Mktg Project Phase 2

Facebook Inc. Phase #2 Course MKTG361, Section 2 March 20, 2019

Team #64 Neil Aoun Zachary Fetter Fernnie Garcia Brandon Hahn Justin Im Alec Vedder

Intro The purpose of this report is to give an overview of the current status of Facebook, it’s positioning within the broader industry, and key marketing issues and strategy. More specifically, the report includes a brief background of the company, an outlook on the industry, details of current marketing challenges and potential strategies to enter new markets, and a deepanalysis of competitors already operating in those target markets. Company Overview Facebook is a social media platform designed to allow people to connect with others and share content. Facebook Inc. was founded in 2004 by Harvard dropout, Mark Zuckerberg. The company has quickly grown to become a dominant player in social media. According to IBISWorld, Facebook currently owns a 36% market share in the Internet Publishing and Broadcasting Industry, NAICS code 51913b (Hadad, 2018). The internets publishing and broadcasting industry is still in the “growth” phase; expected to grow at an annual rate of 14.1% from 2018-2023, a small uptick from the 13.7% annual growth rate from 2013-2018. As a market leader, Facebook’s dominant 36% market share makes it wellpositioned to take advantage of the growing industry. Its top competitors in this segment include Alphabet Inc., Netflix Inc., and Apple Inc., with market shares of 26.3%, 11.7%, and 10%, respectively (Hadad, 2018). Facebook’s current portfolio of products includes Facebook, Instagram, and WhatsApp. Together these products generated $55.8 billion in revenue for the fiscal year 2018 (Facebook Inc, 2019). Facebook’s main product is its own platform, synonymous with the company’s name. Other products including Instagram, a photo-sharing platform, and WhatsApp, an encrypted messaging application, face stiff competition from other media and technology companies outside of the narrowly-defined internet publishing and broadcasting industry. These companies include Twitter, LinkedIn, and Google. While Twitter, LinkedIn, and Google share some of the same features of Facebook, Facebook has more universal applications and appeals to a broader base of users. For example, Twitter might appeal mainly to millennials just as LinkedIn mostly attracts young professionals. Facebook’s value proposition and competitive advantage over it’s largest competitors can be ascribed to it’s appeal to a broad demographic. The industry is also shaped by current seasonal trends and environmental forces as seen in the SWOTT attachment (Table 1). One of the largest external threats facing the industry is the increasing regulations being proposed and drafted into law by governments across the world, such as the new GDPR regulation in Europe. Being wary of these challenges both external and internal, Facebook must be careful to navigate a strategy that takes these into consideration. Strategy

Facebook can leverage its strengths, such as its sheer size, to capitalize on new opportunities and markets. In order to do so successfully, Facebook needs to address its internal issues revolving around data privacy while also navigating around external threats such as new regulations and malicious hackers (Table 1). Target Markets and Competitors (Table 2) The three primary target markets have been segmented based upon age, geographic location, and income. These markets will be broken down into greater detail in order to better understand the scope of the markets. However, there is one consistency in all the segments and this is geographic location, which is the United States. This is because based upon Figure 2, the United States average revenue per user is more than three times the next country and the majority of the users in the country have internet access. Additionally, the top three competitors will be discussed in this section. This information can be used in order to gain greater insight into the behaviors and wants of the users that Facebook targets. It will also allow the reader to better understand our competition and why their product is different than ours. Primary Market and Competitor The primary market for Facebook is anybody living in the United States, between the age of 1834, with an median income of over $40,000 (See table 2). This group is estimated at a population of 48.9 million (Garcia, 2018). This market is valuable to Facebook because this age group knows a lot about common technology and understands how to use it. Also, they have the income to purchase the devices needed in order to access this platform. Facebook, has direct access to this market through its ability to address the wants and needs to users within this segment. These needs and wants can come in two main forms. The first is the ability to connect to friends and family members. The second is having the capability to post photos, videos, and other media on the social media platform (Ayyar, 2014). These two things combine to prove that this market is the best target market for Facebook. One company that threatens to take away the primary market from Facebook is its primary competitor, Twitter. Twitter is a social media company that is very similar to Facebook which is why is it such a threat. However, there is one major difference between the two companies. Twitter is much more focused around real-time events and conversations (“Twitter Company Details”, n.d.). Another factor of Twitter that makes it such a threat is the fact that they own a mobile-focused advertising company, MoPubs Advertising Solutions which is the world's largest mobile advertising server (Gorton, 2018). MoPubs gives Twitter a distinct edge over Facebook in its ability to reach the primary target market on the mobile platform as most people within this segment have smartphones. Secondary Market and Competitor

