COMPANY OVERVIEW Facebook Inc.

is a social network platform, which enables users to share ideas, opinions, pictures and activities. The company primarily operates in the US and has presence across the world. Facebook is headquartered in Melno Park, California and employed 3,539 people by the end of March 31, 2012. The company builds products that support social networking and provide utility to its users, platform developers, and advertisers. Facebook users utilize the companys products to stay connected and share content. Developers use the Facebook platform to build applications and websites that integrate with Facebook. Advertisers use the companys products to engage with users on Facebook or subsets of the companys users based on certain information such as age, location, gender, or interests. Facebook had 901 million monthly active users and 526 million daily active users on average in March 2012. Facebooks products for users are centered on building the tools that enable users to connect, share, discover, and communicate with each other. The companys products for users are free of charge and available on the web, mobile web, and mobile platforms such as Android and iOS.

COMPANY HISTORY Facebook has come a long way in eight years. What started as a social network exclusively for Harvard students has quickly evolved into a global phenomenon rapidly approaching one billion active users. Beyond personal use, businesses have deemed Facebook an important way to reach current and potential customers. Facebook was founded by Mark Zuckerberg with his college roommates and fellow students Eduardo Saverin, Andrew McCollum, Dustin Moskovitz and Chris Hughes. In October 2003 Harvard student and coding whiz Mark Zuckerberg created Facemash and nearly got expelled for his efforts. In January 2004, Zuckerberg started writing code for a Harvard-only social network, which launched in February 2004 as "thefacebook." Soon after, three Harvard seniors accused Zuck of tricking them into thinking he would help them create a social network called HarvardConnection.com. Subsequent lawsuits were settled, and the major players involved became fabulously wealthy. Facebook proved an instant hit at Harvard and soon expanded to more universities across the United States and Canada. In 2005 it expanded to high schools and employees of select companies, including Apple and Microsoft. The following year the site opened its doors to everyone at least 13, and Facebook as we know it today was born. The social network had 12 million users by December 2006. No longer a private club, Facebook quickly attracted users of all ages. Between August 2008 and April 2008, the social network doubled its number of active users from 100 million to 200 million. Using Ben Mezrich's 2009 book

The Accidental Billionaires as source material, director David Fincher and screenwriter Aaron Sorkin crafted "The Social Network," which was released in 2010. By the end of March 2012, Facebook claimed more than 900 million monthly active users. Facebook launched its initial public offering in May 2012 and the stock traded in NASDAQ under the FB symbol from the same month. Strengths Strong market position provides favorable competitive environment Facebook enjoys formidable position in the industry it operates in. Among the social networking sites, Facebook enjoys strong market share of visits. According to the industry estimates, the company had 63.2% share of visits in March 2012. Its nearest competitor YouTube had 20.3% share while Twitter had a mere 1.7% share. The company has successfully displaced many of its competitors. Facebook overtook several rival social networks including Bebo in the UK, Friendster and Myspace among others. Facebook enjoys a leading position in the US online display advertising market, which includes spending on online video, sponsorships and media advertisements. The industry estimates indicate that, Facebooks share of overall US display ad market revenues grew to 14% in 2011, up from11.5% in 2010. The company commands a high share of visits which indicates the popularity of the Facebook products. The company gained significant share in the market while the companys competitors are yet to build a product with such compelling success rates. Facebook enjoys unprecedented reach Facebooks extensive reach enhances its appeal to its key client group of advertisers. The company provides unprecedented reach with 900 million monthly active users, a significant increase form one million users in 2004 In 2011, Facebooks penetration was 66% of the internet users in the US. During the same period, the companys penetration among the internet users in Europe stood at 46%, in Asia (excluding China) was 42% and in the rest of the world it was 47%. These users are also very active considering they account for one in every seven minutes spent online around the world. Facebook's users spent an average of 8.3 hours on the network per month, per person which adds up to 23 minutes per day. The companys reach is a non replicable competitive advantage that can be leveraged to enhance appeal for the advertisers. Facebook effectively offers relevance, social context, engagement which provide unique and huge prospects The company supports offering relevance, social context and engagement to the advertisers. Facebook has a large amount of data which facilitates targeted marketing. The company enables the advertisers to offer relevant advertisements. Leveraging its user base, Facebook allows advertisers to

