Facebook Product Teardown
Facebook, with 2.2 billion monthly active users, is the largest social media site of all time. This young company, founded in 2004, leverages their network to sell advertising and has cemented its role as Google’s counterpart in the digital advertising “duopoly.” We’ve outlined facts and figures to help you understand how this young company has gotten to where it is today.
Market Cap: $452.86B
PE Ratio: 28.92
FY’ 17 Revenue: $40.65 Billion
YOY Growth: 47%
Advertising Revenue: $39.94
YOY Growth: 49%
Mark Zuckerber, CEO
Sheryl Sandberg, COO
David Wehner, CFO
Mike Schreopfer, CTO
Chris Cox, CPO
Essential Reading to Understand Facebook:
- How Facebook Keeps Scaling Its Culture
- Inside Facebook’s Internal Innovation Culture
- Mark Zuckerberg explains Facebook’s new Graph Search – YouTube
- This Is The Social Graph Explained – Business Insider
- Daring Fireball: Fuck Facebook
- Facebook Philosophy: Move Fast and Break Things – IEEE Spectrum
- How Facebook Ships Code | FrameThink
- The Digital Advertising Duopoly – AVC
- The Facebook Effect: The Inside Story of the Company That Is Connecting the World: David Kirkpatrick: 9781439102121: Amazon.com: Books
Timeline of Facebook Products vs Valuation
- Facebook’s quarterly revenue reached 5 billion USD in 2017 (Statista chart shows growth 2010-2017 in the US and Canada)
- In Q3 of 2017, Facebook reported a 47% YOY change in revenue.
- A chart of Facebook’s revenue growth by source from 2012-2016 reveals that much of its growth is spurred by mobile advertising
- Facebook nears ad-only business model: “The social network is more dependent than ever on the cyclical ad market, even as its rival Google finds new revenue streams in hardware and software.”
- As of 2017, Facebook comprises 39.1% of total digital display ad revenues in the US and is projected to reach 43.7% by 2019.
- Facebook has been getting higher prices for its ads, slowing the growth in the number of ads seen in the news feed.
- Instagram’s net mobile advertising revenue is a significant percentage of Facebook’s total mobile advertising revenue: “In 2018, Instagram is projected to account for 27.8 percent of Facebook’s net mobile advertising revenues in the United States and for 18 percent of global mobile ad revenues.”
- As of Q3 of 2017, Facebook had over 2 billion monthly active users worldwide and was easily the most popular social networking site.
- This number of monthly active users (MAUs) represent a 16% year-over-year increase.
- As of Q3, daily active users (DAU) accounted for 66 percent of monthly active users. (1.37 billion active users, a 16% year-over-year increase)
- Even as of February 2016, each active Facebook use was connected to every other user by an average of three and a half other people.
- Facebook’s mobile traffic has grown significantly.: “There are 1.15 billion mobile daily active users (Mobile DAU) for December 2016, an increase of 23 percent year-over-year.”
- The number of Instagram users in 2017 was 85.5 million and is projected to grow to 118.1 million by 2021
- Facebook’s growth rate in 2017 was 2.6% and is projected to drop to 1.7% by 2020
- Customer growth may be slowing, but advertising revenue could more than offset this decline.: “…as Facebook and its platforms (Whatsapp, Instagram) now have close to 60% penetration among internet users, average revenue per user for the company could decline as new users were mostly added from international markets, which have lower monetization rates.”
- What caused the increase in X’s valuation over the last 5 years?
- Facebook exceeded $500 billion in market value in July of 2017, worth less than only Microsoft, Apple, and Alphabet.
- Facebook has shown steady growth in valuation since 2006.
- For the most part, Facebook stock looks attractive for 2018
- However, as of the beginning of 2018, some believe that Facebook stock is in trouble, particularly due to data management
- NASDAQ reported that Facebook was losing ground after announcing news feed changes.
- Due to this announcement, Facebook had one of its worst week in months. “CEO Mark Zuckerberg wrote that the feed will soon start prioritizing “meaningful social interactions” instead of “relevant content.” In other words, posts from friends and family will appear much for frequently than news items from now on… Facebook Inc shares closed at $179.37 on Friday, down $8.40 (-4.47%). Year-to-date, FB has gained 1.65%, versus a 4.14% rise in the benchmark S&P 500 index during the same period.”
