What is Facebook? Since 2004, Facebook has grown from a website that provides personal information for people in universities to make friends with each other to one of the most influential and largest companies in the whole world. It now has billions of users and influences the global political landscape. With a privacy-focused direction, Facebook will support instantaneous encrypted and private communication rather than profitable news feed and public sharing.
There are four parts of this essay. First of all, this essay will illustrate the historical development of Facebook. Then, the second and third part are about Facebook’s business model and ecosystem separately. The last part will cover the transformative impact of Facebook.
The historical development of Facebook
There are four stages of Facebook’s development. The first stage was from 2004 to 2006. On 4 February 2004, Facebook was founded as the Web service by Mark Zuckerberg, Chris Hughes, Eduardo Saverin and Dustin Moskovitz. It is like an online directory that brings people together by social networks at universities and colleges(Brügger, 2015).
(Facebook in 2004, by Gonzoonews, CC BY 2.0)
In the second stage, Facebook made a rapid and strong extension from 2006 to 2008. First of all, its users have been extended on the basis of the first stage, from education-based people to some corporate employees and politicians, and finally it was open to everyone(Brügger, 2015). Second, Facebook has introduced plentiful new features, such as “Gift” that users can send friends virtual gifts and the iPhone version of Facebook(Brügger, 2015). Moreover, Facebook lowered the age of users from 18 in the first stage to 13 and released versions in other languages. In the third phase(2008-2013), not only the expansions, layout and alterations of the profile pages have undergone incalculable changes, but also page types and interaction elements presented in previous stages have changed(Brügger, 2015). For example, Facebook users are able to review their past on Facebook by the “Timeline” function(Brügger, 2015).
In the first three stages, Facebook provided a blank digital space for users to fill in content in the form of pictures, sounds, texts, networked social relationships and software(Brügger, 2015). The Facebook platform became more and more mature and paved the way for advertising technology platform and enterprises. In other words, Facebook started from the role of a public company to treat businesses and advertisers as both customers and new development partners(Helmond, Nieborg & Vlist, 2019). Since 2013, because of abundant funds and momentum from last year’s initial public offering(IPO), Facebook has made many high-profile acquisitions, such as the acquisition of programmatic and video advertising platforms—Atlas and LiveRail(Helmond, Nieborg & Vlist, 2019). In 2018, Facebook integrated Messenger and Instagram which are the two most popular apps into its kernel platform as an effort of marketing development(Helmond, Nieborg & Vlist, 2019). However, in the same year, Facebook also suffered a huge storm in the course of its development—the data leak scandal related to Cambridge Analytica. This incident makes Facebook’s modern development direction withdrawn and closed, and Facebook needs to apologize for the status of the platform and abuse of power.
The business model of Facebook
Facebook is an attention-based business model. According to statistics in June 2019, it has attracted the attention of 2.4 billion users. 98% of Facebook’s revenue comes from the advertising business, reaching $31.9 billion. If advertising on social networks is to be effective, social networks must meet two requirements. First, the links on social networks should be relevant to the target advertisement; second, social information can be readily combined with present targeting methods to predict the feedback rate(Curran, Graham & Temple, 2011). Through cooperating with Facebook, businesses are able to learn about countless diamonds needs, wants and wallets that showed on the social network every day(Curran, Graham & Temple, 2011). Meanwhile, Facebook is actively popularizing their advertising services.
In addition, Facebook also broke through the downward trend in the click-through rate of banner ads. Banner adverts are omnipresent interactive posters along the right-hand side of users’ profiles(Curran, Graham & Temple, 2011). These advertisements never disappear, even if the user closes or minimizes it, another ad will appear immediately(Curran, Graham & Temple, 2011). The fact of banner ads is that only a few people click on them and the proportion of people who interact with them is decreasing(Curran, Graham & Temple, 2011). To solve this problem, Facebook allows businesses to target the interests that people post on their profile pages and demographic profiles. This detailed positioning can recommend personalized advertisements for users, thereby eliminating the cost of advertising for people who do not match(Curran, Graham & Temple, 2011). However, this targeted marketing form is controversial. Many people think that it will constitute an invasion of privacy. The Federal Trade Commission was given hope by consumer protection organizations to restrict the sum of data that companies can accumulate(Curran, Graham & Temple, 2011). Moreover, it is challenging to maintain privacy rights when users voluntarily post their information to a social network. On the other hand, not all people fill in personal information according to the real situation so that personalized advertising is difficult to reach all users(Curran, Graham & Temple, 2011).
In general, the success of Facebook’s business model lies in the efficiency of defining specific populations and a large number of users. In this way, Facebook can distribute advertising services from small companies to large enterprises with reasonable prices(Curran, Graham & Temple, 2011).