select relevant and appropriate audiences for their ads, ranging from millions of users in the case of global brands to hundreds of users in the case of smaller, local businesses. The companys rich data set is extremely difficult to replicate providing it with sustainable competitive advantage.Facebooks ability to offer relevance, social context, user engagement and authentic identity will facilitate increased effectiveness of advertisements. Strong revenue growth, profitability and cash flow Facebook has over the years recorded strong growth rates compared to its peers. The companys revenues in FY2011 grew by 88% compared to FY2010. The revenue growth rates highlight the companys inherent ability to drive growth, Facebook being the market leader with strong potential in a relatively underpenetrated market of social network advertising. Facebook also enjoys strong cash flows. The companys operating cash flow margin in FY2011 was 41.7%. The companys high cash flow generation capability indicates that the company enjoys high financial flexibility. The companys free cash flow position enables it to invest in expansion inorganically. Facebook will be able to fund its expansion plans at feasible rates. Weaknesses Slow to monetize the mobile user base Facebook has significant presence in the mobile segment. However, the company is yet to come up with strategy to monetize its use base. Of the 845 million MAUs as of December 31, 2011, about 432 million were mobile users. However, Facebook does not display ads through its mobile interface and therefore the large user base is unexploited. The companys prime competitor Google has been able to drive growth through this segment. The company suffers a huge competitive disadvantage and as its users access Facebook through mobiles, the companys revenues are likely to be negatively impacted. Low effectiveness of ads will impact the revenues Facebooks ads are yet to be proved for effectiveness due to the inherent business model that the company adopts. Google is well poised to capture the online ad market which Facebook significantly lacks in. Facebook relies on display ads which are known to generally hurt the user experience, and are not as efficient at producing revenues. Facebook has positioned itself as a platform for socializing with friends. This aspect reduces the effectiveness of advertising in Facebook. The questionable effectiveness of Facebook ads was also highlighted by the most recent announcement by General Motors dropping its paid ads on Facebook primarily because the ads were not effective. Earlier, several other retailers such as Gamestop to JC Penney withdrew from Facebook. Litigations Facebook is involved in several litigations. In 2011, 22 lawsuits were filed against the company for patent infringement which was double the number in 2010. One of the lawsuits alleges that Facebook violated a patent that covers

the core ability to transmit messages to large networks of users. Facebook faces more patent cases than any of its peers like Groupon and LinkedIn. In addition to the patent infringement claims, the company is also involved in a class action law suit filed regarding protection of users privacy. Regarding the collection of user information, the company was sued multiple times. Several of these law suits seek large amounts of punitive damages which will have an impact on Facebooks operating results. Furthermore, these lawsuits also seek injunction to halt Facebook at least temporarily. If Facebook is required to comply with these, the companys reputation and operations could be severely hampered. The law suits in addition to exposing the company to contingent liabilities also have a negative impact on the brand image. Opportunities Robust growth in online display advertisement spend The online display ad spend is estimated to increase at a robust pace. According to the industry estimates, the current global display advertising market is predicted to reach $25.27 billion in 2012 and is estimated to reach $34.4 billion in 2013. The estimates further indicate that the online display advertisement market is witnessing fastest growth rates compared to other types of advertising. Facebook.com has been the leading online property accessed through personal computers worldwide as measured by total minutes spent and total page views. Display advertisers also use Facebook in order to more precisely reach their target audiences among the users and to leverage social context and social distribution channels to increase engagement. Payments provides a diversified opportunity Facebooks payments revenue stream will provide diversification as the market for the same is estimated to increase. Payments transactions between Facebook users and Platform developers are for virtual goods used in social games, for example virtual tractors in the social game FarmVille. According to industry estimates, the worldwide revenue generated from the sale of virtual goods on social networking sites, online worlds, and casual games was $9 billion in 2011, and is forecasted to increase to $14 billion by 2016. Payments integration is currently required in apps on Facebook that are categorized as games, and the company seeks to extend the use of payments to other types of apps in the future. Threats Substitution of PC usage with mobile usage Facebook is yet to come up with monetizing its mobile user base. Meanwhile, the users are replacing the use of PC for accessing Facebook with mobile phones at a fast pace. Facebook has not shown ads to users accessing Facebook through mobile apps or mobile website. The number of ads that Facebook delivers to users and its revenue may be negatively affected unless and until the company is successful with monetization strategies for mobile usage of Facebook as ads are not shown on mobile apps or mobile website substitutes. Therefore, as the PC substitution continues to increase, it could lose appeal to the advertisers.

Privacy concerns Users and governments have been expressing privacy concerns which could harm the companys strategy to use user information to deliver effective advertisement. While the class action law suit filed against the company could potentially imply damages of more than $15 billion if successful, the claimants could stifle Facebook's ability to collect data about its users and hinder its ability to grow advertising revenues. Excessive advertising or privacy fears could lead to a mass exodus of users, which threatens the growth prospects. Exposure to mature markets Facebook is already reaching maturity among a large part of the user base. The company will have to come up with aspects that could further enhance engagement. Furthermore, monetizing current users beyond a certain point could hurt the user engagement. Facebooks potential to expand into other geographies is questionable, considering several local oriented social networks already in place. China in particular, where Facebook has so far been banned, has many thriving social sites, as does Russia with VKontake claiming about 290 million users. Facebooks impending saturation in its key market coupled with the hurdles that the company faces with effective expansion into other countries limit Facebooks growth opportunities.

BIBLIOGRAPHY http://en.wikipedia.org/wiki/Facebook http://blog.trejdify.com/2012/02/swot-analysis-is-facebook-good.html http://www.iandavidchapman.com/ http://blogs.msdn.com/b/arpans/archive/2007/10/14/is-your-face-onfacebook.aspx http://www.alexa.com/topsites http://www.facebook.com/press/info.php?statistics http://talkfinanceonline.com/swot-analysis-of-facebook/ http://www.informationweek.com/security/privacy/facebooks-history-fromdorm-to-ipo-darli/240000615 www.marketlineinfo.com