This assignment profiles Facebook and begins by explaining the background of it, its development history, and ownership. Then, it goes on to the business model of Facebook and its ecosystem infographic will be given. In the end, there will be a debate on how Facebook has a political aspect in elections around the world.
Background of Facebook
On February 4, 2004, Harvard student, Mark Zuckerberg and some others founded Facebook (Shiau, Dwivedi & Lai, 2018, p. 53) which is a free social network (Clement, 2020). The users can add people as friends and join any groups of schools, communities, or workplaces (Clement, 2020). They can post photos, videos, and any other updates and share them with their friends and even send messages to them (Clement, 2020) through the instant messaging service, Messenger owned by Facebook. Facebook also owns major social media services such as Instagram, WhatsApp, and Oculus (Clement, 2020). The majority of users maintain communications with others via Facebook and also enhance connections with friends and families by posting photos and sharing links (Shiau, Dwivedi & Lai, 2018, p. 53). Facebook was originally offered to only students at Harvard University to contact one another although it expanded to other Ivy League universities’ students eventually (Clement, 2020). Facebook is now the most popular social media in the world (Shiau, Dwivedi & Lai, 2018, p. 53) that holds 2.5 billion users in 2020 with having India as the top country holds the largest number of users (Clement, 2020). It is available to everyone who is over 13 years old at any time and no matter where they are (Shiau, Dwivedi & Lai, 2018, p. 53). Figure 1 is a pie graph showing Facebook users by age. From the graph, it is clear that each young age group and middle age group accounts for almost half out of the all and the usage of over 55 years old is typically low. Therefore, it can be said that the main user base of Facebook tends to be young generations.
Figure 1: Facebook – Users by Age, Using the Social Media in Iraqi Higher Education, 2017, p. 4
The video below shows how Facebook pages which started as a website and now mostly used as an app have changed.
(Today Youtuber, 2019, “Evolution Of Facebook 2004 – 2020 | Facebook Evolution Of 2004 – 2020 | Facebook Evolution”, YouTube Standard License)
Historical overview of Facebook Development
There would be 2 transformations of Facebook in this part. Firstly, Facebook has evolved to address strategic stakeholder groups using programmability and architectural design. (Helmond, 2019, p. 141). “In particular, its programmability has facilitated multiple developer communities to embed Facebook’s platform and operations in various other domains, including software development, advertising, marketing, content production, and media publishing.” (Helmond, 2019, p. 141). And finally, the platform was originally a social networking website, however, it has evolved into a platform that can be used in many areas of developments of social apps, marketing, and advertising (Helmond, 2019, p. 141).
Secondly, “in terms of its evolving embedding, Facebook has accumulated external dependencies by routing additional technical and business operations and stakeholder interactions through its platform.” (Helmond, 2019, p. 141). Although Facebook used be a company that stands alone, it turned to public holding firms that have shareholders and stakeholders, and then now Facebook holds platforms that offer businesses such as Instagram (Helmond, 2019, p. 141).
Ownership of Facebook
Shares of Facebook are owned by several shareholders (Johnson, 2020a, para 3) and this part introduces the top 3 of them. Firstly, Mark Zuckerberg who is co-founder and longtime CEO of Facebook is the largest shareholder (Johnson, 2020a, para 4). Currently, Facebook’s 400 million shares are owned by him including $82.2 billion of market value (Johnson, 2020a, para 4). “Zuckerberg’s holdings also give him a disproportionate share of voting rights. He controls 57.9% of the total voting shares, giving him effective control of the company.” (Johnson, 2020a, para 4).
Secondly, Vanguard Group Inc. which “is one of the world’s largest investment management companies” (Johnson, 2020, para 5) owns “approximately 184.0 million shares of Facebook with a combined market value of about $37.7 billion.” (Johnson, 2020a, para 5).
Thirdly, BlackRock which “is one of the world’s leading asset and investment management firms” (Johnson, 2020a, para 6) owns “about 158.2 million shares of Facebook with a combined market value of $32.3 billion.” (Johnson, 2020a, para 6).
Business model and research agenda of Facebook
More than 98% and $31.9 billion of Facebook’s revenue come from selling spaces for ads (Cuofano, 2020, para 1) on their multiple social media platforms such as WhatsApp, Instagram, and Messenger that users can connect with others through those (Johnson, 2020b, para 1). And the rest of the total revenue comes from payments and other fees “consists of the net fee received from developers using Payments infrastructure or revenue from the delivery of virtual reality platform devices and others” (Cuofano, 2020, para 6). “Marketers pay for ads based on the number of impressions delivered or the number of actions, such as clicks, undertaken by users.” (Johnson, 2020b, para 10).
Main competitors against Facebook are “Apple Inc. (AAPL), Alphabet Inc.’s (GOOGL) Google and YouTube, Tencent Music Entertainment Group (TME), and Amazon.com (AMZN).” (Johnson, 2020b, para 2). They sell marketers advertising and also offer social network platforms for users to share and connect with each other (Johnson, 2020b, para 2). Although there are other giant companies such as FAANG, Facebook’s business places on the top (Cuofano, 2020, para 8).
Internet ecology of Facebook
The ecosystem of Facebook by Marie Arai
In internet ecology, agents and information technology become mutual relationships that help and influence each other (Looi, 2001). Facebook take a part of the market of the sharing economy such as in freecycling Facebook groups where users post their items and give them away for free (Norbutas & Corten, 2018, p. 115). As a brief explanation for Facebook’s ecosystem, the biggest 10 Facebook’s competitors are Twitter, WeChat, TikTok, Google, YouTube, Microsoft, Amazon, Apple, LinkedIn, and Pinterest (Das, 2019). From the users’ activity data on Facebook platform, their clients, advertisers can target users specific ads and at the same time, regulators are regulating harmful contents, sexual activities, and users’ privacy.
