Facebook SWOT Analysis 2018

Facebook SWOT Analysis 2018

Facebook has been hailed as the king of social media networks. In the recent months, the network has been through a series of issues related to user generated content and user privacy. Growth of the social media giant was based on the high level popularity it acquired soon after release. The brand has enjoyed sharp growth and good financial performance in recent years. User privacy related concerns however, have continued to remain  a problem for the social media giant. Apart from that, pressure from governments and legal agencies will also affect its business. While, the audience of the social media brand has continued to grow, its addictive qualities have become a topic of heated discussion among scholars. Apart from Facebook, the social media brand also owns Instagram, WhatsApp, Messenger and Oculus. Nearly all of the social networking giant’s revenue comes from online advertising. In this area, it has emerged as a mighty rival for Google’s online advertising empire. Current issues, however, have become a threat to the brand’s reputation. Despite emerging concerns, its popularity among users remains high because of the easy to use interface and other several features which have been admired as effective and criticised for being addictive. Facebook is among the leading businesses in the internet world. In the recent period, number of users of Facebook was past 2 Billion. Read more about the social networking brand in this SWOT analysis highlighting its Strengths, Weaknesses, Opportunities and Threats.

Strengths:-

Leading social media network: –

Despite recent concerns and controversies Facebook is the leading social network of the world. The popularity of the social media site was high right since its foundation. With time, it kept growing even popular. Individual users, businesses and other groups started using it for striking connections and for marketing. With time, it has added several more features that have made the platform all the more engaging and attractive for users.

High number of users: –

The number of Monthly Active users at Facebook has grown very fast doing the recent years. It is past 2.2 Billion now. The popularity and audience size of the social media brand has grown very fast. It’s famous globally as the leading social media platform. The number of users in Asian and Western markets has grown very high.

Leading online advertising business: –

It is one of the leading online advertising businesses. Facebook is behind Google in this area. However, the brand has grown its presence in the area of mobile advertising.  Facebook’s advertising revenue was close to 40 Billion US dollars in 2017. In the below table, you can see the revenue of Facebook from 2016 (all quarters) to 2018 (3rd quarter).

Facebook's Quarterly Revenue from 2016-2018 (Million Dollars)

Quarterly RevenueAdvertisingPayments & Other feesTotal Revenue
q1 2016 $         5,201 m $              181 m $           5,382 m
q2 2016 $         6,239 m $              197 m $           6,436 m
q3 2016 $         6,816 m $              195 m $           7,011 m
q4 2016 $         8,629 m $              180 m $           8,809 m
q1 2017 $         7,857 m $              175 m $           8,032 m
q2 2017 $         9,164 m $              157 m $           9,321 m
q3 2017 $      10,142 m $              186 m $         10,328 m
q4 2017 $      12,779 m $              193 m $         12,972 m
q1 2018 $      11,795 m $              171 m $         11,966 m
q2 2018 $      13,038 m $              193 m $         13,231 m
q3 2018 $      13,539 m $              188 m $         13,727 m

Ownership of multiple platforms: –

Apart from Facebook, Facebook Inc, also  owns WhatsApp, Instagram, Oculus and Messenger. Facebook is  a platform for building connections, sharing and forming groups. Instagram on the other hand is a platform for  sharing visual media like images, videos and for forming groups and communities as well as connecting with others and messaging. WhatsApp is a mobile application for instant messaging and for video messaging. Oculus is  a virtual reality technology and content platform that allows users to learn and train as well as connect.

Human Resource management:-

Facebook is also known widely for its excellent human resource management. Apart from paying its staff well , the brand has also  adopted excellent HR management policies that have been hailed industry wide as among the best. Apart from training and education, it provides its employees with opportunities for growth.

Research and development:-

Every technology brand depends heavily on research and development for growth. Facebook also keeps its platform  updated to remain technologically ahead of its social media competitors. In the recent years, it has raised its expenditure on research and development aggressively. In 2015, its expenditure in research and development was 4.8 Billion dollars which increased to 5.9 Billion dollars in 2016 and then 7.8 Billion dollars in 2017. That’s a large sum and bFacebook is among the leading spenders on R&D. Research and development has played a major role in fuelling the growth of the social media brand during the recent years. Overtime, as the social media network and its audience grew, it brought several new features to make social networking an immersive experience.

Facebook quarterly Research and Development expenses in millions (2016-2018)

Quarterly expensesR&D (in Millions)
Q1 2016 $         1,343 
Q2 2016 $         1,471 
Q3 2016 $         1,542 
Q4 2016 $         1,563 
Q1 2017 $         1,834 
Q2 2017 $         1,919 
Q3 2017 $         2,052 
Q4 2017 $         1,949 
Q1 2018 $         2,238 
Q2 2018 $         2,523 
Q3 2018 $         2,657 

High Investment in Marketing & Sales :-

Part of the fast growth of Facebook as a social network can be attributed to its excellent marketing. Facebook has marketed its brand heavily leading to fast growth in the numbers of mobile users. Its investment in marketing and sales has grown a lot in just last few years. It grew from 3.8 Billion in 2016 to 4.7 Billion in 2017 and then 5.4 Billion dollars in the first three quarters of 2018.

