• Embed Doc
  • Copy Link
  • Readcast
  • Collections
  • 1
    CommentGo Back
Download
 
 
MT5007 Management of TechnologicalInnovation
LIM CHING WU LESLIE
 g0603039@nus.edu.sg HT0063039Y
 
Division of Engineering & Technology Management
MT5007 Management of Technological Innovation
2
Introduction 
 In 2004, college sophomore Mark Zuckerberg wanted to build an online version of studentdirectory with basic information, commonly known to schools as face book [1]. Harvard didnot offer such a directory and the administration insisted that they were unable to aggregatethe information required. Thus, one night, Zuckerberg hacked into Harvard’s student recordsand created a basic site called
Facemash
, which randomly paired photos of undergraduatesand invited visitors to determine who was “hotter”. After four hours, 450 visitors, and 22,000photo views, Harvard administration disconnected Zuckerberg’s internet connection and took down the site. However, Zuckerberg continued with this new project as he believed thatinformation should be available to all students. He added applications and expanded thenetworks to other schools, and to work networks such as employees from the
Central Intelligence Agency
,
 McDonald’s
, and the
U.S. Marine Corps
. Eventually in September 2006,Zuckerberg’s social networking website,
 Facebook.com
, was opened to the public.Presently, the site has more than 68 million active users worldwide [2].
 Exhibit 1
in
 Appendix A
shows the population of users worldwide. Based on report by Alexa [3], the site’s trafficranking rose from 60
th
in September 2006 to 6
th
in February 2008.
 Exhibit 2
 in
 Appendix A
,from Wall Street Journal, depicts the monthly growth in number of active users from June2004 to June 2007. In comparison with the rival social networking sites, as seen in
 Exhibit 3
 of 
 Appendix A
, Facebook is ranked 2
nd
in the “
Top 10 U.S. Social Networking Site for  November 2007 
” report released by Nielsen Online. In January 2008, Zuckerberg reportedFacebook’s revenue at US$150 million in 2007 and projected revenue at US$350 million for2008 [4].
 
Division of Engineering & Technology Management
MT5007 Management of Technological Innovation
3This paper examines Facebook’s revenue model and investigates on the factors that led to thecurrent success of Facebook, to understand and illustrate the different technologicalmanagement concepts behind this success. While the emphasis in this case study is on thelessons learnt for a successful innovation, it also briefly discusses the other issues Facebook is currently facing and recommends some future strategies to maintain its competitiveadvantages.
Revenue Model 
There were several funding from venture capitalists since the launch of Facebook. NotablyUS$500,000 from Peter Thiel (co-founder of PayPal) in 2004, US$13 million from AccelPartners in 2005, and US$25 million from Greylock Partners, Accel Partners, MeritechCapital Partners and Peter Thiel.The revenue model of Facebook is based on the following:
•
 
Display advertisements – Example of revenue from this is through outsourcingadvertising deal. Besides the common banner advertisements, Facebook allows usersto make their own advertisements known as
Facebook Flyers
at low prices based onnumber of clicks. These advertisements are filtered according to targets’ gender, age,education status, and regional networks. Direct advertisements accounts for majorityof Facebook’s revenue.
•
 
Sponsorship – This is in the form of homepage sponsored stories and sponsoredgroups. In the former sponsorships, advertisements are displayed in the News Feedsection of Facebook users’ pages which most users pay attention to. The click-throughrates of such advertisements are higher than normal banner advertisements by ten totwenty times. Levels of filtering (such as by gender or location) for targeted users areapplied with a premium. Sponsored groups are groups in Facebook created for
of 00

Leave a Comment

You must be to leave a comment.
Submit
Characters: ...
08 / 19 / 2010This doucment made it onto the Rising List!
You must be to leave a comment.
Submit
Characters: ...