Facebook’s secondary target consists of 35-54 year olds in the United States that have an estimated income of $78,000 (See table 2) (Garcia, 2018). In the social media market, Facebook holds 70% of it and LinkedIn hold’s 10% as seen in Figure 1 (IBISWorld). This makes LinkedIn, a big competitor for Facebook due to the fact that LinkedIn’s platform allows user connections all over the world. However, LinkedIn is primarily used for professional use, which correlates with our secondary target market as they are typically professionals with established careers. One trait that makes LinkedIn a big threat to Facebook is that they are extremely similar in the visual and overall mission. Which brings up the concern that people will be more inclined in using LinkedIn rather than Facebook, as our target market may think it is more important to have a professional page to connect with colleagues than a Facebook account (Schaffer, 2019). However, Facebook is still the largest social media platform and has about one billion users as opposed to the over 500 million users that LinkedIn has (Gallant, 2017 & Facebook, Inc. 2019). Tertiary Market and Competitor As for the tertiary market, Facebook targets older individuals 55 years and above with an income upwards of $41,000 and an estimated population of 23.8 million (See table 2) (Garcia, 2018). Contrary to the primary market group, this age group is more incline with basic communication features let alone those provided on the Facebook platform. Although this class of baby boomers is able to afford the devices needed to access the company’s platform, the lack of proficiency in modern technology strays them away from the ease of use provided from Google and its extended features. Facebook holds the highest percentage in the social media market, however other surrounding platforms have been competing for the reign. In addition to Twitter and LinkedIn, Google has also played as a key threat towards Facebook. Already being the world's biggest search engine, Google has also entered the social network realm with the development of Google+. Although the platform allowed for its users to share and connect with friends, colleagues, and family, “launched with so much promise of being a viable competitor to Facebook, Google+ ended up as a social media platform with a declining user base” (Si, 2019). Marketing Issues This section will discuss the three marketing issues that Facebook is facing, with three examples and solutions for each issue. The three marketing concerns is that is is not appealing to younger generations, ad saturation, and not promoting a safe and secure setting for the user. There is a simplified marketing problems figure (Table 3) that has each example and each solution.

Not Appealing to the Younger Generations Facebook currently has 2.2 billion monthly active users, and it’s getting very difficult to continue growth in number of users. Despite the odds, they have continued to grow by over 10% year

after year. However, the biggest issue that Facebook faces is keeping its users engaged. A recent survey showed that only 15% of teenagers consider Facebook as a valuable social media network. This is down from 68% in 2012. To go along with this, only 51% of users aged between 13-17 even use Facebook anymore compared to 85% on youtube and 69% on Snapchat (Solon, O. 2018). User engagement is a crucial aspect in Facebook's business model, because the more time people spend on the application the more likely they are to click on or view an advertisement. (Niu, E. 2019) Examples People have been spending more time on rival social media platforms such as twitter and snapchat.(Solon, O. 2018). Secondly, the Facebook platform is becoming outdated and less appealing to the younger generation. (4 Reasons Why Facebook Has Lost Young People Forever). Lastly, the younger generation shuns the fact that Facebook is increasing in popularity with older people (Solon, O. 2018). Solutions The younger generation wants a more creative platform for them to be able to express themselves freely and connect with their favorite brands and celebrities. Facebook needs to add more features geared towards a younger audience such as personal stories, adding a “follow” button on people's profiles, and allowing more interaction between platforms. See table 3. Ad Saturation A second key marketing issue that Facebook is facing is that they are creating an ad load saturation. Ad load saturation is where the users’ app is flooded with ads to the point that Facebook can’t add more ads to the feed without jeopardizing the loss of the user. Over time Facebook has continually been able to increase the price of advertisement that businesses are willing to purchase space. Since Facebook is increasingly approaching the equilibrium of demand for advertisement and the amount businesses are willing to pay, soon Facebook will begin to lose businesses for advertisements. Examples Users feeds are being filled with ads on products and political areas. It has been reported that Facebook’s list of ads on people's feeds are partial bias towards the liberal point of view (Byrnes, 2016). Small companies that are looking to promote on big tech websites are switching to Amazon over Facebook because Facebook has too many ads and not enough room on the platform for them to be advertised efficiently (Bercovici, J. 2018). Facebook has also had issues with large concentrations of fake advertisements that enter the platform, Facebook has failed to prevent fake ads from entering its platform which force more ads to be entered into the algorithm (Lomas, 2018).

