Market Research And Financial Analysis Of Facebook

Introduction and Background of Facebook

Identify a Biotechnology or Social media or Intelligent agent Technology company that you think is doing really well and will continue to do so.

1. Please provide introduction and background of the company, and a table with last 5 years performance in terms of revenue, profitability and other relevant metrics.

2. Please discuss the competitive land scape and provide analysis for 3 closest competitors.

3. Please provide customer characteristics, and consumer behavior of target segments.

Facebook, Inc., initiated in July 29, 2004 is characterized as a social networking company, headquartered at Menlo Park, California (Kacen et al., 2013). The specialty of the company is that it provides appealing products and services that help the people to connect and share with the help of personal computer or mobile phones. The services provided by the company are mainly focused on the people, marketers and developers. Presently, people can share their thoughts, feelings, opinions, photos and videos moreover they can engage in some other activities like playing games. Facebook provides people the platform to perform all these tasks. Mainly the products of Facebook include Instagram, Messenger, and Whatsapp. According to the empirics of December 31, 2014, Facebook had 890 millions of daily active users (Acegroup.com, 2016). Facebook mainly allows its users to connect, share and communicate with each other on personal computers or mobile phones. Facebook has a universal accessibility; this means that it can be used from all over the world. On the other hand, another product Instagram is a mobile app. Instagram provides its users the privilege to take photo and videos and share them instantaneously with their friends. Again, according to Aguinis and Glavas (2012), facebook messenger is a company messaging application that enables the users to message from mobile to mobile. It simply works as an online short messaging service application that allows the users to connect easily. This application is also amalgamated within the Facebook messaging, thus it can be used from the computers also. Moreover, there is another product Whatsapp, which is simply a cross platform mobile messaging application.  The study is solely focused on the market research of Facebook, the competitor analysis, external and environmental analysis as well as the financial statement of the company is also given. Based on the market analysis the researcher has provided certain plausible solutions also. These solutions may help the company to overcome certain issues in near future.

Year end December 31,
	2014	2013	2012	2011	2010
	Except per share data
income	$12,466	$7,872	$5,089	$3,711	$1,974
Total overheads and expenses(1)	7472	5,068	4,551	1,955	942
Revenue from operations	4994	2,804	538	1,756	1,032
Income before provision for income taxes	4910	2,754	494	1,695	1,008
Net income	2940	1,500	53	1,000	606
Net income attributable to Class A and Class B common stockholders	2925	1,491	32	668	372
Earnings per share attributable to Class A and Class B common stockholders (2):
Basic	$1.12	$0.62	$0.02	$0.52	$0.34
Diluted	$1.10	$0.60	$0.01	$0.46	$0.28
(1) Total costs and expenses include $1.84 billion, $906 million, $1.57 billion, $217 million, and $20 million of share-based compensation for the years ended December 31, 2014, 2013, 2012, 2011, and 2010, respectively.
(2) See Note 3 of the notes to our consolidated financial statements for a description of our computation of basic and diluted earnings per share attributable to Class A and Class B common stockholders.

Financial Data and Analysis

 Table 1: Financial data

(Source: In.reuters.com 2016)

			2014	2013	2012	2011	2010
Consolidated Balance Sheets Data:	in millions
Cash, cash equivalents, and marketable securities	$11,199	$11,449	$9,626	$3,908	$1,785
Working capital		12,246	11,970	10,215	3,705	1,857
Property and equipment, net	3,967	2,882	2,391	1,475	574
Total assets		40,184	17,895	15,103	6,331	2,990
Capital lease obligations	233	476	856	677	223
Long-term debt		—	—	1,500	—	250
Total liabilities		4,088	2,425	3,348	1,432	828
Additional paid-in capital	30,225	12,297	10,094	2,684	947
Total stockholders’ equity	36,096	15,470	11,755	4,899	2,162

Table 2: Financial data

(Source: In.reuters.com, 2016)

The above chart states key components of financial data of Facebook for over a period of five years from 2010 to 2014. The table above distinctly provides data about the revenues of Facebook over a period of five years from 2010 to 2014. Facebook accumulated revenue worth USD 1,974 in the year 2010. It is understandable that the figures cut such a low figure. The global recession and economic downturn are somewhat responsible for this. However, 2011 witnessed a hike in the revenue with figures amounting to USD 3,711 and followed with sustainable returns until 2014 (In.reuters.com, 2016). Income has shown a sustainable growth due to various factors. It is important to note that Facebook enjoys uninterrupted supremacy in the domain of social networking sites. The EPS also witnessed a development during the same period. Facebook had generated immense interest amongst the masses which reflected in its returns and financial data.

