Facebook has experienced significant growth in its workforce, with a 50% increase in the past year, currently employing nearly 4,000 people. The number of monthly active users has also risen by 29%, reaching a total of 955 million users. However, challenges are present for Facebook. They have incurred an overall net loss of $157 million and their initial public offering (IPO) was disappointing due to technical glitches and high expectations. Furthermore, their costs and expenses have nearly tripled from last year to $1.93 billion, primarily due to spending $1.3 billion on stock-based compensation and related payroll expenses. Consequently, Facebook is struggling to meet the expectations of its investors.
But despite these weaknesses, there are opportunities for growth as well. Facebook plans to continue investing aggressively and focus on promoting their “sponsored stories” ad product which allows advertisers to pay for broadcasting their brand when a user’s friends “like” it. Additionally, creating the social layer is considered one of Facebook’s biggest opportunities.
However, there are threats that need addressing by Facebook too.
The shift towards mobile technology is impacting Facebook’s payments business, which contributes around 16% of their total revenue, because users prefer playing mobile games with fewer payment options instead of using Facebook’s website. Additionally, the growing use of mobile devices for accessing the social site instead of PCs has resulted in a decline in ad views. Moreover, there are concerns about the effectiveness of ads on Facebook’s platform. In today’s business environment, the SWOT method is an effective way to assess an organization’s overall well-being. By utilizing this approach, I can focus on Facebook’s current challenges and evaluate both internal and external factors impacting the company. Essentially, this method provides a foundation for creating a strategy that allows us to optimize strengths and opportunities while determining the future direction of the organization.
Facebook’s workforce has increased by 50% in the past year, totaling almost 4,000 employees. This growth indicates that the company is thriving and confident in overcoming its current challenges. It is worth noting that despite being well-established with a large user base, Facebook is still relatively young and expanding. Therefore, this rapid growth showcases its ongoing progress despite experiencing a decline following its IPO.
The article highlights the remarkable expansion of Facebook’s monthly active users, which has risen by 29% in the past year and currently sits at 955 million users. This demonstrates that the company is consistently drawing in new users, which continues to be their main objective. Mr. Ebersman, Chief Financial Officer of Facebook, emphasizes the importance of maintaining focus on the fact that the company has not changed its fundamental principles. However, weaknesses have arisen since Facebook’s initial public offering (IPO) in May.
Facebook has incurred a net loss of $157 million, equivalent to 8 cents per diluted share, since its IPO. The main reason for this substantial loss is the operational failures of Nasdaq, which resulted in incorrect trades worth tens of millions of dollars for Facebook and UBS Financial Services. Consequently, the overall value of Facebook has significantly declined. Moreover, stock-based compensation and related payroll expenses have further affected the company.
Zacks reports that Facebook’s costs and expenses have surged by threefold from the previous year, reaching a total of $1.93 billion. Stock-based compensation and payroll expenses account for the majority of this increase, totaling $1.3 billion. One major factor contributing to the company’s internal weakness is a 50% rise in staffing compared to the prior year. Additionally, Facebook is currently facing difficulties in meeting investor expectations.
To tackle this issue, significant endeavors are being made by Facebook to persuade advertisers that advertising on their social network continues to be highly effective and profitable.
If Facebook fails to meet the expectations of marketers, they will face a significant loss of business from their already skeptical clients. General Motors Co. withdrew $10 million worth of ads from Facebook in May, stating that there was no evidence of increased car sales resulting from the ads on the site. This withdrawal is currently one of Facebook’s major vulnerabilities and has contributed to its recent steady decline.
Opportunities: Facebook is poised to maintain a proactive approach towards investment, as indicated in the SWOT analysis table. By staying updated on investment trends and capitalizing on opportunities like the Asia–Pacific Gateway and the “underwater fiber optic cable,” Facebook can contribute to enhancing internet accessibility for various Southern Asian nations and their use of the platform. (Ludwig) Additionally, Facebook is intensifying its endeavors to popularize the “sponsored stories” advertisement feature, where advertisers can pay to promote an ad when a user’s friend expresses affinity towards a brand by liking it.
Facebook is able to generate revenue through sponsored stories, where users “like” something, resulting in a $1 million a day annual run-rate. The social media platform is also focused on creating a social layer that allows access to information from various enterprise applications. However, Facebook’s mobile application poses a threat as it impacts the growth of its payments business. The company is facing a decline in ad views due to users accessing it more on their phones than on personal computers. Additionally, doubts regarding the effectiveness of ads on Facebook’s site have become a significant threat.It is reasonable for people to question whether advertising on Facebook is effective or not. However, this skepticism poses a significant risk, and resolving this issue promptly is crucial for Facebook’s turnaround.
Works Cited
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Eldon, Eric. “Facebook’s ‘Sponsored Stories’ Ads On $1 Million Daily Run-Rate, Half From Mobile.” TechCrunch. TechCrunch, 26 July 2012. Web. 10 Sept. 2012. <http://techcrunch.com/2012/07/26/facebooks-sponsored-stories-ads-on-1-million-run-rate-half-from-mobile/>.
Ludwig, Sean. “Facebook Invests in Underwater Fiber Optic Cable to Fish for More Asian Users.” VentureBeat. VentureBeat, 5 July 2012. Web. 10 Sept. 2012. <http://venturebeat.com/2012/07/05/facebook-asia-underwater-cable/>.
Lynch, Christopher. ReadWriteWeb. Rep. Socialtext, n.d. Web. 12 Sept. 2012. <http://www.readwriteweb.com/reports/social-layer>.
Yarow, Jay. “Here’s One Of The Biggest Risks To Facebook’s Business That Gets Overlooked.” Business Insider. Business Insider, 27 June 2012. Web. 13 Sept. 2012. <http://www.businessinsider.com/facebooks-payments-revenue-2012-6>.
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