Facebook Case Study By MTiPO: Desiree Fabunan Yee Han Kuan Svyatoslav Mishchenko Patrick Lin Ngai Lung Wenhan Zhou

Decision Problem: Proposed Solutions: Assumptions: Growth/Expansion Strategy Proposed Solutions: To Grow Internationally To Enter Different Market Segments To Concentrate On Increasing Per-User Revenue Assumptions: User base higher priority than revenue Significant number of countries with small Facebook user base Facebook has the capability and resources to localize Growth is viral Problem: Facebook Growth/Expansion Strategy   Proposed Solutions: - To grow internationally, expanding its user base & to gain foothold in other countries on top of those existing countries. - To open up different categories other than college & high school to boost up its user base in US. - To partner local advertising companies in countries with strong facebook foothold to increase the company revenue. Assumptions: - Establishing a larger user’s base is a higher priority than compared to increasing revenue. - There is significant number of countries which Facebook has a very little penetration with a very small user’s base. Facebook has the ability to expand & customize its website with local language – localization. (http://www.insidefacebook.com/2007/08/06/coming-soon-facebook-in-your-language/) The business can grow virally in a real life social network if it has critical mass (http://weblogs.hitwise.com/to-go-ap/2007/05/facebook_doubles_its_popluarit.html & http://weblogs.hitwise.com/to-go-ap/2007/07/facebook_increasingly_popular.html)

SWOT Analysis Strengths Weaknesses Opportunities Threats Truly compelling product Continual viral growth Virtually unlimited feature set High user retention Weaknesses Low revenue per user Currently only support English (limited market) Inexperienced in overseas market & culture High learning curve for new users Opportunities To grow internationally To open up different segments To concentrate on increasing company revenue Threats Emergence of better social networking websites Lose its appeal to users Privacy issues Financial threat due to impending lawsuit (ConnectU) Strength: - True product leader. Features are better than its competitors. Able to stay ahead of its clones by product innovation. - The creator with many web applications available to its website - The business can grow virally in a real life social network if it has critical mass (http://www.comscore.com/press/release.asp?press=1555) => already gained a foothold in US. - High user retention rate – additional meaning to high retention rate(http://home.compete.com.edgesuite.net/site_media/upl/img/MF-FacebookPV1.1.gif). Weakness: - Low $/user - It only supports English => limits its market. - Inexperienced management team – in overseas markets with different cultures. Launching to another country: Steep Learning curve for new users, with its complex features. This leads to local people being less acceptive to Facebook. Opportunities: -To grow internationally, expanding its user’s base & gaining foothold in other countries on top of those existing countries. -To open up different segments other than college & high school to boost up its users base in US. -To partner local advertising companies in those countries with a strong facebook foothold to increase the company revenue. Threats: - Emergence of technical superior social networking website, overseas competitors & big elephants. - Online Social networking as a category loses its appeal to users. Online users switch to the next big thing available on the market (iRC -> ICQ -> msn). - Public concern over Privacy Issues similar to those haunting Myspace repeats on Facebook Platform - Financial threat due to impending lawsuit (ConnectU).

Analysis –Economic Analysis Improve Revenue Source in Existing Markets Target New Segment in Existing Markets Existing New Approach Products Customers New Existing International Expansion Graph: 3 Dimensions for examining opportunities Comparative Graph: Projected No of users vs time for the 3 options. Note: Option 1: Slow initial growth (In term of revenue & users). Requires substantial investment in overseas market. Expected substantial sharp growth eventually. Option 2: Sharp increment initially, but it is likely to become stagnant in long term. Option 3: Good for short term revenue, but unlikely to have any boost in no of users. (http://www.comscore.com/press/release.asp?press=1735): Delphine Gatignol, comScore’s Business Development Manager for France, commented on the importance of a social networking site being able to cater to individual countries: “Social networking sites are founded on their ability to allow Internet users to communicate quickly and informally with one another. The dominance of Skyrock Networks in France is a strong indication that language is a key factor. The provision of local language pages has allowed some of the multi-national sites to penetrate the French market as well.” 4 Decision: To Grow Internationally.

How To Grow Internationally Challenge: It may find it hard to displace the dominant local competitors. Local resistance to foreign culture. How to Grow in other markets Localization through Language Spread Facebook through Evangelist Overseas Student Early Adopters Use Bowling Alley Effect Characteristic of a Suitable Initial Overseas Market Competing Product is technically weak or clone User base comfortable with Social Networks Users verse in both English and their Mother tongue I.e (Mexico, India, Sweden, Germany, France, China) Decision: To grow internationally, expanding its user base & to gain foothold in other countries on top of those existing countries. Challenge: It may find it hard to displace the dominant local competitors. Local resistance to foreign culture. How to Grow in other markets Localization through Language Spread Facebook through Evangelist Overseas Student Early Adopters Use Bowling Alley Effect Characteristic of a Suitable Initial Overseas Market Competing Product is technically weak or clone User base comfortable with Social Networks Users verse in both English and their Mother tongue Pros: - Huge Market Potential. - Large existing user base is incentive for joining. Economic of scales (Fixed cost: Software development & Variable Cost: Server & bandwidth ) Cons: - Large capital investment required. - Decrease exclusivity may turn off current users. Local resistance to foreign culture. (http://www.comscore.com/press/release.asp?press=1735) DesiMartini This Facebook clone is designed for India, and prominently features familiar Facebook features such as profiles, friends, groups, and classifieds. Ironically, the site features an embedded YouTube video on the homepage. StudiVZ A Facebook clone for the German market, the founders of StudiVZ have already sold the site for more than $100 million. StudiVZ is nearly identical to Facebook in terms of features, functionality, and interface. StudentFace Drawing inspiration in both features and name, StudentFace is a social network for the Australian market. They have added a feature similar to Facebook’s News Feed, allowing you “to see which one of your friends have updated their profiles and/or added friends.”

Reality Test Risk Mitigation Strategy Contingency Plan Severity Probability Market Facebook does not gain a foothold in overseas market To hire local talent to localize the website. Target Initial Segment to Students whom have are returning from overseas studies Establish a partnership with local social network High Medium Team Inexperienced in oversea culture & management To hire someone with experience taking a website internationally Buyout local networking website Technology Emergence of superior social networking website Improve the facebook feature to ensure it remains appealing to the users Adopt & learn from other competitors Low Financial Substantial Marketing Investment required expanding into overseas market Decreased in revenue/user in international market Improve advertising model. Seek other sources of revenue