- However, this strategic move could actually be positive for investors: “Analysts are concerned the changes will impact ad revenue… [they] assume that Facebook users were visiting the site mainly to see new publisher content and communications from businesses. Remember, Facebook initially rose to prominence due to family and friend interactions … not publisher content. So, while direct publisher and business revenue may falter a bit, ad revenue shouldn’t be impacted all that much. In fact, this move could bring more users back to Facebook.”
- Instagram has played a significant role in Facebook’s increase in valuation
- Other reasons for increase in valuation?
- Acquisition strategy: Mark Zuckerburg explains that Facebook’s acquisition strategy includes “building relationships”, “a shared vision,” “sometimes use scare tactics,” and “move fast and buy things.”
- This infographic from techwyse shows a complete list of Facebook’s acquisitions.
- Facebook has an impressive mobile lineup: “Not only does Facebook generate most of its revenue on mobile devices now, the company also owns some of the most popular apps in the world.”
- As of July 2017, Facebook’s most expensive acquisition was WhatsApp, followed by Oculus VR and Instagram.
- Techworld provides a similar ranking of costs of acquisition and includes some background information.
- Facebook’s most important acquisitions https://www.investopedia.com/articles/investing/021115/facebooks-most-important-acquisitions.asp
- In total, Facebook owns and operates nine companies in addition to the services offered by Facebook Inc. and Facebook Ireland Ltd.
A number of these companies, such as Facebook Payments, were not acquisitions. The following list of companies are Facebook’s acquisitions in chronological order:
- Facebook reached an agreement to buy Instagram in April of 2012, and in September posted an article welcoming Instagram to the Facebook family.
- By 2016, Instagram had proved to be “one of the smartest acquisitions ever in consumer tech.” In 2016, Credit Suisse analysts estimate[d] that Instagram brought in $570 million in revenue in the first quarter of 2016, which is nearly 10% of Facebook’s overall projected revenue for the period.”
- “[Kevin Systrom, CEO of the photo-sharing app Instagram] are future-proofing Facebook, in the process proving Zuckerberg’s purchase was one of the five best deals of the Internet era. Forbes estimates that Instagram, if broken out, is now worth somewhere between $25 billion and $50 billion.”
- Atlas from Microsoft https://newsroom.fb.com/news/2013/02/facebook-to-acquire-atlas-from-microsoft/
Oculus VR (2014)
- WhatsApp https://newsroom.fb.com/news/2014/02/facebook-to-acquire-whatsapp/
- WhatsApp blog https://blog.whatsapp.com/499/Facebook
- TBH https://techcrunch.com/2017/10/16/facebook-acquires-anonymous-teen-compliment-app-tbh-will-let-it-run/
- Security https://venturebeat.com/2017/11/01/zuckerberg-facebooks-security-investments-will-significantly-impact-profitability/
- Catalyze Affordable Housing https://newsroom.fb.com/news/2017/08/a-step-to-catalyze-affordable-housing-in-the-community/
- Investing in Menlo Park https://newsroom.fb.com/news/2017/07/investing-in-menlo-park-and-our-community/
- Aquila unmanned aircraft https://newsroom.fb.com/news/2016/07/aquilas-first-flight-a-big-milestone-toward-connecting-billions-of-people/
- Telecom Infra https://newsroom.fb.com/news/2016/02/introducing-the-telecom-infra-project/
Management of Data
(?) What data does X collect from the customer? What rights and permissions do customers give to X in terms of managing their data?
