Facebook Inc.

Phase #2
Course MKTG361, Section 2
March 20, 2019

Team #64
Neil Aoun
Zachary Fetter
Fernnie Garcia
Brandon Hahn
Justin Im
Alec Vedder
Intro
The purpose of this report is to give an overview of the current status of Facebook, it’s
positioning within the broader industry, and key marketing issues and strategy. More
specifically, the report includes a brief background of the company, an outlook on the industry,
details of current marketing challenges and potential strategies to enter new markets, and a deep-
analysis of competitors already operating in those target markets.

Company Overview
Facebook is a social media platform designed to allow people to connect with others and share
content. Facebook Inc. was founded in 2004 by Harvard dropout, Mark Zuckerberg. The
company has quickly grown to become a dominant player in social media. According to
IBISWorld, Facebook currently owns a 36% market share in the Internet Publishing and
Broadcasting Industry, NAICS code 51913b (Hadad, 2018).

The internets publishing and broadcasting industry is still in the “growth” phase; expected to
grow at an annual rate of 14.1% from 2018-2023, a small uptick from the 13.7% annual growth
rate from 2013-2018. As a market leader, Facebook’s dominant 36% market share makes it well-
positioned to take advantage of the growing industry. Its top competitors in this segment include
Alphabet Inc., Netflix Inc., and Apple Inc., with market shares of 26.3%, 11.7%, and 10%,
respectively (Hadad, 2018).

Facebook’s current portfolio of products includes Facebook, Instagram, and WhatsApp.

Together these products generated $55.8 billion in revenue for the fiscal year 2018 (Facebook
Inc, 2019). Facebook’s main product is its own platform, synonymous with the company’s name.
Other products including Instagram, a photo-sharing platform, and WhatsApp, an encrypted
messaging application, face stiff competition from other media and technology companies
outside of the narrowly-defined internet publishing and broadcasting industry.

These companies include Twitter, LinkedIn, and Google. While Twitter, LinkedIn, and Google
share some of the same features of Facebook, Facebook has more universal applications and
appeals to a broader base of users. For example, Twitter might appeal mainly to millennials just
as LinkedIn mostly attracts young professionals. Facebook’s value proposition and competitive
advantage over it’s largest competitors can be ascribed to it’s appeal to a broad demographic.

The industry is also shaped by current seasonal trends and environmental forces as seen in the
SWOTT attachment (Table 1). One of the largest external threats facing the industry is the
increasing regulations being proposed and drafted into law by governments across the world,
such as the new GDPR regulation in Europe. Being wary of these challenges both external and
internal, Facebook must be careful to navigate a strategy that takes these into consideration.
Strategy
Facebook can leverage its strengths, such as its sheer size, to capitalize on new opportunities and
markets. In order to do so successfully, Facebook needs to address its internal issues revolving
around data privacy while also navigating around external threats such as new regulations and
malicious hackers (Table 1).

Target Markets and Competitors (Table 2)

The three primary target markets have been segmented based upon age, geographic location, and
income. These markets will be broken down into greater detail in order to better understand the
scope of the markets. However, there is one consistency in all the segments and this is
geographic location, which is the United States. This is because based upon Figure 2, the United
States average revenue per user is more than three times the next country and the majority of the
users in the country have internet access. Additionally, the top three competitors will be
discussed in this section. This information can be used in order to gain greater insight into the
behaviors and wants of the users that Facebook targets. It will also allow the reader to better
understand our competition and why their product is different than ours.

Primary Market and Competitor

The primary market for Facebook is anybody living in the United States, between the age of 18-
34, with an median income of over $40,000 (See table 2). This group is estimated at a population
of 48.9 million (Garcia, 2018). This market is valuable to Facebook because this age group
knows a lot about common technology and understands how to use it. Also, they have the
income to purchase the devices needed in order to access this platform. Facebook, has direct
access to this market through its ability to address the wants and needs to users within this
segment. These needs and wants can come in two main forms. The first is the ability to connect
to friends and family members. The second is having the capability to post photos, videos, and
other media on the social media platform (Ayyar, 2014). These two things combine to prove that
this market is the best target market for Facebook.

One company that threatens to take away the primary market from Facebook is its primary
competitor, Twitter. Twitter is a social media company that is very similar to Facebook which is
why is it such a threat. However, there is one major difference between the two companies.
Twitter is much more focused around real-time events and conversations (“Twitter Company
Details”, n.d.). Another factor of Twitter that makes it such a threat is the fact that they own a
mobile-focused advertising company, MoPubs Advertising Solutions which is the world's largest
mobile advertising server (Gorton, 2018). MoPubs gives Twitter a distinct edge over Facebook
in its ability to reach the primary target market on the mobile platform as most people within this
segment have smartphones.