The above chart lays out balance sheet data of Facebook over the years of 2010 till 2014. The year of 2010 witnessed a measly amount of USD 1,785 to begin with. However, the figure consolidated and nearly doubled to USD 3,908 post 2010. Facebook operates in a highly aggressive market. It has heavy competition from players like Google plus and so on. The players namely, Google plus and others are fast catching on Facebook (ZenithOptimedia, 2016). Hence, it’s imperative for the firm to devise new strategies and plans and work out the plan subsequently.

Facebook users across the globe are becoming smarter with time and require new entities every now and then to remain ahead in the domain. The problem here is that the firm may experience laxity in its operations. It may offer generalized products and solutions to countless clients and users across the length and breadth of the world. Another area of concern is the sanction of Facebook in some nations where people are barred from using the same. Some governments of respective nations are contemplating to pass legislations which would mean that the natives will face an inability to access to the site thereby using it (In.reuters.com, 2016). Overall, it is fair to say that the financial prospects of the firm look bright, and the figures as stated above is likely to surge more upwards in the coming years. Recently, Facebook had formed released IPO in the US stock market, and the response has been quite exemplary. Facebook enthusiasts and users wait eagerly most of the year to receive better service and unique products and services which are unlike to other social networking sites. The author has drafted a graphical analysis below based on the computation of previously mentioned financial data and reports. This will facilitate the readers and other interested parties to decipher financial state of affairs of Facebook lucidly (In.reuters.com, 2016).

Customer Characteristics

Figure 1: Graphical analysis of the balance sheet

(Source: Created by Researcher)

The competitive analysis of facebook can be illustrated with the help of Porter’s five forces model. This is illustrated with the help of the following table,

Forces	Strength
Competition within the industry	Medium to high
Customer’s bargaining power	Medium to high
Threats emerging from new entrants	Medium
Supplier’s bargaining power	Low
Threat emerging from the existence of substitute products	Medium to high

Table 3: Porter’s five forces analysis

(Source: In.reuters.com, 2016)

Broadly, the competitors of Facebook can be classified into four broad categories, they can be illustrated as follows. The main competitors of Facebook are the companies, which provide the products will complete features that is a mirror image of the products and services that are provided by Facebook. For example Google plus can be considered as a tough competitor of Facebook, as Google has incorporates some of its goods like search and Android, and some other provincial and societal networks that acquires a strong position in certain countries (Khang et al. , 2012).

The organizations, which are specialized in developing application to be more precise, mobile based applications. If the applications provide the facility of its users to communicate socially or other functionality for example sharing of photo, video etc. can be considered as a competitor of Facebook. Again, the companies that are capable of providing web based or mobile based entertainment products and services, which are so designed that, will acquire people’s time.

Traditional companies, which provide web, based marketing solutions to the marketers along with the online and mobile-based business companies, which enables the marketers to reach their clients and designs specific tools that will help to manage and optimize the advertising campaigns.

In the context of the closest competitors of Facebook, it can be said that Facebook Inc. is standing a number of steps ahead from them. Google plus has been launched as a competitor of Facebook. However, it was unable to accrue the popularity like Facebook. Facebook is very user friendly and it is supported by an advanced user interface. But Google plus is unable to provide its user that much comfort to its users. Thus, according to John et al. (2012) the Google plus is lagging far behind than that of Facebook.

Again, LinkedIn can be considered  as a competitor of Facebook, but it is mainly used by the professional people. The professional people use LinkedIn to promote their works and skills. However, Facebook provides a platform where people can communicate and share their point of views as well as they can play some games on the same platform. Thus, Facebook provides a multi dimensional platform where people can perform serious work and find some entertainment at the same time (Hair et al., 2012).

Competitive Analysis

Twitter is another emerging social media that has become very popular in recent times. However, Twitter also differs from Facebook in the context of user’s perception and functionality. Facebook mainly targets the young generation, but the socially established peoples mostly use Twitter.

There is a number of models that are useful in explaining the buying behavior of a consumer. The Motivation- Response model is one of the most accepted models. As per the Motivation – Response model, marketing promotion and other stimuli enters the buyer’s black box and gives rise to specific responses. The aim of the marketers is to what is contained in the buyer’s black box and how the stimuli can change the responses. Marketing stimuli mainly comprises of four Ps of marketing, Product, Price, Place and Promotion. Other stimuli may be the other major forces, which include the buyer’s environment: economic, political, technological and cultural (Dechenaux et al., 2015). All of them enter the buyer’s black box, in which they are turned into a set of observable responses of the buyers: product choices, brand choice, choosing the dealer and the timing of purchase. The objective of the marketers is to determine transformation process of these stimuli into responses within the consumer’s black box. This transformation process mainly consists of two parts, at first the characteristics of the buyer how they will react and perceive as per the stimuli. Secondly, the decision process of the buyers affects the purchasing decision of the buyer.