- FB terms of service https://www.facebook.com/terms.php
- Data policy https://www.facebook.com/about/privacy/
- Government secret requests for data https://www.cnbc.com/2017/12/18/facebook-transparency-report-says-more-secret-u-s-requests-in-2017.html
- Social network or DMP? https://www.digitaldoughnut.com/articles/2017/august/facebook-s-identity-crisis;-social-platform-or-dmp
- Facebook and Google…https://www.bloomberg.com/news/articles/2017-09-11/forget-equifax-facebook-and-google-have-the-data-that-should-worry-you
- Comparative analysis of big data management http://ieeexplore.ieee.org/document/7724456/?reload=true
- Facebook data center FAQ http://www.datacenterknowledge.com/data-center-faqs/facebook-data-center-faq
- Local selling model https://newsroom.fb.com/news/2017/12/moving-to-a-local-selling-model/
- Information operations update https://newsroom.fb.com/news/2017/09/information-operations-update/
- Inside Facebook’s hardware lab https://code.facebook.com/posts/561611824036387/inside-facebook-s-hardware-labs-moving-faster-with-more-collaboration/
- Area “404” hardware lab https://techcrunch.com/2016/08/03/facebook-area-404/
- Building 8 announcement https://www.facebook.com/zuck/posts/10102777889538891
- Hardware in data centers https://code.facebook.com/posts/392743124493876/2017-year-in-review-data-centers/
- ‘Aloha’ video chat device http://www.businessinsider.com/facebooks-andrew-bosworth-to-lead-oculus-building-8-aloha-video-chat-device-details-2017-8
- Echo show competitor https://www.inc.com/business-insider/portal-facebook-hardware-device-video-chat-spring-amazon-echo-show-competitor.html
- Voice speaker and video chat device https://www.theverge.com/circuitbreaker/2017/8/1/16076492/facebook-voice-speaker-video-chat-device-rumor
- “Facebook said to be working on a video chat device” https://www.bloomberg.com/news/articles/2017-08-01/facebook-is-said-to-work-on-video-chat-device-in-hardware-push
- 4 hardware devices https://www.thestreet.com/slideshow/14097706/1/4-futuristic-hardware-devices-that-facebook-has-been-quitely-developing.html
Facebook product usage https://www.statista.com/statistics/703896/facebook-services-and-products-usage-in-us/
Facebook product usage frequency https://www.statista.com/statistics/703901/facebook-services-and-products-usage-frequency-in-us/
Most popular Facebook activities https://www.statista.com/statistics/275788/share-of-facebook-user-activities/
- Messenger https://messenger.fb.com/
- Messenger reaches 500 million https://newsroom.fb.com/news/2014/11/messenger-reaches-500-million-2/
- Messenger for Kids https://newsroom.fb.com/news/2017/12/introducing-messenger-kids-a-new-app-for-families-to-connect/
- High Resolution Photos in Messenger https://newsroom.fb.com/news/2017/11/making-visual-messaging-even-better-introducing-high-resolution-photos-in-messenger/
- Messenger/Video chat https://newsroom.fb.com/news/2017/06/messenger-just-added-more-fun-to-your-video-chats/
- Video calling in Messenger Introduced https://newsroom.fb.com/news/2015/04/introducing-video-calling-in-messenger/
- Group video chat in messenger https://newsroom.fb.com/news/2016/12/introducing-group-video-chat-in-messenger/
- Facebook Video launches in 2007
- Sharing VR https://newsroom.fb.com/news/2017/07/live-from-facebook-spaces
- Captions for FB live https://newsroom.fb.com/news/2017/06/making-facebook-live-more-accessible-with-closed-captions
- FB 360 VR https://newsroom.fb.com/news/2017/03/introducing-facebook-360-for-gear-vr/
- New ways to watch FB vide https://newsroom.fb.com/news/2017/02/new-ways-to-watch-facebook-video/
- FB video on TV https://newsroom.fb.com/news/2016/10/a-new-way-to-watch-videos-from-facebook-on-your-tv/
- Share and discover live video https://newsroom.fb.com/news/2016/04/introducing-new-ways-to-create-share-and-discover-live-video-on-facebook/
- Live Video for Profiles https://newsroom.fb.com/news/2015/12/introducing-live-video-and-collages/
- Facebook Watch a Hit? Study Finds 40% of Users Tune In to Video Weekly: http://variety.com/2018/digital/news/facebook-watch-usage-survey-morgan-stanley-1202669471/
- Facebook Camera, a mobile app for photo sharing, launched in 2012
- The Camera effects platform is announced in 2017
- As of April 2017, Facebook has 68.9 million unique video viewers who accessed the site via desktop in the U.S.
- Facebook is the third most popular online video property(as of June 2017), ranking behind Google and ahead of Yahoo
- Video on Instagram is launched in 2013.
- Hyperlapse, a new app from Instagram to capture high-quality time lapse videos, is introduced in 2014.
