great case study for both students and professionals to learn from, since it shows many of the success factors needed for a new start-up, including the risks of alienating users when their privacy needs are not listened to.


Facebook's value proposition

In 2013, the Facebook mission is simply to 'make the world more open and connected'.

Previously, it described itself as:

'a social utility that helps people communicate more efficiently with their friends, family and coworkers. The company develops technologies that facilitate the sharing of information through the social graph, the digital mapping of people’s real-world social connections. Anyone can sign up for Facebook and interact with the people they know in a trusted environment'.

You almost certainly know the story behind how the Facebook value proposition developed from watching the 2010 film The Social Network? It describes how Facebook was founded while Mark Zuckerberg was a student at Harvard University - initially for limited Harvard student membership. The initial viral effect of the software was indicated since more than half of the undergraduate population at Harvard registered on the service within the first month!

he film also describes the long-running dispute on the ownership of Facebook since another Harvard-originated social networking site ‘HarvardConnection’, which later changed its name to ConnectU, alleged in September 2004 that Zuckerberg had used their source code to develop Facebook when they originally contracted him to help in building their site.

When Facebook first launched in February 2004, there were just three things that users could do on the site which are still core to the functionality of the site.

  • 1. Users could create a profile with their picture and information.
  • 2. View other people’s profiles.
  • 3. Add people as friends.

Core Consumer Benefits

The latest Facebook SEC update explains these core consumer benefits defined by the company:

  • Connect and Share with your friends. Staying connected is the core feature as we would expect, but note the more emotional underpinnings of the other elements of the value proposition.
  • Discover and Learn. Facebook references public figures and organisations that interest them – available through Facebook company pages.
  • Express yourself. A fundamental need and Facebook does this through it’s key features which it describes as the Timeline, News Feed, Photos and Videos and messaging through Email, Chat and Text.
  • Stay connected everywhere. Referencing the importance of mobile use and use on other sites to Facebook’s users and business model. People can access Facebook through the website, mobile sites, smartphone apps, and featured phone products.

Value proposition for marketers and businesses

Facebook works hard to monetise its audience particularly since it held its initial public offering (IPO) on May 18, 2012. This was the biggest IPO for an Internet company, with a peak market capitalization of over $104 billion. Facebook describes its offer to businesses as...

'Marketers can engage with more than one billion monthly active users on Facebook or subsets of our users based on information people have chosen to share with us such as their age, location, gender, or interests. We offer marketers a unique combination of reach, relevance, social context, and engagement to enhance the value of their ads'.

Commercial companies or Not-For-Profit organizations can also create their own Facebook Pages for their company (currently free). Facebook users can then express their support by adding themselves as a fan, writing on the company Wall, uploading photos, and joining other fans in discussion groups. When users become fans, they can optionally agree to be kept up to date about developments which then appear in their news feeds.

Facebook's revenue model

Facebook has an ad-based revenue model. Some of the features of Facebook Ads  include:

  • Targeting by age, gender, location, interests, and more.
  • Alternative payment models: cost per click (CPC) or impression-based (CPM).
  • Trusted Referrals’ or ‘Social Ads’ – ads can also be shown to users whose friends have recently engaged with a company’s Facebook page or engaged with the company website.

Promises from Facebook at launch

At the time of the launch of ads, the Facebook blog made these comments, which indicates the delicate balance between advertising revenue and user experience. They said, first of all, What’s not changing?:

  • Facebook will always stay clutter-free and clean.
  • Facebook will never sell any of your information.
  • You will always have control over your information and your Facebook experience.
  • You will not see any more ads than you did before this'.