Secondary Market and Competitor

Facebook’s secondary target consists of 35-54 year olds in the United States that have an
estimated income of $78,000 (See table 2) (Garcia, 2018). In the social media market, Facebook
holds 70% of it and LinkedIn hold’s 10% as seen in Figure 1 (IBISWorld). This makes LinkedIn,
a big competitor for Facebook due to the fact that LinkedIn’s platform allows user connections
all over the world. However, LinkedIn is primarily used for professional use, which correlates
with our secondary target market as they are typically professionals with established careers.

One trait that makes LinkedIn a big threat to Facebook is that they are extremely similar in the
visual and overall mission. Which brings up the concern that people will be more inclined in
using LinkedIn rather than Facebook, as our target market may think it is more important to have
a professional page to connect with colleagues than a Facebook account (Schaffer, 2019).
However, Facebook is still the largest social media platform and has about one billion users as
opposed to the over 500 million users that LinkedIn has (Gallant, 2017 & Facebook, Inc. 2019).

Tertiary Market and Competitor

As for the tertiary market, Facebook targets older individuals 55 years and above with an income
upwards of $41,000 and an estimated population of 23.8 million (See table 2) (Garcia, 2018).
Contrary to the primary market group, this age group is more incline with basic communication
features let alone those provided on the Facebook platform. Although this class of baby boomers
is able to afford the devices needed to access the company’s platform, the lack of proficiency in
modern technology strays them away from the ease of use provided from Google and its
extended features.

Facebook holds the highest percentage in the social media market, however other surrounding
platforms have been competing for the reign. In addition to Twitter and LinkedIn, Google has
also played as a key threat towards Facebook. Already being the world's biggest search engine,
Google has also entered the social network realm with the development of Google+. Although
the platform allowed for its users to share and connect with friends, colleagues, and family,
“launched with so much promise of being a viable competitor to Facebook, Google+ ended up as
a social media platform with a declining user base” (Si, 2019).

Marketing Issues
This section will discuss the three marketing issues that Facebook is facing, with three examples
and solutions for each issue. The three marketing concerns is that is is not appealing to younger
generations, ad saturation, and not promoting a safe and secure setting for the user. There is a
simplified marketing problems figure (Table 3) that has each example and each solution.

Not Appealing to the Younger Generations

Facebook currently has 2.2 billion monthly active users, and it’s getting very difficult to continue
growth in number of users. Despite the odds, they have continued to grow by over 10% year
after year. However, the biggest issue that Facebook faces is keeping its users engaged. A recent
survey showed that only 15% of teenagers consider Facebook as a valuable social media
network. This is down from 68% in 2012. To go along with this, only 51% of users aged
between 13-17 even use Facebook anymore compared to 85% on youtube and 69% on Snapchat
(Solon, O. 2018). User engagement is a crucial aspect in Facebook's business model, because the
more time people spend on the application the more likely they are to click on or view an
advertisement. (Niu, E. 2019)

Examples
People have been spending more time on rival social media platforms such as twitter and
snapchat.(Solon, O. 2018). Secondly, the Facebook platform is becoming outdated and less
appealing to the younger generation. (4 Reasons Why Facebook Has Lost Young People
Forever). Lastly, the younger generation shuns the fact that Facebook is increasing in popularity
with older people (Solon, O. 2018).

Solutions
The younger generation wants a more creative platform for them to be able to express
themselves freely and connect with their favorite brands and celebrities. Facebook needs to add
more features geared towards a younger audience such as personal stories, adding a “follow”
button on people's profiles, and allowing more interaction between platforms. See table 3.

Ad Saturation
A second key marketing issue that Facebook is facing is that they are creating an ad load
saturation. Ad load saturation is where the users’ app is flooded with ads to the point that
Facebook can’t add more ads to the feed without jeopardizing the loss of the user. Over time
Facebook has continually been able to increase the price of advertisement that businesses are
willing to purchase space. Since Facebook is increasingly approaching the equilibrium of
demand for advertisement and the amount businesses are willing to pay, soon Facebook will
begin to lose businesses for advertisements.

Examples
Users feeds are being filled with ads on products and political areas. It has been reported that
Facebook’s list of ads on people's feeds are partial bias towards the liberal point of view (Byrnes,
2016). Small companies that are looking to promote on big tech websites are switching to
Amazon over Facebook because Facebook has too many ads and not enough room on the
platform for them to be advertised efficiently (Bercovici, J. 2018). Facebook has also had issues
with large concentrations of fake advertisements that enter the platform, Facebook has failed to
prevent fake ads from entering its platform which force more ads to be entered into the algorithm
(Lomas, 2018).