Facebook Music Efforts
- Facebook trialing music video (May 2016) http://www.thedrum.com/news/2016/05/16/facebook-trialling-music-video-product-rival-youtube
- Global music strategy (Jan 2017) https://www.billboard.com/articles/business/7669971/facebook-hires-youtubes-tamara-hrivnak-to-lead-global-music-strategy
- Comprehensive music strategy (March 2017) https://www.musicbusinessworldwide.com/facebook-set-to-challenge-spotify-with-comprehensive-music-strategy/
- Facebook looks for music deals (Feb 2017) http://fortune.com/2017/02/14/facebook-music-deals/
- Music rights (Sept 2017) https://www.bloomberg.com/news/articles/2017-09-05/facebook-said-to-offer-hundreds-of-millions-for-music-rights
- Upload song permission https://www.theverge.com/2017/9/5/16256844/facebook-video-music-publishers-rights-youtube-competition
- Music deal/video effort http://www.businessinsider.com/facebooks-deal-with-universal-music-challenges-youtube-2017-12
- Real steps into music business (Dec 2017) https://www.recode.net/2017/12/21/16806512/facebook-universal-music-streaming-video-instagram
- News feed https://newsroom.fb.com/news/2016/06/building-a-better-news-feed-for-you/
- Facebook’s big news feed change https://www.nytimes.com/2018/01/11/technology/facebook-news-feed.html?action=click&contentCollection=Technology&module=RelatedCoverage®ion=Marginalia&pgtype=article
- Tracing news feed algorithm http://www.adweek.com/digital/facebook-news-feed-algorithm-change-background/
- External publishers are being deprioritized in the latest Facebook algorithm update.
Paper: Stories from Facebook https://newsroom.fb.com/news/2014/01/introducing-paper-stories-from-facebook-2/
- Instant article monetization: Publishers using Facebook’s Instant Articles can now show more ads
- They added that publishers using Instant Articles are now receiving a total of more than $1 million per day via Facebook Audience Network, and RPMs (revenue per thousand impressions) from Audience Network in Instant Articles are up more than 50 percent over the past six months.
- In April, Forbes, Hearst, The New York Times and others, including The Guardian, backed out of Instant Articles. Meanwhile, other major media organizations like Bloomberg, The WSJ, ESPN, CBS News, NPR, Financial Times and VICE News have been holdouts, running little to no content in Facebook’s format, it’s been reported.
- There are now more than 10,000 publishers worldwide using the format — a figure that’s up 25 percent over the last six months. A third of all clicks to articles on Facebook are now to Instant Articles, Facebook also notes. And, in aggregate, Instant Articles deliver 20 percent to 50 percent more traffic, as compared with the mobile web. Publishers using Facebook’s Instant Articles can now show more ads
- Facebook sent 25 percent less traffic to publishers this year , while Google increased its traffic by 17 percent, according to
- Instant Articles, meanwhile, has fallen out of the conversation as Facebook increasingly prioritizes video over text articles in its news feed.
Facebook’s Journalism Project
- Brown and Simo said Facebook has met with 2,600 publishers globally since launching Facebook Journalism Project.
- Games on messenger https://newsroom.fb.com/news/2017/12/celebrating-one-year-of-games-on-messenger/
- More: games on messenger https://newsroom.fb.com/news/2017/05/game-on-games-on-messenger-go-global-with-new-features-and-games/
- Games with Oculus touch https://newsroom.fb.com/news/2016/06/over-30-full-games-launching-with-oculus-touch-this-year/
Voice and NLP Efforts
- Built-in NLP (FB) https://developers.facebook.com/docs/messenger-platform/built-in-nlp
- NLP in Messenger (news – techcrunch) https://techcrunch.com/2017/07/27/wit-ai-is-shutting-down-bot-engine-as-facebook-rolls-nlp-into-its-updated-messenger-platform/
- NLP in Messenger (news – venture beat) https://venturebeat.com/2017/07/27/facebook-builds-natural-language-processing-into-messenger/
- FB’s NLP research https://research.fb.com/category/natural-language-processing-and-speech/
Server & Cloud Products
Facebook Open Compute: http://www.opencompute.org/
- Facebook is increasingly wielding influence on the infrastructure design that stretches from the fiber optic cables to the datacenter to the last mile of your home. And it’s using an open source approach to rally a vast ecosystem that’ll follow its lead.
