckerberg’s company.

Do you want to know what we have discovered? Keep on reading!

Strategy

As usual, in our SWOT analyses, we evaluate and connect all the strengths, weaknesses, opportunities and threats in order to identify the most important or unique features of the company. Based on our input, we eventually arrive at a recommended strategy. Often, the recommendations for different strategies are more or less equally distributed, but in Facebook’s case the recommendation was pretty clear — utilize the Aggressive one.

It means that the American company has a lot of solid strengths and these strengths are connected with its opportunities. The companies which want to utilize the aggressive strategy should focus on making use of their opportunities and using internal strengths to gain a competitive advantage. They should invest in innovation, react to competitors moves, explore emerging markets and sometimes raise the stakes.

But, what are these strengths and opportunities that Facebook has?

Strengths

In the picture below you can see which strengths (green ones) have a major impact on Facebook’s opportunities.

The first and most important one is Facebook’s potential to invest. Their market cap is now equal to $264 billion and they can literally drown their competitors in money. Facebook is not only able to invest huge amounts of money in marketing, and research and development, but is also able to acquire a number of smaller or medium-sized companies to expand its reach, as happened in the past with WhatsApp, Oculus Rift or Instagram.

The second most important asset of Facebook is its users. As we stated in the introduction, Facebook now has almost 1.5 billion users worldwide, which is not only an impressive statistical curiosity. First of all, it is an enormous market for ad campaigns — a main source of Facebook’s income. Secondly, it creates a vacuum which sucks in the competition which tries to roll-out their own social-related networks of services. Ask yourself a question: if “everyone is on Facebook” why should I bother using other social network where none of my friends are?

Opportunities

We talked about strengths, now it is the time for opportunities. In the picture below, you can see which Facebook opportunities are most influenced by the company’s strengths.

The first and foremost opportunity is the further exploitation of the mobile advertising market. Why is this so important? The answer is simple — because there is tons of money buried down deep in those tiny devices called smartphones. Actually, in the chart below we can see that the majority of Facebook’s ad income comes precisely from mobile devices. When we add to the equation the previously mentioned fact that advertising is almost the sole source of Facebook’s income and the cornerstone of its business model, we can clearly see how important the mobile market is.

The second major opportunity for Facebook is the new emerging markets such as Africa, China or Russia. The social network markets in Europe and U.S. are more or less saturated, so the strategy is simple — when there is no more cake left to be eaten, then expand the cake.

But, as was demonstrated with the example of Russia, where Facebook has been beaten by VK — a main local social network, entering new markets is not that easy. Therefore, Facebook utilizes two different strategies. First, it buys the companies which already have users in countries that it want to expand (vide WhatsApp deal).

Second, it creates a market where one has not previously existed  — as happens with Facebook Internet.org program, which aims at providing undigitized countries with the internet, access to innovative technologies and …of course Facebook ads.

Weaknesses and Threats

But, as usual, Facebook is not only about strengths and opportunities. There are also solid weaknesses which impact Facebook’s threats or limit its opportunities. You can see some of them listed above.

The first and most important weakness of Facebook is its privacy model. The model is now far easier to

understand than it has been before, but it is still not very transparent and understandable to users. People publish thousands of pictures on their Facebook pages, share updates and write controversial opinions, but only a fraction of them actually understands with whom they are sharing the information.

It might be seen as a problem for users, not Facebook, but it is actually the other way around. Eventually, if the privacy issues will increase in magnitude and users will become more afraid of putting more and more private content on the web, the Facebook itself would shrink and one of its biggest assets — the number of users — might start to decrease in importance. This is too serious of a threat to be neglected.

The second and the fourth most important weaknesses are also crucial. They can be combined together as they mostly concern the mobile advertising market. When we described the Facebook strengths, we showed how important the mobile market is for Facebook — but, what if the ads would be mostly ignored by users? What would happen to Facebook’s income?

Even now, many corporate customers of the Facebook Ad Service complain that the ads are not that efficient. People see the ads, but don’t click on them, and therefore, don’t generate new leads. Why? People are like bacteria, there are becoming more and more immune. When they see random commercials they just ignore them. Moreover, they even install software which actually blocks ads.

It is a race, and the only way for Facebook to keep ahead is to find more and more sophisticated ways to reach its users, or to create ads that will be useful to them. It is not an easy thing to do, but fortunately for Facebook, they have the best people in the world to accomplish this.

Summary

So, we have summed up some of Facebook’s features, but what kind of future does it have? It seems that for now, it is still a bright one. As we wrote before, Facebook has the right strengths to make the use of its opportunities. They are still growing, making investments and expanding to new markets. They are on the right track to becoming the biggest company in the world which foremost connects everything and everybody. One website to rule them all! Does that sound scary to you?

In this article, we have mentioned only the most important features that were a part of Facebook’s SWOT analysis, but if you would like to see more, or take a look at more interesting statistics please take a look at the Facebook analysis in our SWOT Library.

But, if you are not interested in Facebook, you can still take a look at our other articles about companies such as Amazon, Walmart, Airbnb, Lego, Tesla or Uber.