Solutions
The first solutions to fix ad situation is by letting the users select which ad they would like to
view from a selection. This would make users happier with ads and to stay on the app longer.
The second solution is ads have to wait 6 days after being used to be thrown back into the ad
cycle so that different ads show up on users feeds. The last solution is to improve the targeting
system for ads so that users get ads more appropriate to them and increase their usage on the app.
See table 3.

Not Promoting a Safe and Secure Environment for Users

The issue that Facebook is currently having with security and privacy is causing business users
and regular consumers to change social platforms when it comes to promoting ads and viewing
ads. In this day and age, privacy and security is a key aspect for users social media usage.
Facebook has put in money to revamp its security but has also failed to let consumers worldwide
know about this fix. Parents are also not giving approval for their children to be on the Facebook
platform due to the privacy breaches. Countries are also taking action but implementing bills so
that their users are protective.

Examples
Some examples that depict this marketing issue is the General Data Protection Regulation.
(GDPR) was implemented to safeguard against big tech companies to prevent the collection of
private data within the European Union (The EU, n.d.). In addition, the implementation was to
limit the selling of users’ data to Facebook's partnered companies, which is an abusing
power.(Laforgia et al. 2019). Lastly, when the United States gave their first lawsuit to Facebook
in response to the Cambridge Analytica in 2018(Romm et al. 2018).

Solution
There are three main solutions that can fix the issue of not promoting a safe and secure
environment. The first one is an opt-in strategy for the entire company in response to the General
Data Protection Regulation and India’s Data Protection Bill. The second solution is to have
Facebook delete its data after it is collected and used by the company, making the users feel
safer. The third solution is for Facebook to add more data security personnel so that security
breaches and the selling of data is prevented. See table 3.

Conclusion
Facebook is a huge player in the social media market. With major competitors such as Twitter,
LinkedIn and Google, it is crucial that Facebook maintains a good image in the public eye. By
addressing the marketing issues that appeals to new generations, too much ad saturation and
promoting a safe and secure environment, Facebook will be able to retain users and gain new
users in the future. It is important for Facebook to continue to make strides by trying different
solutions for each issue to see which ones fit the majority of users.

Attachments
Table 1: SWOTT Analysis

Strengths: Weaknesses:
 -Dominant market share -Data privacy issues
-Near monopoly
-Well-known globally

Opportunities: Threats:
-Target individuals 18-34 in the US -Growing competition from Twitter, LinkedIn,
-Individuals aged 35-54 Google
-Older individuals aged 55+ -GDPR

Trends:
-Increasing regulations
-Increased awareness around privacy

Table 2: Target Markets

Target Markets Primary Secondary Tertiary

Description Young individuals Middle-aged Older individuals

with the means to individuals looking to seeking to share
purchase a device to connect with family, photos and videos
access our platform, friends, and with friends and
who is looking for a colleagues personally family
way connect with and professionally.
friends and family

Size of Market (Millions) 48.9 38.9 23.8

Household Income $40,000+ $78,000+ $41,000+

Age 18-34 35-54 55+

Geographic (Country) United States United States United States

Figure 1: Market Share of the Social Media Industry

Attachments
 Table 3: Marketing Issues
Issue Example 1 Example 2 Example 3 Solution 1 Solution 2 Solution 3

Not social media Outdated Platform: Gaining popularity Stories more Making the More
appealing to rivals: Facebook Facebook forces the with an older age available to following interactivity
younger is losing users to user to have a single group: This makes use button so between
generations younger geared identity, lacking in the platform uncool there's more platforms on
social media creativity and and ill-favored with interaction facebook app
platforms freedom for its users younger
generations

Ad saturation Ads are Companies Failure to prevent Users choose Ads have to Improve the
discriminating switching platforms fake ads from which ads wait 6 days targeting ad
users on a biased for promoting their entering its they watch after being system to
algorithm ads platform out of a used to be increase the
selection reused usage of apps

Not GDPR: Recently Selling data: A lawsuit from the Opt-in Force Adding more
promoting a implemented by deteriorating US: Due to the strategy-Full Company to data security
safe and the EU to parents approval on Cambridge transparency delete data personnel
secure protect the users' social media, and Analytica breach throughout over time
environment private making users feel that involved 87 the company and not sell
for users information abused by the power million users to outside
of large companies accounts businesses

Figure 2: Average Revenue Across the world by Quarter 4

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