In recent times, the users view the online environment from a new perspective; rather they refer this as a commercial platform. The massive development of the online stores and their emergence in the social media has transformed the users to consumers. Again, social media like Facebook has changed the way of communication between the consumer’s and the marketers. The consumers buying decision and the process of evaluating a product is largely affected by informational society. Facebook is providing the customers to develop a proper idea about a product with the help of a proper communication. Moreover, via reviews of the product consumers now possess the power to influence other buyers as well.

According to Peng and Lai (2012), the uniqueness of Facebook and its enormous popularity have changed the forms and patterns of the popular marketing practices like promotion and advertising. It has also affected the consumer behavior in the sense that consumers now can evaluate the product before buying. They can also gain information from other individuals about the post purchase experience, from statements reflecting dissatisfaction regarding a product.

Market Research

The communication between the consumer and a brand or company in turn creates an image of the concerned company that goes either in favor or not in the mind of other users. These users may consider theses information as a factor that affects that influence their purchasing decision. The interaction with the target brand in Facebook helps the consumers to gain a broader insight of the product in a different manner depending on the type of information the message is emitting. The presumed risk of purchasing a product and the willingness to pay for a particular product thereby influences the consumers to think about the quality and utility of the product in detail.

As per Bolton et al. (2013) the previous research, it is evident that a small amount of negative information arising out of a low number of posts may affect the buying decision of the consumers negatively. According to West and Bogers (2014), consumers are always in need of an underlying emotional bonding while buying the products associated with higher level of involvement. This emotional bonding between the brand and the customers are very important for the company and making it stronger gives rise to loyalty.

Presently, the use of social network is evolving as the users use them for several reasons, including maintaining relationship with relatives or colleagues. Developing interpersonal connectivity among the online users has certain advantages which is derived from building up and maintaining contact with other people in a way that seems like providing them social support, intimacy and friendship. In this way the users connect with the peers by adding them in the friends network. This in turn smoothens the process of communication especially among the peer groups. The groups formed in Facebook possess significant implication on the buying behavior of the consumers and the intention of the consumer and thereby has an influence on the buying decision of the consumer (Di Stefano et al., 2012).

The experience of shopping has always been a social one, and a social networking site like Facebook , provides the consumers the privilege to interact with the individuals. Most of them these individuals are more likely to be strangers. Presently, enabling the social media sites for e commerce has enabled the companies to reach a larger number of potential customers in a very short time. As the dealings in online social networking site is cost effective, it takes lesser time and aims the customers directly and furthermore, it has an enormous effect on the purchasing decision of the consumers, it is adopted by almost all the companies.

Thus, from the above analysis it can be said that Facebook and other social media has affected the buying behavior of the consumers largely. At first, social media turns the users into consumers and then by the extensive use of online communication it leaves a huge impact on the purchasing decision of the consumers. According to Batra et al. (2014)It has not only changed the consumers buying behavior but also affected the selling strategies of most of the companies.  Presently, almost all the companies are using e-commerce as a platform of selling their products. Facebook provides those companies as well as the customers to gain knowledge about the product both before purchasing and after purchasing experience.

Over the past few years, it was sufficient to possess an online presence for single sided broadcasting or acquiring information about a particular topic. However, presently with the emergence of social networking sites like, Facebook, Twitter, LinkedIn, new forms of social networking have developed. Now, people can exchange their point of views; interact with each other, post comments and updates. From general chats it is now emerging towards a serious mode of activity where people can propagate the breaking news, spread broadcast messages about an upcoming disaster prediction.

Thus social networking sites are not just helping the internet users in fast flowing conversations but also helping them to follow breaking news, maintain contacts with family and friends and enabling them to take part on online debates and thereby contributing ion he online database. According to Rai et al. (2012), social media is modifying the user’s behavior into behavior of the users in terms of their buying behavior, searching methods and browsing. However, Zhou and Li (2012), argue that in future people will spend less time on the internet for searching information independently rather they will make decisions based on word of mouth, that is suggestion from their acquainted.

In the following section, the projected trends of the future five years will be discussed based on the study conducted by Sashi (2012). The table depicts the projected five years trend of Facebook, Google Plus, Twitter and LinkedIn. As per Persaud and Azhar (2012) from the social marketing trend of 2016 it can be clearly predicted that in the years Facebook will remain on the top for Video streaming, Messaging and Buy Buttons. Facebook will be the most used social networking site by the companies of the United States in 2016 and further. Nowadays, social media is regarded as an available media channel to a brand when they design a communication strategy. For the next five years, it is believed that the brands will shift from traditional communication models to a more amalgamated and collaborative methods in which the organizations will be working with the communities of the consumers for mutual benefits. This will in turn made Facebook a platform and a central organizational strategy of the business. Businesses backed up by social networking site like Facebook, will empower their customers to provide feedbacks regarding their products. Furthermore, they will also be empowered to contribute and advocate the particular brands.