In the field of social networking, Facebook has grown from a new type of startup company to a dominant company on a global scale in a few years, while also replacing previous platforms such as Myspace and StudiVZ(Dolata, 2017). In order to protect its own business areas and integrate capabilities and resources, Facebook usually adopts acquisitions rather than cooperation.
(The table of Facebook acquisition information)
As of mid-2016, Facebook had 1.7 billion monthly active users, WhatsApp had nearly 1 billion monthly active users, and Instagram had 500 million monthly users(Dolata, 2017). Therefore, the number of users attracted by Facebook and its two subsidiaries has a dominant force in the field of social networking(Dolata, 2017). The reason is direct or indirect network influence. The more network services are used, the more users there are and the more likely it is to attract more high-quality customers(Dolata, 2017). This dominant social network is very popular with advertisers because advertisers bundle advertisements with social networks to concentrate their advertising market(Dolata, 2017).
The Internet advertising market accounts for 33% of the entire advertising market, but this does not mean that Facebook can occupy the majority(Dolata, 2017). 75% of total Internet revenue is occupied by the top 10 advertising companies in the United States, of which Google accounts for 45%(Dolata, 2017). In addition, a large part of the advertising market is invaded by television advertisements such as Cable Television and Broadcast(Dolata, 2017).
Facebook’s dominance and huge bring attention to countries and organizations from the aspects of the revivification of anti-trust, data protection and competition(Andrews, 2019). First of all, organizations that pay attention to and manage these issues are the Competition and Consumer Commission, the European Competition Commissioner, the FTC, the UK House of Lords and House of Commons, the Furman Review for the UK Treasury, etc(Andrews, 2019). Secondly, Facebook’s data is managed by the data protection laws of the countries and regions where the data is held, EU General Data Protection Regulations, competition laws and other laws governing illegal content(Andrews, 2019).
According to the research, the proportion of women (51.5%) of Facebook users is higher than that of men (47.3%), and the remaining 1.2% do not show gender clearly(Knautz & Baran, 2016). These people come from all ages phases. The members between 18-24 years old accounts for about 43.4%(Knautz & Baran, 2016). Moreover, Facebook users generally have a high educational background, 52.4% of them have University degree certification, and 29.1% have graduated(Knautz & Baran, 2016).
Below is a diagram of the Facebook ecosystem:
The transformative impact of Facebook
As one of the most popular networks in the world, Facebook provides a good space for information transmission and sharing, friendship establishment and communication between friends. First, it has an impact on interpersonal relationships and the connection between people and society(Shiau, Dwivedi & Lai, 2018). Facebook overcomes temporal and spatial constraints and reaches the requirement of interactive communication anytime and anywhere(Shiau, Dwivedi & Lai, 2018). People’s happiness also increases by participating in online community activities and keeping in touch with friends, so Facebook also indirectly affects the development of society.
Secondly, Facebook is also having an impact on university students and teachers(Shiau, Dwivedi & Lai, 2018). In addition to socializing with Facebook, students can also use it to increase interaction with teachers(Shiau, Dwivedi & Lai, 2018). For example, students can set up different study groups on Facebook to discuss classroom activities and homework, so as to improve learning efficiency and integrate into university life faster(Shiau, Dwivedi & Lai, 2018).
Furthermore, Facebook also has a certain influence on the privacy of users. In March 2018, Aleksandr Kogan collected personal data of 300,000 users who had taken a personality quiz(Brown, 2020). This personality quiz application also collected Facebook data of more than 80 million users associated with it. Aleksandr sold the collected data to Cambridge Analytica, and then Cambridge Analytica used the data to place specific political ads on Facebook(Brown, 2020). At the same time, Facebook was criticized by the US government for not taking active measures to prevent the leakage of privacy. Although the privacy leak does not seem to be the result of a collusion between Facebook and Cambridge Analytica, many users still do not forgive Facebook(Brown, 2020). Because the mismanagement of social media exposed in this incident not only led to the invasion of personal privacy, but also threatened citizens’ rights in the democratic political society(Brown, 2020). After the Cambridge Analytica Scandal, the number of tweets involving the #deleteFacebook hashtag on Twitter grew rapidly, and 74 percent of users began resetting their privacy settings, suspending some services and even removing Facebook(Brown, 2020). What’s more, this is the second time the emoji has appeared, the first time in 2009.
In less than 20 years, Facebook has expanded its scale by constantly updating its programs and acquiring some companies, making itself one of the largest social networks. The way people live, study and work is gradually changed and integrated with it. However, as Facebook continues to expand globally, it has exposed problems such as Breach of credit. Only in this way can social media have sustainable development and can provide users with better services.
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