Case Study of Facebook’s Platform Business

The multimedia essay will focus on Facebook as a social media case study. First, the essay will explore Facebook’s business commencement in addition to the core field of advertisement and Big Data business and its dynamics for the purposes of appreciating how Facebook makes money. Secondly, the essay will explore Facebook’s global download times to assess whether the platform is profitable or not. Third, the essay will investigate the security issues and concerns pertaining to the case.

Business Commence of Facebook and Basic Fields of Operation

The spread of Covid-19 from 2019 through 2020 and 2021 saw an increase in the travel restrictions and other social distancing rules that many countries had established. Due to the people’s need to connect with their loved ones and because many of there were idle in the home, there was a spike in Facebook downloads among many young people across the world. Data indicates that in 2020, there were 985 million downloads up from 685 million downloads in 2019 (Business of Apps, 2021). The general trend of Facebook downloads in the previous years was that there was a decline because in 2018 the number of downloads were 710 million and in 2019 the numbers were 985 million which is greater (Business of Apps, 2021). Facebook is a preferred social media site for individuals who 25 years and above, but anyone above 13 is allowed to join the platform. The total number of active Facebook users were 2.8 billion in 2021 which is up from 2.6 billion in the last quarter of 2020 (Zephoria, 2021. Therefore, the emergence of Covid-19 created a growth in the demand or need for Facebook’s social media services.

Facebook advertising business is one of the main business models that the company has been engaged in for years. Facebook advertisers range from those who engage in free self-promotion or free self-advertisements and those who actually pay to have their advertisements or pages promoted by the social media provider. An example of self-advertisement on Facebook is that which was made to request the readers to follow Alberrt Heijn on Facebook with reference to The Hague, in South Holland. In the job advertisement, the readers are encouraged to employ the details follow Albert at the Hague.

Created by: Donald Trung Quoc Don

This Advertisement on Facebook by Donald Trung Quoc Don is licensed under the Creative Commons Attribution-Share Alike BY-SA 4.0 International license

Facebook also posts advertisments on behalf of its clients. Such advertisements usually come in terms of “sponsored” commercercials. For example, there is an advertisement that Facebook posted on behalf  of DEVal Fashion Show at Miles Continental. DEVal is obsessed with fine European automobiles particularly the Volkswagen. The latter is a fashion organisation that sells mainly fashion bags. By putting such  a commercial or advertisment on its platform, Facebook was targetting anyone who has shown interest in fashion products and may want to buy the product to do so. However, Facebook uses Big Data and algorithms to target specific clients or customers (Srinivasan, 2019). To do this, Facebook collects personal data from billions of its users based on their online activities in order to create a personalised digital character for each user. The personalised digital character is then used to recommend products to social media users (Marengo & Montag, 2020). Facebook also sells the personal users’ data to other third-parties for use in online marketing and other commercial undertakings.

Created by: Miles Continental

This Fashion Show at Miles Continent showroom at the 70th Tuam Street, Christchurch on Facebook by Miles Continental is licensed under the Creative Commons Attribution-2.0 Generic license

Facebook relies on user-generated content and some smart algorithms to maintain user numbers so as to enhance its popularity. Celebrities like Rihanna have millions of followers and those followers are converted into audience for the advertisers using the platform. Rihanna has more than 102 million followers. One single post by Rihanna attracts millions of views and this creates advertising opportunities.

Created by: Tai Lopez

This picture of Rihanna’s interview by Tai Lopez during one of her shows was originally on YouTube and is licensed under the Creative Commons Attribution 3.0 Unported license

Is Facebook a Successful Social Media Platform?

Facebook is one of the most successful social media platforms in the world at the moment. Facebook only has one major competitor: Google. Facebook and Google basically create a duopoly in the social media market because the two companies control 70 percent of the social media market (The Business of Apps, 2021). During the last one year and because of Covid-19, Facebook’s user numbers grew by more than 985 million users thereby bring the number of Facebook users to about 2.9 billion active users. This was on top of the fact that the platform had been receiving hundreds of millions of app downloads every year since  Facebook has been successful in reducing competition in the market by buying up WhatsApp, Instagram and Oculus. The acquisition of the three other companies has helped the platform to retain more than 1 billion users that would otherwise be controlled by three rivals. Facebook growth is  expected to continue unabatted because the company has been able to buy up competition to maintain its market dominance.