The people will be asked to contribute in the business and this will be a key element of the company. This will enable Facebook to get an insight of what and how people want their products and services. With the direct feedback from the consumers, it will be easier for them to meet the needs of the consumers. Again, as there will be an increase in the population, with the passage of time there will also be an increase in the number of Facebook users and potential users. As a youths constitute a major portion of the population and most of them have a smart phone (Wang et al., 2012). It is quite natural that all of them are equally likely to have a Facebook account or any other social networking account or both.

In the context of the competitors, Google Plus is still lagging far behind than that of Facebook. Marketers are more interested on Facebook for promotion of their products. The number of users in Google Plus may be high, as Google has amalgamated its social networking site with the Email accounts. However, the number of active users is significantly lower if compared to Facebook. Thus, it can easily be said that with the bright future of social media in future, Google Plus will also flourish but at a slower pace than that of Facebook.

In the context of Twitter, it is place where people can express their point of view with a short message of 140 characters long. This is called a tweet; this can be done for a specific and popular person, regarding the persons activity or thoughts. Popular and professional people generally use this site to promote their skills and abilities in the social networks. According to Brodie et al. (2013) the normal people are more likely to use facebook. Thus, however Twitter has provided Facebook a strong competition over the last few years, for the coming years it will not be able to cross the popularity of Facebook. The most used social media by marketers are Facebook and Twitter, but, Facebook is used by much higher number of marketers.

Now, turning to LinkedIn it is also a network social networking site that is mostly used by professional people. It is also not very popular for advertising. Thus, in near future it will grow but not like the other sites.

4:  The following are a few websites and reports, which were used during the preparation of this report. These articles and websites have helped the researcher to gain a better insight of the topics covered.

Acegroup.com,. (2016). ACE Group: One of the World’s Largest Multiline Property and Casualty Insurers. Retrieved 26 February 2016, from https://www.acegroup.com/

This website has helped he researcher to get an idea about the social media marketing strategies of the organizations. How, these social networking sites have helped them to develop their business from various dimensions. It is more important to mention that the companies, which are using social media as a tool of marketing, also undertake various risks. However, risk is not covered under this study but the researcher has gained a brief knowledge about the risk factors with the help of this article.

In.reuters.com,. (2016). Business News – Indian Stock Market, Stock Market News, Business & Finance, Market Statistics | Reuters India. Retrieved 26 February 2016, from https://in.reuters.com/

This particular website provided the researcher an verview of the Facebook and other social networking company. Specifically this has helped the researcher to analyse Facebook from a competitive point of view. In other words, the competitive analysis portion of the study wouldn’t have been possible without the contribution of this particular website. It is enriched with current statistics of the user base, and projected user base in future years of all of the social networking websites.

ZenithOptimedia,. (2016). ZenithOptimedia The ROI Agency. Retrieved 26 February 2016, from https://www.zenithoptimedia.com/

The recent trends and the projected future trend in Facebook and its competitive companies has been projected in this study with the help of this website. This has equipped the researcher with the knowledge of upcoming marketing strategy and the trends that will emerge within the economy of United States. This has also helped to gain knowledge about the idea that customers will contribute about the product development and delivery. This has also been implemented by Volkswagen China, where the people have contributed their ideas about the car and he car has been developed exclusively for Chinese people.

Investor.fb.com,. (2016). Annual Reports – Facebook. Retrieved 26 February 2016, from https://investor.fb.com/annuals.cfm

The Facebook, Inc. annual report has helped the researcher to identify the main competitors of the company. The company competes in which sectors and for what that has also been identified with the help of this report. Therefore, the report is useful in analyzing the financial data and situation of the company. The financial analysis that has been performed in the report has been solely based on this report.

Conclusion:

To conclude it can be said that the entire criterion are met by the report. The competitive analysis of Facebook Inc. has been performed successfully. Moreover, the financial analysis of the company has also been performed efficiently and effectively. Based on the financial analysis it can also be said that the financial health of the company is in a very good shape. Again, the study has also covered the competitive analysis of Facebook Inc. therefore, the current situation competitors of the company are analyzed and based on that the current standing of Facebook Inc. is determined.  Thus, the study refers to the company that the current situation is splendid but it can be improved by adopting perfect strategies. As he company is racing ahead of all of its competitors, it will also be easier for the company to reach a prosperous position very easily.

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