Facebook’s economic and social/cultural aspect
Zuckerberg says that “Today we already see that private messaging, ephemeral stories, and small groups are by far the fastest growing areas of online communication,” (McCracken, 2020, para 3). So, the platforms such as Facebook, WhatsApp, Messenger, and Instagram owned by Facebook would be developed as unified strategy (McCracken, 2020, para 3). Instagram made a successful business as Facebook paid for $1 billion for purchasing the phenomenon of photo sharing and the number of users of 30 million impressively increased within just 1 year and a half (McCracken, 2020, para 17) which leads to significant profit for the company, Facebook. “Years later, Instagram played a decisive role in Facebook’s strategy for staving off Snapchat, which had twice spurned Zuckerberg’s acquisition proposals.” (MacCracken, 2020, para 17). Therefore, it is clear to say that the functions that users demand from the platform are steadily changing and evolving. In that environment, Facebook is developing platforms with new features that meet users’ expectations and enriching their lives and online communication.
Political and regulatory debates of Facebook
👏 4.4 👏 MILLION 👏
That's how many people we estimate we've helped register to vote so far this year across Facebook, Instagram and Messenger.
With only a week left until Election Day, make sure to plan your vote if you haven't already. A vote counted is a voice heard! ✉️🗳 pic.twitter.com/S7qM0QJY5Z
— Facebook (@Facebook) October 26, 2020
Facebook, [@Facebook], Facebook’s political campaign on Twitter, Oct 27, 2020, Retrieved from https://twitter.com/Facebook/status/1320803587983699968?s=20
Election Day is almost here. Are you ready? Check to make sure you have everything you need. For official information from election authorities, visit the Voting Information Center at https://t.co/7aUSFllpTy pic.twitter.com/o0sde4rH18
— Facebook (@Facebook) November 2, 2020
Facebook, [@Facebook], Facebook’s political campaign on Twitter, Nov 3, 2020, Retrieved from https://twitter.com/Facebook/status/1323329677927227393
From the tweets by Facebook, it is clear that they have been involved in political aspects as the company pushed voters to participate in voting. As a result, the video says that 4,400,000 voters have registered through Facebook, Messenger, and Instagram. Therefore, elections benefit from getting more votes and Facebook for contributing to political aspect and getting a high number of accessing and reaching to those platforms.
“Political advertising on Facebook is the latest in a long line of developments in campaign practice, and is a tool that has been mobilised extensively in elections around the world.” (Dommett & Power, 2019, p. 257). These years, by using different ways, Facebook has been playing such an important role in elections in many countries such as Australia, United Kingdom, Ukraine, Brazil, and especially the United States (Dommett & Power, 2019, p. 257) for winning of candidates (Khairuddin, 2017, p. 345) and Facebook has become such an arena for political communications (Bene, 2017, p. 513). According to Khairuddin (2017, p. 345) it tends to be high possibility to win for candidates when campaigning by advertising on social media including Facebook. Out of the different ways, the rapid increase and cultivation of Facebook advertising have become the most significant (Dommett & Power, 2019, p. 257). In many countries, it is allowed for Facebook to play a role in election campaigns such as “political advertising and micro-targeting” (Dommett & Power, 2019, p. 257), although candidates of election only used Facebook for creating their pages before (Dommett & Power, 2019, p. 257). “Through their followers’ reactions, politicians’ messages can reach many voters” (Bene, 2017, p. 514). Dommett and Power (2019, p. 257) give a great example of the U.S. President, Donald Trump who uses political advertising on Facebook as Figure 4 shows below.
Figure 4: Screenshot of President Trump political advertising on Facebook Ad Library page – Marie Arai
The new platform was offered by Facebook that could be consumed for targeting advertising while it is impossible for clients to identify the exact users’ personal information rather they are allowed to use filters for categorizing such as users’ locations and their interests (Dommett & Power, 2019, p. 257).
“It has been reported that at the US midterm elections ‘Digital media campaign spending rose 2,400 percent from the 2014 midterms to $1.8 billion, roughly 20 percent of the total $8.9 billion in ad spending’.” (Dommett & Power, 2019, p. 258).
Brader (2005, p. 388) finds “that political ads can change the way citizens get involved and make choices simply by using images and music to evoke emotions”. Therefore, political ads on Facebook negatively influence users voting decisions. So, there should be regulations for political advertising and campaigns to not affect elections. In fact, Facebook took a significant step in the 2020 US presidential election. In October 2020, Facebook has announced that they will be banning all the ads relating to politics on the platform during the election (Stewart, 2020, para 1) “to reduce opportunities for confusion and abuse” (Stewart, 2020, para 2). While this regulation of Facebook seems effective and “they’re better than doing nothing, they are also too little, too late.” (Stewart, 2020, para 4). The regulation allows politicians to lie in advertising and micro-targeting small group voters as a political campaign (Stewart, 2020, para 5). And it is even reported that some ads related to elections were detected as active Facebook political ads in their ads library (Graham, 2020, para 1). Therefore, it is clear that Facebook’s ban is still not working enough and they need improvements to have more strict censorship for this.
Facebook has been suggested as the biggest giant tech and advertising sector play an extremely important role in their business model and economically. And it has developed significantly as they provide multiple fields, social apps, marketing, and advertising. Facebook functions as each element in the ecosystem are supporting and influencing each other in the mutual relationship. Facebook joins in the political aspect as they influence elections and have many political ads which often affect users’ voting decisions so that Facebook needs to make the regulations more strict as their current banning is often not working.
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