From an institutional perspective, Facebook has the capacity to alter the structural dynamics that shape modern society. Facebook will help the world to create a “platform society”, which is a society that will rely on the social media giant for information thereby undermining the traditional journalism (de Kloet, Poell, Guohua & Fai, 2019). Facebook has also been instrumental in sustaining a technology-enabled shared economy. A technology-enabled shared economy is where people use technology to engage in peer-related creation and consumption of content that enhance their economic ways of life (Nicholas, 2016). Facebook provides opportunities for its users to share platforms where each one can create and share videos, newspaper articles and products on sale; yet such actions would have required people to meet in person in order for the sharing to prevail. Therefore, Facebook is a successful social media platform.

 

How does Facebook generate Revenue and how Much Money Does it make?

Facebook makes its revenue through Facebook platform generates revenue mainly through advertising. Advertising on Facebook mainly generates about 98 percent of the platform’s income. Facebook app generated about US$60 billion of the US$86 billion that the company made in 2020 (Business of Apps, 2021). F The United States and Canada account for about half of the US$60 billion that the company makes in revenue yearly (Business of Apps, 2021). Europe accounts for about 25 percent of Facebook’s revnue whereas the rest of the world accounts for the rest of the revenue or about 25 percent (Business of Apps, 2021). In essence, acebook platform’s revenue is dependent on the number of its users and the market where the platform operates. The company has more that 2.9 billion active users who it translates to audiences for its advertisements. There are self-sponsored ads that pay Facebook to carry those advertisements on the platform. Facebook ad Manager page provides advertisers with the opportunity to create and post their ads on the platform in an easy way.

Facebook also relies on targeted advertisements to generate revenue (O’Connell, 2018) . Facebook users its data minining capabilities to enhance targetted ads. There are other ads that are relayed through Facebook Messanger tool as it helps users to engage privately with one another. There are also video ads that are relayed through the Facebook Live or video tool (O’Connell, 2018) . Facebook also earns income through personal data generation, which is generally value addition from an outsider perspective. Through data mining, the company is able to earn an equivalent of US$84 for every North American user and about US$27 for every 27 for every European user and this is after selling their data to third parties (O’Connell, 2018).  The fact that Facebook can mine data from other apps that each user is relying on his or her computer means that the company will still generate good money so long as it keeps people glued to its app.  Therefore, Facebook is quite profitable platform. The typical Facebook’s corporate and busness tax bill outline the tax distribution by income.It depicts the progressive tax system where those at the top expereince disproportinate taxation of 70% of the United Stae’s income tax while half of the population pays 0% of income tax.

Created by: Office of Congressman Mark Sanford

The Mark Sanford chart of percent of federal income taxes paid by income level on Facebook by Office of Congressman Mark Sanford from https://www.facebook.com/RepSanfordSC/ is in the public domain under the terms of Title 17, Chapter 1, Section 105 of the US Code

 

 

References

Business of Apps. (2021). Facebook revenue and usage statistics (2021). https://www.businessofapps.com/data/facebook-statistics/

de Kloet, J., Poell, T., Guohua,Z., & Fai, C.Y. (2019). The plaformization of Chinese Society: infrastructure, governance, and practice. Chinese Journal of Communication, 12(3), 249–256, https://dx.doi.org/10.1080/17544750.2019.1644008

Marengo, D., & Montag, C. (2020). Digital phenotyping of big five personality via facebook data mining: a meta-analysis. Digital Psychology, 1(1), 52-64. https://doi.org/10.24989/dp.v1i1.1823

Nicholas, J. A. (2016). The age of sharing. Polity Press. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/usyd/detail.action?docID=4770940.

O’Connell, B. (2018). Facebook is an advertising giant, but users should know how their personal data is being used on the social media platform. The Street. https://www.thestreet.com/technology/how-does-facebook-make-money-14754098

Srinivasan, D. (2019). The antitrust case against Facebook: A monopolist’s journey towards pervasive surveillance in spite of consumers’ preference for privacy. Berkeley Bus. Law Journal, 16, 39-101. https://lawcat.berkeley.edu/record/1128876/files/fulltext.pdf

Zephoria. (2021). The top 10 valuable Facebook statistics – Q2 2021. https://zephoria.com/top-15-valuable-facebook-statistics/

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