Facebook quarterly expenses Marketing and sales (2016-2018) in million dollars

Quarterly expensesMarketing & Sales
q1 2016 $             826 m
q2 2016 $             901 m
q3 2016 $             926 m
q4 2016 $         1,118 m
q1 2017 $         1,057 m
q2 2017 $         1,124 m
q3 2017 $         1,170 m
q4 2017 $         1,374 m
q1 2018 $         1,595 m
q2 2018 $         1,855 m
q3 2018 $         1,928 m

Weaknesses:

User privacy and content related concerns :-

User privacy has become a central issue challenging the internet industry in the recent times. Facebook is facing  a lot of criticism over its user data related policies. Complaints against Facebook over its user data management have risen. In the recent months of 2018, it missed some of its important targets related to revenue due to declining popularity over the user privacy row. Europe has adopted strict rules related to user data. The result has been that user base eroded most rapidly in Europe. In Canada and US, the position of the social media network has remained relatively unchanged.

Tainted image :-

Fake news, user privacy related concerns and other similar issues have tainted the image of the social media network. Some experts argue that core Facebook platform has been in a  state of decline. It is now not as much popular as it was some time ago (TIME).  In July 2018, data scandals resulted in user disenchantment. The Facebook data scandal was considered to be the worst of this century resulted in increased government oversight and higher pressure on internet based businesses. Questioning of Facebook leader Mark Zuckerberg was an evidence of the gravity of the issue. Brand image is very important for any business and especially leading global platforms. Analysts expect that the charm of Facebook could thin further unless management pays able attention to its data and user management practices. Moreover, Facebook owns several platforms like Instagram and whatsApp. Its aggressive user acquisition practices have bene criticised by media and competitors. Its use by foreign entities to affect the outcome of the US elections is also a major problem that could taint face book’s image further. Analysts see a solution only in heavier control. The ‘Cambridge Analytica’ data scandal has tainted Facebook’s image and its effects are going to remain for long. According to several researchers and analysts, it is the worst to have happened to Facebook and to regain the image and value it held would be very difficult if not impossible. The leader’s duty would be to ensure that management follows the highest level of ethics and to ensure such incidents do not happen again at Facebook.

Management issues :-

The data scandal at Facebook has been linked with management problem. Apart from the founder other top executives have also been held accountable in this area. Management problems are seen as the biggest problems in the business world. They can lead to more and more problems. Convincing users has become difficult for the leader. However, he is convinced, he might be able to bring things back under control in  future.

Opportunities :-

 

Diversification:-

Facebook owns several platforms including WhatsApp, Instagram and Messenger. To find further growth diversifying into new technology areas can be an attractive option. Once Facebook has overcome the recent data and management related problems, it could consider diversifying into other related areas.

New acquisitions:-

Facebook has managed a series of acquisitions including that of WhatsApp and Instagram. It has had attractive financial growth in the recent years. It can also consider making new acquisitions. Acquiring technology start ups can help it build a string portfolio of businesses.

Targeting new user segments:-

Facebook has mainly remained the social network of the modern users. However, it can target new user segments. It can target older users too as well as bring additional features for businesses and institutions. While it offers attractive features for marketing, not all kinds of institutions find it much suitable for marketing. It could become a marketing platform of choice given it innovates to suit the needs of all kinds of users.

Threats:

Competitive threat :-

Competitive threat against Facebook has kept rising. Google has got some formidable strengths and the strongest position in the internet industry. It is the toughest competitor that Facebook has to face. Other competitors like Amazon, Microsoft and Apple too hold significant clout that can lead to higher pressure in the social networking platform. Higher competitive threat can shrink the user base of the social media giant. While Facebook has got a large user base, competitive pressure has forced it to make compromises.

Regulatory threat :-

Regulatory pressures on all the internet businesses have increased. From user privacy to data safety and content quality related concerns there are several areas where these brands have been forced by governments to adopt extra transparency and higher accountability.

Operational costs :-

As the size of audience has grown, the operational costs of Facebook have also increased. There has bene a sharp rise in the cost of revenue of the social media business during the previous three years. from 2015 to 2017, its cost of revenue has nearly doubled. Cost of revenue  stood at 2867 million dollars in 2015, and increased to 3789 million dollars in 2016. From there it increased by around 44% or 1.67 Billion dollars  5.5 Billion dollars in 2017. Apart from other things, the increased expenses related to data centres and technical infrastructure has led to higher operational costs for Facebook. Facebook is trying to increase its data centre capacity further which will further increase its operational expenses.

Conclusion:-

Facebook is the leading social media network of the world. However, a series of user data and content related controversies have bothered it in the recent years. An increasing number of user are feeling disenchanted form the social media experience. While the social media experience is considered immersive on the one had, on the other it is also highly addictive. Moreover, fake news, election rigging and other similar challenges are  giving rise to new controversies and troubles. The brand has performed well financially in the recent years. The social media network enjoyed heavy growth in recent years but sometimes growth also brings huge and unanticipated costs. Mark Zuckerberg might not have anticipated earlier that the Cambridge data scandal would take such  form. However, his focus must remain on bringing things back under control and changing the image of his website into a responsible social media network. This would also require higher accountability from the top executives as well as better user and user data management. These scandals have rocked Facebook. However, it still has  large sure base and in the Western Nations especially its audience has remained nearly unchanged. The revenue and user acquisition targets of Facebook have fallen below expectations. However, if we compare the quarterly earnings of the social media brand for the first three quarters of 2018 with the previous year, its financial performance is still better than last year.

Sources:

Abhijeet Pratap

I have studied Marketing and English Literature and like to write on topics in Business management, Marketing, literature, latest technologies and other areas. I also like to spend my time learning coding.