Solutions The first solutions to fix ad situation is by letting the users select which ad they would like to view from a selection. This would make users happier with ads and to stay on the app longer. The second solution is ads have to wait 6 days after being used to be thrown back into the ad

cycle so that different ads show up on users feeds. The last solution is to improve the targeting system for ads so that users get ads more appropriate to them and increase their usage on the app. See table 3. Not Promoting a Safe and Secure Environment for Users The issue that Facebook is currently having with security and privacy is causing business users and regular consumers to change social platforms when it comes to promoting ads and viewing ads. In this day and age, privacy and security is a key aspect for users social media usage. Facebook has put in money to revamp its security but has also failed to let consumers worldwide know about this fix. Parents are also not giving approval for their children to be on the Facebook platform due to the privacy breaches. Countries are also taking action but implementing bills so that their users are protective. Examples Some examples that depict this marketing issue is the General Data Protection Regulation. (GDPR) was implemented to safeguard against big tech companies to prevent the collection of private data within the European Union (The EU, n.d.). In addition, the implementation was to limit the selling of users’ data to Facebook's partnered companies, which is an abusing power.(Laforgia et al. 2019). Lastly, when the United States gave their first lawsuit to Facebook in response to the Cambridge Analytica in 2018(Romm et al. 2018). Solution There are three main solutions that can fix the issue of not promoting a safe and secure environment. The first one is an opt-in strategy for the entire company in response to the General Data Protection Regulation and India’s Data Protection Bill. The second solution is to have Facebook delete its data after it is collected and used by the company, making the users feel safer. The third solution is for Facebook to add more data security personnel so that security breaches and the selling of data is prevented. See table 3. Conclusion Facebook is a huge player in the social media market. With major competitors such as Twitter, LinkedIn and Google, it is crucial that Facebook maintains a good image in the public eye. By addressing the marketing issues that appeals to new generations, too much ad saturation and promoting a safe and secure environment, Facebook will be able to retain users and gain new users in the future. It is important for Facebook to continue to make strides by trying different solutions for each issue to see which ones fit the majority of users.

Attachments Table 1: SWOTT Analysis Strengths:

Weaknesses:

-Dominant market share -Near monopoly -Well-known globally

-Data privacy issues

Opportunities: -Target individuals 18-34 in the US -Individuals aged 35-54 -Older individuals aged 55+

Threats: -Growing competition from Twitter, LinkedIn, Google -GDPR

Trends: -Increasing regulations -Increased awareness around privacy

Table 2: Target Markets Target Markets

Primary

Secondary

Tertiary

Description

Young individuals with the means to purchase a device to access our platform, who is looking for a way connect with friends and family

Middle-aged individuals looking to connect with family, friends, and colleagues personally and professionally.

Older individuals seeking to share photos and videos with friends and family

Size of Market (Millions)

48.9

38.9

23.8

Household Income

$40,000+

$78,000+

$41,000+

Age

18-34

35-54

55+

Geographic (Country)

United States

United States

United States

Figure 1: Market Share of the Social Media Industry

Attachments

Table 3: Marketing Issues Issue

Example 1

Example 2

Example 3

Not appealing to younger generations

social media rivals: Facebook is losing users to younger geared social media platforms

Outdated Platform: Facebook forces the user to have a single identity, lacking in creativity and freedom for its users

Ad saturation Ads are discriminating users on a biased algorithm

Not promoting a safe and secure environment for users

GDPR: Recently implemented by the EU to protect the users' private information

Solution 2

Solution 3

Gaining popularity Stories more with an older age available to group: This makes use the platform uncool and ill-favored with younger generations

Making the following button so there's more interaction

More interactivity between platforms on facebook app

Companies switching platforms for promoting their ads

Failure to prevent fake ads from entering its platform

Users choose which ads they watch out of a selection

Ads have to wait 6 days after being used to be reused

Improve the targeting ad system to increase the usage of apps

Selling data: deteriorating parents approval on social media, and making users feel abused by the power of large companies

A lawsuit from the US: Due to the Cambridge Analytica breach that involved 87 million users accounts

Opt-in strategy-Full transparency throughout the company

Force Company to delete data over time and not sell to outside businesses

Adding more data security personnel

Figure 2: Average Revenue Across the world by Quarter 4

Solution 1

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