Businessmodel of Facebook

Customer Segments

Facebook depends on three customer segments: internet users, developers, and advertisers.

Value Proposition

Facebook has over a billion monthly users whose traffic drives their advertising revenue. These users value Facebook as a convenient platform on which to interact with friends and family. Increasingly, users also use Facebook as a source for news.

For advertisers, Facebook is a valuable partner because they can offer more reach, social context and an increased chance of advert engagement than most other channels of advertising. This is because Facebook has a lot of data about their users and they have developed algorithms that use this data to target individual users with adverts that they are more likely to engage with.

Developers are drawn to Facebook because it offers tools and APIs which can be easily integrated into the site, making it an ideal platform for apps and platform-integrated websites. Facebook also provides an easy to use payment system to ensure developers may profit from their work.

Channels

Regular Facebook users access the site through two main channels. Web browsers and phone apps.

Facebook provides a key advertising channel for innumerable businesses who pay to have their ads targeted at users of the site.

Marketers on Facebook may also use the website to set up pages and run advertising campaigns to promote their products.

Channels available for developers seeking to integrate their products into Facebook include a number of tools and APIs provided by Facebook.

Customer Relationships

To maintain a good relationship with regular users, Facebook tries to ensure that the platform is as secure, customizable and reliable as possible. They continually introduce new features to improve the user experience and allow users some control of their privacy settings so the user feels in control of their data.

The precise legal details of the relationship Facebook has with its customers and the rights Facebook has over the data they collect from them are outlined in privacy and data policies available on the website. Users tacitly agree to these policies by using the site.

Key Activities

Facebook invests heavily in continually updating the platform, hiring large teams of developers to regularly offer new features such as voice chat and personalized time-lines.

Facebook has massive computing needs to host the gigantic amounts of photos and videos its users store on their profiles. Facebook therefore invests heavily in the data centers used to that.

Key Partners

Facebook has partnered with many other web companies such as Hulu, Netflix and media outlets such as the Washington Post so that these sites’ content may be integrated on the Facebook platform.

Key Resources

One key resources is the Facebook platform itself. Over the years Facebook has invested a lot in hiring large numbers of world-class software engineers to build their platform and it remains a valuable resource.

Technological infrastructure is another key resource. Facebook’s data centers house several hundred petabytes of data, and this is only a part of Facebook’s growing sophisticated and expensive technological infrastructure.

Another key resource is the Facebook user base. Facebook harvests data from its users in order to better target them with adverts. The userbase is, therefore, a key resource in and of itself. Facebook has a massive 1.7 billion users so this is not a resource to be underestimated.

Cost Structure

Facebook spends large amounts of money on maintaining its massive data centers, and on the development of new services to add to its platform.

They also spend substantially on marketing and sales teams, who comprise a large portion of their 12,000 employees globally.

Revenue Streams

Facebook makes in excess of 80% of its profit from ad revenues, but an increasing amount comes from payment revenues received from third party developers.