- Facebook contributes telecom designs, plans to Telecom Infra Project, adds partners
- Open Compute Project: Gauging its influence in datacenter, cloud computing infrastructure
- Facebook wants to do to 5G what it has already done to the datacenter
- Open Compute Project enlists AT&T, Verizon while growing telco support
- Microsoft to release version 2 of its Open Compute Project server design
- Microsoft submits new open-sourced networking components to Open Compute Project
- Google joins Open Compute Project, contributes 48V rack
- Google, Facebook pause rivalries: Here’s their 48V power-saving rack spec for Open Compute Project
- Add it up and it’s clear Facebook’s approach has given it a lot of voice in how cloud data centers are designed. It’s also worth noting that Facebook’s capital spending relative to hyperscale cloud providers is sizable, but the social network’s influence is still punching above its wallet (not that $1 billion or so in capital expenses a quarter is chump change).
- All above from: How Facebook is using its cloud clout to design your network, datacenter
Artificial Intelligence Efforts
- Facebook’s AI strategy: https://techcrunch.com/2016/11/08/shining-light-on-facebooks-ai-strategy/
- Facebook AI Research (FAIR) https://research.fb.com/category/facebook-ai-research-fair/
- New experiences AI https://newsroom.fb.com/news/2016/11/accelerating-innovation-and-powering-new-experiences-with-ai/
- AI to aid vision-impaired https://newsroom.fb.com/news/2016/04/using-artificial-intelligence-to-help-blind-people-see-facebook/
- Deep text https://code.facebook.com/posts/181565595577955/introducing-deeptext-facebook-s-text-understanding-engine/
- Deep text news https://techcrunch.com/2016/06/01/facebook-deep-text/
Virtual & Augmented Reality
- Oculus https://developer.oculus.com/
- Introducing Oculus Rift https://newsroom.fb.com/news/2015/06/introducing-the-oculus-rift/
- Donate launched https://newsroom.fb.com/news/2013/12/donate-to-nonprofits-through-facebook/
- Send money via Messenger https://newsroom.fb.com/news/2017/11/send-money-to-friends-in-messenger-now-in-euros-and-british-pounds/
- Facebook Messenger P2P Expands To UK, France
- Marketplace news https://newsroom.fb.com/news/2017/10/marketplace-adds-more-options-for-us-car-shoppers/
- New: order food https://newsroom.fb.com/news/2017/10/order_food/
- Group payments in messenger https://newsroom.fb.com/news/2017/04/get-paid-back-announcing-group-payments-in-messenger/
- Introducing Marketplace https://newsroom.fb.com/news/2016/10/introducing-marketplace-buy-and-sell-with-your-local-community/
- Personal Fundraising https://newsroom.fb.com/news/2017/03/more-ways-to-support-causes/
- Pay through Facebook http://www.wired.co.uk/article/banks-data-tech-giants
- Marketing https://developers.facebook.com/products/marketing-api/overview/
- Advertising updates https://newsroom.fb.com/news/2017/10/update-on-our-advertising-transparency-and-authenticity-efforts/
- Updates to ad targeting https://newsroom.fb.com/news/2017/09/updates-to-our-ad-targeting/
- FB launches in Spanish https://mashable.com/2008/02/07/facebook-spanish/#nXB7MYYH8qq8
- As of 2016, Facebook was available in 101 languages
- Internet.org launched https://newsroom.fb.com/news/2015/05/announcing-the-internet-org-platform/
- Free basics/Internet.org https://info.internet.org/en/
- Internet.org app launches in Tanzania https://newsroom.fb.com/news/2014/10/internet-org-app-launches-in-tanzania/
- New feature in India https://newsroom.fb.com/news/2017/09/blood-donations-in-india/
- Marketplace expands to Europe https://newsroom.fb.com/news/2017/08/marketplace-is-expanding-to-europe/
- “Find Wifi” goes global https://newsroom.fb.com/news/2017/06/expanding-find-wi-fi-globally/
- Facebook for Every Phone https://newsroom.fb.com/news/2013/07/feature-phone-milestone-facebook-for-every-phone-reaches-100-million/
- State of global connectivity https://newsroom.fb.com/news/2015/02/the-state-of-global-connectivity/
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